Question 1

To increase the money supply,the Fed could

Accepted Answer

A)  sell government bonds. 
B)  decrease the discount rate. 
C)  increase the reserve requirement. 
D)  None of the above is correct. 
A)  sell government bonds. 
B)  decrease the discount rate. 
C)  increase the reserve requirement. 
D)  None of the above is correct.

Question 2

Table 29-1.The information in the table pertains to an imaginary economy.
  
-Refer to Table 29-1.What is the M1 money supply?

Accepted Answer

A)  $215 billion 
B)  $216 billion 
C)  $226 billion 
D)  $301 billion 
A)  $215 billion 
B)  $216 billion 
C)  $226 billion 
D)  $301 billion

Question 3

When we add up currency,demand deposits,other checkable deposits,and travelers checks,we get

Accepted Answer

A)  the money supply,as universally defined by economists. 
B)  the totality of common stores of value in the United States. 
C)  M1. 
D)  M2. 
A)  the money supply,as universally defined by economists. 
B)  the totality of common stores of value in the United States. 
C)  M1. 
D)  M2.

Question 4

If the public decides to hold less currency and more deposits in banks,bank reserves

Accepted Answer

A)  decrease and the money supply eventually decreases. 
B)  decrease but the money supply does not change. 
C)  increase and the money supply eventually increases. 
D)  increase but the money supply does not change. 
A)  decrease and the money supply eventually decreases. 
B)  decrease but the money supply does not change. 
C)  increase and the money supply eventually increases. 
D)  increase but the money supply does not change.

Question 5

To decrease the money supply,the Fed could

Accepted Answer

A)  sell government bonds. 
B)  increase the discount rate. 
C)  increase the reserve requirement. 
D)  All of the above are correct. 
A)  sell government bonds. 
B)  increase the discount rate. 
C)  increase the reserve requirement. 
D)  All of the above are correct.

Question 6

Draw a simple T-account for First National Bank which has $5,000 of deposits,a required reserve ratio of 10 percent,and excess reserves of $300.Make sure you balance sheet balances.

Accepted Answer

The answer of Draw a simple T-account for First National...

Question 7

In an economy that relies upon barter,

Accepted Answer

A)  trade does not require a double coincidence of wants. 
B)  scarce resources are allocated just as easily as they are in economies that do not rely upon barter. 
C)  there is no item in the economy that is widely accepted in exchange for goods and services. 
D)  All of the above are correct. 
A)  trade does not require a double coincidence of wants. 
B)  scarce resources are allocated just as easily as they are in economies that do not rely upon barter. 
C)  there is no item in the economy that is widely accepted in exchange for goods and services. 
D)  All of the above are correct.

Question 8

Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control.

Accepted Answer

First,the Fed does not control the amoun

Question 9

There is a

Accepted Answer

A)  short-run tradeoff between inflation and unemployment. 
B)  short-run tradeoff between an increase in the money supply and inflation. 
C)  long-run tradeoff between inflation and unemployment. 
D)  long-run tradeoff between an increase in the money supply and inflation. 
A)  short-run tradeoff between inflation and unemployment. 
B)  short-run tradeoff between an increase in the money supply and inflation. 
C)  long-run tradeoff between inflation and unemployment. 
D)  long-run tradeoff between an increase in the money supply and inflation.

Question 10

The Board of Governors

Accepted Answer

A)  is currently chaired by the Speaker of the House of Representatives. 
B)  has as its members individuals who are appointed by the president and confirmed by the Senate. 
C)  has 10 members. 
D)  All of the above are correct. 
A)  is currently chaired by the Speaker of the House of Representatives. 
B)  has as its members individuals who are appointed by the president and confirmed by the Senate. 
C)  has 10 members. 
D)  All of the above are correct.

Question 11

In a fractional-reserve banking system,a decrease in reserve requirements

Accepted Answer

A)  increases both the money multiplier and the money supply. 
B)  decreases both the money multiplier and the money supply. 
C)  increases the money multiplier,but decreases the money supply. 
D)  decreases the money multiplier,but increases the money supply. 
A)  increases both the money multiplier and the money supply. 
B)  decreases both the money multiplier and the money supply. 
C)  increases the money multiplier,but decreases the money supply. 
D)  decreases the money multiplier,but increases the money supply.

Question 12

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)  banks buy Treasury securities from Fed,which increases the money supply. 
D)  banks buy Treasury securities from the Fed,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)  banks buy Treasury securities from Fed,which increases the money supply. 
D)  banks buy Treasury securities from the Fed,which decreases the money supply.

