Question 1

Monetary policy actions are determined by the

Accepted Answer

A)  Federal Open Market Committee. 
B)  New York Federal Reserve Bank. 
C)  President of the United States. 
D)  U.S. Congress. 
A)  Federal Open Market Committee. 
B)  New York Federal Reserve Bank. 
C)  President of the United States. 
D)  U.S. Congress. A

Question 2

Which of the following is NOT one of the functions of money?

Accepted Answer

A)  Medium of exchange 
B)  Source of wealth 
C)  Unit of accounting 
D)  Store of value 
A)  Medium of exchange 
B)  Source of wealth 
C)  Unit of accounting 
D)  Store of value B

Question 3

To reach the maximum money multiplier, it is assumed that

Accepted Answer

A)  commercial banks keep the amount of reserves. equal to total bank deposits. 
B)  all loans get redeposited in a checkable account. 
C)  there is insufficient loan demand. 
D)  loans are diverted into circulating currency. 
A)  commercial banks keep the amount of reserves. equal to total bank deposits. 
B)  all loans get redeposited in a checkable account. 
C)  there is insufficient loan demand. 
D)  loans are diverted into circulating currency. B

Question 4

Why might people in a country refuse to accept the fiduciary money in the country?

Accepted Answer

If people believed the government was ab

Question 5

Explain what happens to the money supply when the Fed sells bonds on the open market. What happens to the assets and liabilities of the Fed?

Accepted Answer

The money supply falls when the Fed sell

Question 6

Which of the following institutions has responsibility for distributing currency and coins to the U.S. banking system?

Accepted Answer

A)  The Office of the Comptroller of the Currency 
B)  The Federal Reserve System 
C)  The U.S Bureau of Engraving and Printing 
D)  The U.S. Mint 
A)  The Office of the Comptroller of the Currency 
B)  The Federal Reserve System 
C)  The U.S Bureau of Engraving and Printing 
D)  The U.S. Mint

Question 7

The reserve ratio is 20 percent. After the Fed buys $1 million in U.S. government securities from a bond dealer by transmitting the funds to the dealer's deposit account at Bank A, Bank A lends a construction company an amount equal to its excess reserves. The construction company spends the entire amount on lumber from a lumber yard, which deposits the construction company's check in its deposit account with Bank A. The maximum loan Bank A can now make is

Accepted Answer

A)  $0. 
B)  $640,000. 
C)  $800,000. 
D)  $1 million. 
A)  $0. 
B)  $640,000. 
C)  $800,000. 
D)  $1 million.

Question 8

The Federal Deposit Insurance Corporation

Accepted Answer

A)  increases the stability of the banking system by reducing the likelihood of bank runs. 
B)  discourages banks from engaging in excessive risk taking. 
C)  only insures deposits in money-center banks. 
D)  was established after the Panic of 1907. 
A)  increases the stability of the banking system by reducing the likelihood of bank runs. 
B)  discourages banks from engaging in excessive risk taking. 
C)  only insures deposits in money-center banks. 
D)  was established after the Panic of 1907.

Question 9

Currency consists of

Accepted Answer

A)  only coins minted by the U.S. Treasury. 
B)  only Federal Reserve notes. 
C)  coins minted by the U.S. Treasury and Federal Reserve notes. 
D)  coins, Federal Reserve Notes and traveler's checks. 
A)  only coins minted by the U.S. Treasury. 
B)  only Federal Reserve notes. 
C)  coins minted by the U.S. Treasury and Federal Reserve notes. 
D)  coins, Federal Reserve Notes and traveler's checks.

Question 10

When money serves as a standard for comparing values of different things, it is functioning as a

Accepted Answer

A)  store of value. 
B)  hedge against inflation. 
C)  standard of deferred payment. 
D)  unit of accounting. 
A)  store of value. 
B)  hedge against inflation. 
C)  standard of deferred payment. 
D)  unit of accounting.

Question 11

Due to the existence of the FDIC, banks

Accepted Answer

A)  may make riskier loans knowing that their depositors are insured. 
B)  have not changed their behavior even with the existence of insurance. 
C)  become more cautious in making loans. 
D)  are no longer concerned about net worth. 
A)  may make riskier loans knowing that their depositors are insured. 
B)  have not changed their behavior even with the existence of insurance. 
C)  become more cautious in making loans. 
D)  are no longer concerned about net worth.

