Question 1

Suppose banks decide to hold more 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 2

A bank's assets 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 3

The agency responsible for regulating the money supply in the United States is

Accepted Answer

A)  the Comptroller of the Currency. 
B)  the U.S.Treasury. 
C)  the Federal Reserve. 
D)  the U.S.Bank. 
A)  the Comptroller of the Currency. 
B)  the U.S.Treasury. 
C)  the Federal Reserve. 
D)  the U.S.Bank.

Question 4

If the reserve ratio for all banks is 20 percent,then $100 of new reserves can generate

Accepted Answer

A)  $60 of new money in the economy. 
B)  $250 of new money in the economy. 
C)  $500 of new money in the economy. 
D)  $2,000 of new money in the economy. 
A)  $60 of new money in the economy. 
B)  $250 of new money in the economy. 
C)  $500 of new money in the economy. 
D)  $2,000 of new money in the economy.

Question 5

A debit card is more similar to a credit card than to a check.

Accepted Answer

A) True 
 B)False

Question 6

If R represents the reserve ratio for all banks in the economy,then the money multiplier is

Accepted Answer

A)  1/(1-R). 
B)  1/R. 
C)  1/(1+R). 
D)  (1+R)/R. 
A)  1/(1-R). 
B)  1/R. 
C)  1/(1+R). 
D)  (1+R)/R.

Question 7

In the 19th century,when crop failures often led to bank runs,banks would make relatively fewer loans and hold relatively more excess reserves.By itself,these actions by the banks should have

Accepted Answer

A)  increased the money multiplier and the money supply. 
B)  decreased the money multiplier and increased the money supply. 
C)  increased the money multiplier and decreased the money supply. 
D)  decreased both the money multiplier and the money supply. 
A)  increased the money multiplier and the money supply. 
B)  decreased the money multiplier and increased the money supply. 
C)  increased the money multiplier and decreased the money supply. 
D)  decreased both the money multiplier and the money supply.

Question 8

If the reserve ratio is 15 percent,and banks do not hold excess reserves,and people hold only deposits and no currency,then when the Fed sells $65 million of bonds to the public,bank reserves

Accepted Answer

A)  increase by $65 million and the money supply eventually increases by $266.67 million. 
B)  increase by $65 million and the money supply eventually increases by $433.33 million. 
C)  decrease by $65 million and the money supply eventually decreases by $266.67 million. 
D)  decrease by $65 million and the money supply eventually decreases by $433.33 million. 
A)  increase by $65 million and the money supply eventually increases by $266.67 million. 
B)  increase by $65 million and the money supply eventually increases by $433.33 million. 
C)  decrease by $65 million and the money supply eventually decreases by $266.67 million. 
D)  decrease by $65 million and the money supply eventually decreases by $433.33 million.

Question 9

The Fed can increase the price level by conducting open-market

Accepted Answer

A)  sales and raising the discount rate. 
B)  sales and lowering the discount rate. 
C)  purchases and raising the discount rate. 
D)  purchases and lowering the discount rate. 
A)  sales and raising the discount rate. 
B)  sales and lowering the discount rate. 
C)  purchases and raising the discount rate. 
D)  purchases and lowering the discount rate.

Question 10

If people decide to hold less currency relative to deposits,the money supply

Accepted Answer

A)  falls.The Fed could lessen the impact of this by buying Treasury bonds. 
B)  falls.The Fed could lessen the impact of this by selling Treasury bonds. 
C)  rises.The Fed could lessen the impact of this by buying Treasury bonds. 
D)  rises.The Fed could lessen the impact of this by selling Treasury bonds. 
A)  falls.The Fed could lessen the impact of this by buying Treasury bonds. 
B)  falls.The Fed could lessen the impact of this by selling Treasury bonds. 
C)  rises.The Fed could lessen the impact of this by buying Treasury bonds. 
D)  rises.The Fed could lessen the impact of this by selling Treasury bonds.

Question 11

When the Federal Reserve decreases the discount rate,the quantity of reserves increases and the money supply increases.

Accepted Answer

A) True 
 B)False

Question 12

The Federal Reserve does all except which of the following?

Accepted Answer

A)  It controls the supply of money. 
B)  It acts as a lender of last resort to banks. 
C)  It makes loans to large business firms. 
D)  It tries to ensure the health of the banking system. 
A)  It controls the supply of money. 
B)  It acts as a lender of last resort to banks. 
C)  It makes loans to large business firms. 
D)  It tries to ensure the health of the banking system.

