Question 1

Other things the same,if banks decide to hold a smaller part of their deposits as excess reserves,the money supply will fall.

Accepted Answer

A) True 
 B)False

Question 2

Explain how each of the following changes the money supply.
a.
the Fed buys bonds
b.
the Fed raises the discount rate
c.
the Fed raises the reserve requirement

Accepted Answer

a.
If the Fed buys bonds,it pays for the

Question 3

Currency includes

Accepted Answer

A)  paper bills and coins. 
B)  demand deposits. 
C)  credit cards. 
D)  Both (a)and (b)are correct. 
A)  paper bills and coins. 
B)  demand deposits. 
C)  credit cards. 
D)  Both (a)and (b)are correct.

Question 4

Which of the following best illustrates the concept of a store of value?

Accepted Answer

A)  You are a precious-metals dealer,and you are always aware of how many ounces of platinum trade for an ounce of gold. 
B)  You sell items on eBay,and your prices are stated in terms of dollars. 
C)  You keep 6 ounces of gold in your safe-deposit box at the bank for emergencies. 
D)  None of the above is correct. 
A)  You are a precious-metals dealer,and you are always aware of how many ounces of platinum trade for an ounce of gold. 
B)  You sell items on eBay,and your prices are stated in terms of dollars. 
C)  You keep 6 ounces of gold in your safe-deposit box at the bank for emergencies. 
D)  None of the above is correct.

Question 5

Paper money

Accepted Answer

A)  has a high intrinsic value. 
B)  is the primary medium of exchange in a barter economy. 
C)  is valuable because it is generally accepted in trade. 
D)  is valuable only because of the legal tender requirement. 
A)  has a high intrinsic value. 
B)  is the primary medium of exchange in a barter economy. 
C)  is valuable because it is generally accepted in trade. 
D)  is valuable only because of the legal tender requirement.

Question 6

Sandra routinely uses currency to purchase her groceries.She is using money as a unit of account.

Accepted Answer

A) True 
 B)False

Question 7

Who among the following is not always a voting member of the FOMC?

Accepted Answer

A)  the president of the New York Fed 
B)  the Chairman of the Board of Governors 
C)  a member of the Board of Governors other than the chair 
D)  the president of the Philadelphia Fed 
A)  the president of the New York Fed 
B)  the Chairman of the Board of Governors 
C)  a member of the Board of Governors other than the chair 
D)  the president of the Philadelphia Fed

Question 8

Table 29-2.An economy starts with $10,000 in currency.All of this currency is deposited
into a single bank,and the bank then makes loans totaling $9,250.The
T-account of the bank is shown below.
  
-Refer to Table 29-2.This bank operates in a

Accepted Answer

A)  system of 0-percent-reserve banking. 
B)  system of 100-percent-reserve banking. 
C)  system of Federal-Reserve banking. 
D)  fractional-reserve banking system. 
A)  system of 0-percent-reserve banking. 
B)  system of 100-percent-reserve banking. 
C)  system of Federal-Reserve banking. 
D)  fractional-reserve banking system.

Question 9

U.S.dollars are an example of commodity money and hides used to make trades are an example of fiat money.

Accepted Answer

A) True 
 B)False

Question 10

Treasury Bonds are

Accepted Answer

A)  liquid,but not a store of value. 
B)  a store of value,but not liquid. 
C)  both liquid and a store of value. 
D)  neither liquid nor a store of value. 
A)  liquid,but not a store of value. 
B)  a store of value,but not liquid. 
C)  both liquid and a store of value. 
D)  neither liquid nor a store of value.

Question 11

A bank's liabilities include

Accepted Answer

A)  both its reserves and the deposits of its customers. 
B)  neither its reserves nor the deposits of its customers. 
C)  its reserves,but not the deposits of its customers. 
D)  the deposits of its customers,but not its reserves. 
A)  both its reserves and the deposits of its customers. 
B)  neither its reserves nor the deposits of its customers. 
C)  its reserves,but not the deposits of its customers. 
D)  the deposits of its customers,but not its reserves.

Question 12

The Fed increases the reserve requirement and makes open market purchases.Which of these by itself will increase the money supply?

Accepted Answer

A)  neither the increase in the reserve requirement nor the open market purchases 
B)  both the increase in the reserve requirement and the open market purchases 
C)  only the increase in the reserve requirement 
D)  only the open market purchases 
A)  neither the increase in the reserve requirement nor the open market purchases 
B)  both the increase in the reserve requirement and the open market purchases 
C)  only the increase in the reserve requirement 
D)  only the open market purchases

Question 13

When the Fed conducts open-market purchases,

Accepted Answer

A)  it buys Treasury securities,which increases the money supply. 
B)  it buys Treasury securities,which decreases the money supply. 
C)  it borrows money from member banks,which increases the money supply. 
D)  it lends money to member banks,which decreases the money supply. 
A)  it buys Treasury securities,which increases the money supply. 
B)  it buys Treasury securities,which decreases the money supply. 
C)  it borrows money from member banks,which increases the money supply. 
D)  it lends money to member banks,which decreases the money supply.

