Question 1

When the Fed conducts open-market sales,

Accepted Answer

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

Question 2

Members of the Board of Governors are appointed by the president of the U.S.and confirmed by the U.S.Senate.

Accepted Answer

A) True 
 B)False

Question 3

Money

Accepted Answer

A)  is more efficient than barter. 
B)  makes trades easier. 
C)  allows greater specialization. 
D)  All of the above are correct. 
A)  is more efficient than barter. 
B)  makes trades easier. 
C)  allows greater specialization. 
D)  All of the above are correct.

Question 4

The "yardstick" people use to post prices and record debts is called

Accepted Answer

A)  a medium of exchange. 
B)  a unit of account. 
C)  a store of value. 
D)  liquidity. 
A)  a medium of exchange. 
B)  a unit of account. 
C)  a store of value. 
D)  liquidity.

Question 5

When the Federal Reserve conducts open-market operations to increase the money supply,it

Accepted Answer

A)  redeems Federal Reserve notes. 
B)  buys government bonds from the public. 
C)  raises the discount rate. 
D)  decreases its lending to member banks. 
A)  redeems Federal Reserve notes. 
B)  buys government bonds from the public. 
C)  raises the discount rate. 
D)  decreases its lending to member banks.

Question 6

The existence of money leads to

Accepted Answer

A)  greater specialization in production,but not to a higher standard of living. 
B)  a higher standard of living,but not to greater specialization. 
C)  greater specialization and to a higher standard of living. 
D)  neither greater specialization nor to a higher standard of living. 
A)  greater specialization in production,but not to a higher standard of living. 
B)  a higher standard of living,but not to greater specialization. 
C)  greater specialization and to a higher standard of living. 
D)  neither greater specialization nor to a higher standard of living.

Question 7

If banks hold any amount of their deposits in reserve,then they do not have the ability to influence the money supply.

Accepted Answer

A) True 
 B)False

Question 8

Savings deposits 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 9

When we want to measure and record economic value,we use money as the

Accepted Answer

A)  liquid asset. 
B)  medium of exchange. 
C)  unit of account. 
D)  store of value. 
A)  liquid asset. 
B)  medium of exchange. 
C)  unit of account. 
D)  store of value.

Question 10

When money functions as a unit of account,then it cannot be commodity money.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not included in either M1 or M2?

Accepted Answer

A)  U.S.Treasury bills 
B)  small time deposits 
C)  demand deposits 
D)  money market mutual funds 
A)  U.S.Treasury bills 
B)  small time deposits 
C)  demand deposits 
D)  money market mutual funds

Question 12

Which type of money has intrinsic value?

Accepted Answer

A)  commodity money 
B)  fiat money 
C)  both commodity money and fiat money 
D)  neither commodity money nor fiat money 
A)  commodity money 
B)  fiat money 
C)  both commodity money and fiat money 
D)  neither commodity money nor fiat money

Question 13

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

Accepted Answer

When the reserve requirement is less tha

Question 14

Bottles of very fine wine are less liquid than demand deposits.

Accepted Answer

A) True 
 B)False

Question 15

Table 29-4.
The First Bank of Wahooton
  
-Refer to Table 29-4.If the First Bank of Wahooton is holding $4,000 in excess reserves,then the reserve requirement with which it must comply is

Accepted Answer

A)  4 percent. 
B)  6 percent. 
C)  12 percent. 
D)  14 percent. 
A)  4 percent. 
B)  6 percent. 
C)  12 percent. 
D)  14 percent.

Question 16

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

Accepted Answer

A)  balances that lie behind debit cards. 
B)  demand deposits. 
C)  deposits other than demand deposits,such as NOW accounts,on which checks can be written. 
D)  All of the above are correct. 
A)  balances that lie behind debit cards. 
B)  demand deposits. 
C)  deposits other than demand deposits,such as NOW accounts,on which checks can be written. 
D)  All of the above are correct.

Question 17

Over one time horizon or another,Fed policy decisions influence

Accepted Answer

A)  inflation and employment. 
B)  inflation but not employment. 
C)  employment but not inflation. 
D)  neither inflation nor employment. 
A)  inflation and employment. 
B)  inflation but not employment. 
C)  employment but not inflation. 
D)  neither inflation nor employment.

Question 18

In Hugoland,the money supply is $8 million and reserves are $1 million.Assuming that people hold only deposits and no currency,and that banks hold no excess reserves,then the reserve requirement is

Accepted Answer

A)  14 percent. 
B)  12.5 percent. 
C)  8 percent. 
D)  None of the above is correct. 
A)  14 percent. 
B)  12.5 percent. 
C)  8 percent. 
D)  None of the above is correct.

Question 19

Which of the following is a store of value?

Accepted Answer

A)  currency 
B)  U.S.government bonds 
C)  fine art 
D)  All of the above are correct. 
A)  currency 
B)  U.S.government bonds 
C)  fine art 
D)  All of the above are correct.

Question 20

The discount rate is the interest rate that

Accepted Answer

A)  banks charge one another for loans. 
B)  banks charge the Fed for loans. 
C)  the Fed charges banks for loans. 
D)  the Fed charges Congress for loans. 
A)  banks charge one another for loans. 
B)  banks charge the Fed for loans. 
C)  the Fed charges banks for loans. 
D)  the Fed charges Congress for loans.

Exam 29: The Monetary System

When the Fed conducts open-market sales,

Members of the Board of Governors are appointed by the president of the U.S.and confirmed by the U.S.Senate.

Money

The "yardstick" people use to post prices and record debts is called

When the Federal Reserve conducts open-market operations to increase the money supply,it

The existence of money leads to

If banks hold any amount of their deposits in reserve,then they do not have the ability to influence the money supply.

Savings deposits are included in

When we want to measure and record economic value,we use money as the

When money functions as a unit of account,then it cannot be commodity money.

Which of the following is not included in either M1 or M2?

Which type of money has intrinsic value?

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

Bottles of very fine wine are less liquid than demand deposits.

Table 29-4. The First Bank of Wahooton -Refer to Table 29-4.If the First Bank of Wahooton is holding $4,000 in excess reserves,then the reserve requirement with which it must comply is

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

Over one time horizon or another,Fed policy decisions influence

In Hugoland,the money supply is $8 million and reserves are $1 million.Assuming that people hold only deposits and no currency,and that banks hold no excess reserves,then the reserve requirement is

Which of the following is a store of value?

The discount rate is the interest rate that

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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