Question 13

To decrease the money supply,the Fed can

Accepted Answer

A)  buy government bonds or increase the discount rate. 
B)  buy government bonds or decrease the discount rate. 
C)  sell government bonds or increase the discount rate. 
D)  sell government bonds or decrease the discount rate. 
A)  buy government bonds or increase the discount rate. 
B)  buy government bonds or decrease the discount rate. 
C)  sell government bonds or increase the discount rate. 
D)  sell government bonds or decrease the discount rate.

Question 14

During the Great Depression in the early 1930s,

Accepted Answer

A)  bank runs closed many banks. 
B)  the money supply rose sharply. 
C)  the Fed decreased reserve requirements. 
D)  both a and b are correct. 
A)  bank runs closed many banks. 
B)  the money supply rose sharply. 
C)  the Fed decreased reserve requirements. 
D)  both a and b are correct.

Question 15

An item that people can use to transfer purchasing power from the present to the future is called

Accepted Answer

A)  a medium of exchange. 
B)  a unit of account. 
C)  a store of value. 
D)  None of the above is correct. 
A)  a medium of exchange. 
B)  a unit of account. 
C)  a store of value. 
D)  None of the above is correct.

Question 16

Credit cards are a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 17

Imagine that the federal funds rate was below the level the Federal Reserve had targeted.To move the rate back towards it's target the Federal Reserve could

Accepted Answer

A)  buy bonds.This buying would reduce reserves. 
B)  buy bonds.This buying would increase reserves. 
C)  sell bonds.This selling would reduce reserves. 
D)  sell bonds.This selling would increase reserves. 
A)  buy bonds.This buying would reduce reserves. 
B)  buy bonds.This buying would increase reserves. 
C)  sell bonds.This selling would reduce reserves. 
D)  sell bonds.This selling would increase reserves.

Question 18

In the nation of Feutschland,the money supply is $80,000 and reserves are $18,000.Assuming that people hold only deposits and no currency,and that banks hold no excess reserves,then the reserve requirement is

Accepted Answer

A)  29 percent. 
B)  22.5 percent. 
C)  16 percent. 
D)  None of the above is correct. 
A)  29 percent. 
B)  22.5 percent. 
C)  16 percent. 
D)  None of the above is correct.

Question 19

Consider five individuals with different occupations.
 
Which of the following pairs of individuals has a double coincidence of wants?

Accepted Answer

A)  Mary and Clark 
B)  Clark and Nathan 
C)  Nathan and Polly 
D)  Polly and Paul 
A)  Mary and Clark 
B)  Clark and Nathan 
C)  Nathan and Polly 
D)  Polly and Paul

Question 20

Joe wants to trade eggs for sausage.Lashonda wants to trade sausage for eggs.Joe and Lashonda have a double-coincidence of wants.

Accepted Answer

A) True 
 B)False

Exam 29: The Monetary System

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

A bank's assets include

The agency responsible for regulating the money supply in the United States is

If the reserve ratio for all banks is 20 percent,then $100 of new reserves can generate

A debit card is more similar to a credit card than to a check.

If R represents the reserve ratio for all banks in the economy,then the money multiplier is

In the 19th century,when crop failures often led to bank runs,banks would make relatively fewer loans and hold relatively more excess reserves.By itself,these actions by the banks should have

If the reserve ratio is 15 percent,and banks do not hold excess reserves,and people hold only deposits and no currency,then when the Fed sells $65 million of bonds to the public,bank reserves

The Fed can increase the price level by conducting open-market

If people decide to hold less currency relative to deposits,the money supply

When the Federal Reserve decreases the discount rate,the quantity of reserves increases and the money supply increases.

The Federal Reserve does all except which of the following?

To decrease the money supply,the Fed can

During the Great Depression in the early 1930s,

An item that people can use to transfer purchasing power from the present to the future is called

Credit cards are a medium of exchange.

Imagine that the federal funds rate was below the level the Federal Reserve had targeted.To move the rate back towards it's target the Federal Reserve could

In the nation of Feutschland,the money supply is $80,000 and reserves are $18,000.Assuming that people hold only deposits and no currency,and that banks hold no excess reserves,then the reserve requirement is

Consider five individuals with different occupations. Which of the following pairs of individuals has a double coincidence of wants?

Joe wants to trade eggs for sausage.Lashonda wants to trade sausage for eggs.Joe and Lashonda have a double-coincidence of wants.

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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