Question 14

Suppose banks decide to hold fewer excess reserves relative to deposits.Other things the same,this action will cause the

Accepted Answer

A)  money supply to fall.To reduce the impact of this the Fed could sell Treasury bonds. 
B)  money supply to fall.To reduce the impact of this the Fed could buy Treasury bonds. 
C)  money supply to rise.To reduce the impact of this the Fed could sell Treasury bonds. 
D)  money supply to rise.To reduce the impact of this the Fed could buy Treasury bonds. 
A)  money supply to fall.To reduce the impact of this the Fed could sell Treasury bonds. 
B)  money supply to fall.To reduce the impact of this the Fed could buy Treasury bonds. 
C)  money supply to rise.To reduce the impact of this the Fed could sell Treasury bonds. 
D)  money supply to rise.To reduce the impact of this the Fed could buy Treasury bonds.

Question 15

In recent years the Federal Open Market Committee has focused on a target for

Accepted Answer

A)  M1 growth. 
B)  the federal funds rate. 
C)  the number of Treasury Securities issued by the federal government. 
D)  total reserves of banks. 
A)  M1 growth. 
B)  the federal funds rate. 
C)  the number of Treasury Securities issued by the federal government. 
D)  total reserves of banks.

Question 16

Demand deposits are balances in bank accounts that depositors can access by writing a check.

Accepted Answer

A) True 
 B)False

Question 17

Credit card limits are included in

Accepted Answer

A)  M1 but not M2. 
B)  M2 but not M1. 
C)  M1 and M2. 
D)  neither M1 nor M2. 
A)  M1 but not M2. 
B)  M2 but not M1. 
C)  M1 and M2. 
D)  neither M1 nor M2.

Question 18

Credit cards are

Accepted Answer

A)  a medium of exchange. 
B)  counted as part of M2 but not as part of M1. 
C)  important for analyzing the monetary system. 
D)  All of the above are correct. 
A)  a medium of exchange. 
B)  counted as part of M2 but not as part of M1. 
C)  important for analyzing the monetary system. 
D)  All of the above are correct.

Question 19

Consider the following traders who meet.
 
Which,if any,pairs of traders has a double coincidence of wants?

Accepted Answer

A)  Bob with Alice 
B)  Ted with Alice 
C)  Bob with Mary,Ted with Bob,and Ted with Alice 
D)  None of the pairs above has a double coincidence of wants. 
A)  Bob with Alice 
B)  Ted with Alice 
C)  Bob with Mary,Ted with Bob,and Ted with Alice 
D)  None of the pairs above has a double coincidence of wants.

Question 20

The set of items that serve as media of exchange clearly includes

Accepted Answer

A)  demand deposits. 
B)  short-term bonds. 
C)  credit cards. 
D)  All of the above are correct. 
A)  demand deposits. 
B)  short-term bonds. 
C)  credit cards. 
D)  All of the above are correct.

Exam 29: The Monetary System

Other things the same,if banks decide to hold a smaller part of their deposits as excess reserves,the money supply will fall.

Explain how each of the following changes the money supply. a. the Fed buys bonds b. the Fed raises the discount rate c. the Fed raises the reserve requirement

Currency includes

Which of the following best illustrates the concept of a store of value?

Paper money

Sandra routinely uses currency to purchase her groceries.She is using money as a unit of account.

Who among the following is not always a voting member of the FOMC?

Table 29-2.An economy starts with $10,000 in currency.All of this currency is deposited into a single bank,and the bank then makes loans totaling $9,250.The T-account of the bank is shown below. -Refer to Table 29-2.This bank operates in a

U.S.dollars are an example of commodity money and hides used to make trades are an example of fiat money.

Treasury Bonds are

A bank's liabilities include

The Fed increases the reserve requirement and makes open market purchases.Which of these by itself will increase the money supply?

When the Fed conducts open-market purchases,

Suppose banks decide to hold fewer excess reserves relative to deposits.Other things the same,this action will cause the

In recent years the Federal Open Market Committee has focused on a target for

Demand deposits are balances in bank accounts that depositors can access by writing a check.

Credit card limits are included in

Credit cards are

Consider the following traders who meet. Which,if any,pairs of traders has a double coincidence of wants?

The set of items that serve as media of exchange clearly includes

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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