Question 12

A decrease in the reserve ratio will

Accepted Answer

A)  cause the money supply to decrease. 
B)  cause the money supply to increase. 
C)  not affect the money supply. 
D)  decrease the money multiplier. 
A)  cause the money supply to decrease. 
B)  cause the money supply to increase. 
C)  not affect the money supply. 
D)  decrease the money multiplier.

Question 13

A fiduciary monetary system means

Accepted Answer

A)  that the value of each currency is determined by the amount of gold held by each nation. 
B)  that the currency is backed by implicit faith in government. 
C)  that money is legal tender. 
D)  that money has commodity value. 
A)  that the value of each currency is determined by the amount of gold held by each nation. 
B)  that the currency is backed by implicit faith in government. 
C)  that money is legal tender. 
D)  that money has commodity value.

Question 14

Camels have been used as money. Which function of money would this type of money perform least well?

Accepted Answer

A)  Medium of exchange 
B)  Unit of accounting 
C)  Store of value 
D)  Standard of deferred payment 
A)  Medium of exchange 
B)  Unit of accounting 
C)  Store of value 
D)  Standard of deferred payment

Question 15

The money supply in the United States is backed by

Accepted Answer

A)  faith. 
B)  gold. 
C)  silver. 
D)  platinum. 
A)  faith. 
B)  gold. 
C)  silver. 
D)  platinum.

Question 16

In the United States, who determines monetary policy? What is the major tool used to determine monetary policy?

Accepted Answer

The Federal Reserve Bank's Federal Open

Question 17

A fiduciary monetary standard exists when the value of a currency

Accepted Answer

A)  is determined by law. 
B)  is convertible to a fixed quantity of gold. 
C)  depends upon the public's confidence that the currency can be exchanged for goods and services. 
D)  increases with inflation. 
A)  is determined by law. 
B)  is convertible to a fixed quantity of gold. 
C)  depends upon the public's confidence that the currency can be exchanged for goods and services. 
D)  increases with inflation.

Question 18

The reserve ratio is 20 percent. If the Fed buys $1 million of U.S. government securities from a bond dealer by transmitting the funds to the dealer's deposit account at Bank ABC, then

Accepted Answer

A)  Bank ABC can make no additional loans. 
B)  Bank ABC can make additional loans up to $800,000. 
C)  Bank ABC can make additional loans up to $1 million. 
D)  Bank ABC cannot make any additional loans, but the system as a whole can make additional loans up to $1 million. 
A)  Bank ABC can make no additional loans. 
B)  Bank ABC can make additional loans up to $800,000. 
C)  Bank ABC can make additional loans up to $1 million. 
D)  Bank ABC cannot make any additional loans, but the system as a whole can make additional loans up to $1 million.

Question 19

The Fed is the bankers' bank. What functions of the Fed are involved in this role? What are the other important functions of the Fed?

Accepted Answer

The Fed holds reserves of banks, lends t

Question 20

The reserve ratio is 10 percent. Depositors regularly keep 10 percent of their deposits as cash. If the Fed buys $1 million of U.S. government securities, excess reserves

Accepted Answer

A)  increase by $800,000. 
B)  increase by $810,000. 
C)  increase by $900,000. 
D)  increase by $1 million. 
A)  increase by $800,000. 
B)  increase by $810,000. 
C)  increase by $900,000. 
D)  increase by $1 million.

Exam 15: Money, Banking, and Central Banking

Monetary policy actions are determined by the

Which of the following is NOT one of the functions of money?

To reach the maximum money multiplier, it is assumed that

Why might people in a country refuse to accept the fiduciary money in the country?

Explain what happens to the money supply when the Fed sells bonds on the open market. What happens to the assets and liabilities of the Fed?

Which of the following institutions has responsibility for distributing currency and coins to the U.S. banking system?

The Federal Deposit Insurance Corporation

Currency consists of

When money serves as a standard for comparing values of different things, it is functioning as a

Due to the existence of the FDIC, banks

A decrease in the reserve ratio will

A fiduciary monetary system means

Camels have been used as money. Which function of money would this type of money perform least well?

The money supply in the United States is backed by

In the United States, who determines monetary policy? What is the major tool used to determine monetary policy?

A fiduciary monetary standard exists when the value of a currency

The reserve ratio is 20 percent. If the Fed buys $1 million of U.S. government securities from a bond dealer by transmitting the funds to the dealer's deposit account at Bank ABC, then

The Fed is the bankers' bank. What functions of the Fed are involved in this role? What are the other important functions of the Fed?

The reserve ratio is 10 percent. Depositors regularly keep 10 percent of their deposits as cash. If the Fed buys $1 million of U.S. government securities, excess reserves

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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