Question 13

In a 100-percent-reserve banking system,

Accepted Answer

A)  banks can create money by issuing currency. 
B)  banks can create money by lending out reserves. 
C)  the Fed can increase the money supply with open-market sales. 
D)  banks hold as many reserves as they hold deposits. 
A)  banks can create money by issuing currency. 
B)  banks can create money by lending out reserves. 
C)  the Fed can increase the money supply with open-market sales. 
D)  banks hold as many reserves as they hold deposits.

Question 14

Which of the following items is included in the M2 definition of the money supply?

Accepted Answer

A)  credit cards 
B)  money market mutual funds 
C)  corporate bonds 
D)  large time deposits 
A)  credit cards 
B)  money market mutual funds 
C)  corporate bonds 
D)  large time deposits

Question 15

Dollar bills,rare paintings,and emerald necklaces are all

Accepted Answer

A)  media of exchange. 
B)  units of account. 
C)  stores of value. 
D)  All of the above are correct. 
A)  media of exchange. 
B)  units of account. 
C)  stores of value. 
D)  All of the above are correct.

Question 16

The federal funds rate is the interest rate

Accepted Answer

A)  the Federal Reserves charges for loans it makes to the federal government. 
B)  the Federal Reserve charges banks for short-term loans. 
C)  banks charge each other for short-term loans of reserves. 
D)  on newly issued one-year Treasury bonds. 
A)  the Federal Reserves charges for loans it makes to the federal government. 
B)  the Federal Reserve charges banks for short-term loans. 
C)  banks charge each other for short-term loans of reserves. 
D)  on newly issued one-year Treasury bonds.

Question 17

Which of the following actions would have the combined effect of raising the money supply and raising the money multiplier?

Accepted Answer

A)  The Fed sells bonds and raises the reserve requirement 
B)  The Fed sells bonds and lowers the reserve requirement 
C)  The Fed buys bonds and raises the reserve requirement 
D)  The Fed buys bonds and lowers the reserve requirement 
A)  The Fed sells bonds and raises the reserve requirement 
B)  The Fed sells bonds and lowers the reserve requirement 
C)  The Fed buys bonds and raises the reserve requirement 
D)  The Fed buys bonds and lowers the reserve requirement

Question 18

Table 29-1.The information in the table pertains to an imaginary economy.
  
-Refer to Table 29-1.What is the M2 money supply?

Accepted Answer

A)  $125 billion 
B)  $296 billion 
C)  $351 billion 
D)  $431 billion 
A)  $125 billion 
B)  $296 billion 
C)  $351 billion 
D)  $431 billion

Question 19

Suppose that banks desire to hold no excess reserves.If the reserve requirement is 5 percent and a bank receives a new deposit of $400,it

Accepted Answer

A)  must increase required reserves by $20. 
B)  will initially see reserves increase by $400. 
C)  will be able to use this deposit to make new loans amounting to $380. 
D)  All of the above are correct. 
A)  must increase required reserves by $20. 
B)  will initially see reserves increase by $400. 
C)  will be able to use this deposit to make new loans amounting to $380. 
D)  All of the above are correct.

Question 20

Marc puts prices on surfboards and skateboards at his sporting goods store.He is using money as a unit of account.

Accepted Answer

A) True 
 B)False

Exam 29: The Monetary System

To increase the money supply,the Fed could

Table 29-1.The information in the table pertains to an imaginary economy. -Refer to Table 29-1.What is the M1 money supply?

When we add up currency,demand deposits,other checkable deposits,and travelers checks,we get

If the public decides to hold less currency and more deposits in banks,bank reserves

To decrease the money supply,the Fed could

Draw a simple T-account for First National Bank which has $5,000 of deposits,a required reserve ratio of 10 percent,and excess reserves of $300.Make sure you balance sheet balances.

In an economy that relies upon barter,

Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control.

There is a

The Board of Governors

In a fractional-reserve banking system,a decrease in reserve requirements

When the Fed conducts open-market purchases,

In a 100-percent-reserve banking system,

Which of the following items is included in the M2 definition of the money supply?

Dollar bills,rare paintings,and emerald necklaces are all

The federal funds rate is the interest rate

Which of the following actions would have the combined effect of raising the money supply and raising the money multiplier?

Table 29-1.The information in the table pertains to an imaginary economy. -Refer to Table 29-1.What is the M2 money supply?

Suppose that banks desire to hold no excess reserves.If the reserve requirement is 5 percent and a bank receives a new deposit of $400,it

Marc puts prices on surfboards and skateboards at his sporting goods store.He is using money as a unit of account.

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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