Question 1

If the reserve ratio for all banks is 9 percent,then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

Accepted Answer

A)  $60,000.00. 
B)  $66,666.67. 
C)  $90,900.00. 
D)  $100,555.56. 
A)  $60,000.00. 
B)  $66,666.67. 
C)  $90,900.00. 
D)  $100,555.56.

Question 2

Consider four survivors on an island.
 
Which of the following pairs of survivors has a double-coincidence of wants?

Accepted Answer

A)  Rupert with Amber,and Rob with Tom 
B)  Amber with Tom 
C)  Rupert with Rob 
D)  None of the above are correct. 
A)  Rupert with Amber,and Rob with Tom 
B)  Amber with Tom 
C)  Rupert with Rob 
D)  None of the above are correct.

Question 3

The interest rate the Fed charges on loans it makes to banks is called

Accepted Answer

A)  the prime rate. 
B)  the federal funds rate. 
C)  the discount rate. 
D)  the LIBOR. 
A)  the prime rate. 
B)  the federal funds rate. 
C)  the discount rate. 
D)  the LIBOR.

Question 4

In a fractional-reserve banking system,a bank

Accepted Answer

A)  does not make loans. 
B)  does not accept deposits. 
C)  keeps only a fraction of its reserves in deposits. 
D)  keeps only a fraction of its deposits in reserve. 
A)  does not make loans. 
B)  does not accept deposits. 
C)  keeps only a fraction of its reserves in deposits. 
D)  keeps only a fraction of its deposits in reserve.

Question 5

Which of the following is included in both M1 and M2?

Accepted Answer

A)  savings deposits 
B)  demand deposits 
C)  small time deposits 
D)  money market mutual funds 
A)  savings deposits 
B)  demand deposits 
C)  small time deposits 
D)  money market mutual funds

Question 6

Designers of the Federal Reserve System were concerned that the Fed might form policy favorable to one part of the country or to a particular party.What are some ways that the organization of the Fed reflects such concerns?

Accepted Answer

The answer of Designers of the Federal Reserve System were...

Question 7

Consider five high school students working on homework in study hall.
 
Which of the following pairs of students has a double coincidence of wants?

Accepted Answer

A)  Rosie and Piper 
B)  Piper and Molly 
C)  Dewey and Molly 
D)  Bob and Dewey 
A)  Rosie and Piper 
B)  Piper and Molly 
C)  Dewey and Molly 
D)  Bob and Dewey

Question 8

If the reserve ratio is 12.5 percent,then $5,600 of money can be generated by

Accepted Answer

A)  $64 of new reserves. 
B)  $448 of new reserves. 
C)  $700 of new reserves. 
D)  $800 of new reserves. 
A)  $64 of new reserves. 
B)  $448 of new reserves. 
C)  $700 of new reserves. 
D)  $800 of new reserves.

Question 9

Which of the following is included in both M1 and M2?

Accepted Answer

A)  currency 
B)  demand deposits 
C)  other checkable deposits 
D)  All of the above are correct. 
A)  currency 
B)  demand deposits 
C)  other checkable deposits 
D)  All of the above are correct.

Question 10

The money multiplier equals 1/(1 - R),where R represents the reserve ratio.

Accepted Answer

A) True 
 B)False

Question 11

Economists argue that the move from barter to money increased trade and production.How is this possible?

Accepted Answer

The use of money allows people

Question 12

If the reserve ratio for all banks is 5 percent,then $1,000 of additional reserves can create up to

Accepted Answer

A)  $200 of new money. 
B)  $2,000 of new money. 
C)  $20,000 of new money. 
D)  None of the above is correct. 
A)  $200 of new money. 
B)  $2,000 of new money. 
C)  $20,000 of new money. 
D)  None of the above is correct.

Question 13

At the Federal Reserve,

Accepted Answer

A)  the nation's monetary policy is made by the Federal Open Market Committee,which meets twice a year. 
B)  the nation's monetary and fiscal policies are made by the Federal Open Market Committee,which meets twice a year. 
C)  the nation's monetary policy is made by the Federal Open Market Committee,which meets about every six weeks. 
D)  the nation's monetary and fiscal policies are made by the Federal Open Market Committee,which meets about every six weeks. 
A)  the nation's monetary policy is made by the Federal Open Market Committee,which meets twice a year. 
B)  the nation's monetary and fiscal policies are made by the Federal Open Market Committee,which meets twice a year. 
C)  the nation's monetary policy is made by the Federal Open Market Committee,which meets about every six weeks. 
D)  the nation's monetary and fiscal policies are made by the Federal Open Market Committee,which meets about every six weeks.

Question 14

The Federal Reserve primarily uses open-market operations to change the money supply.

Accepted Answer

A) True 
 B)False

Question 15

The series of bank failures in 1907 occurred despite the creation of the Federal Reserve many years earlier.

Accepted Answer

A) True 
 B)False

Question 16

The ease with which an asset can be

Accepted Answer

A)  traded for another asset determines whether or not that asset is a unit of account. 
B)  transported from one place to another determines whether or not that asset could serve as fiat money. 
C)  converted into a store of value determines the liquidity of that asset. 
D)  converted into the economy's medium of exchange determines the liquidity of that asset. 
A)  traded for another asset determines whether or not that asset is a unit of account. 
B)  transported from one place to another determines whether or not that asset could serve as fiat money. 
C)  converted into a store of value determines the liquidity of that asset. 
D)  converted into the economy's medium of exchange determines the liquidity of that asset.

Question 17

Suppose a bank's reserve ratio is 6.5 percent and the bank has $1,950 in reserve.Its deposits amount to

Accepted Answer

A)  $62.25. 
B)  $126.75. 
C)  $22,500.00 
D)  $30,000.00. 
A)  $62.25. 
B)  $126.75. 
C)  $22,500.00 
D)  $30,000.00.

Question 18

If the Fed sells government bonds to the public,then reserves

Accepted Answer

A)  increase and the money supply increases. 
B)  increase and the money supply decreases. 
C)  decrease and the money supply increases. 
D)  decrease and the money supply decreases. 
A)  increase and the money supply increases. 
B)  increase and the money supply decreases. 
C)  decrease and the money supply increases. 
D)  decrease and the money supply decreases.

Question 19

Suppose a bank has a 10 percent reserve requirement,$4,000 in deposits,and has loaned out all it can given the reserve requirement.

Accepted Answer

A)  It has $40 in reserves and $3,960 in loans. 
B)  It has $400 in reserves and $3,600 in loans. 
C)  It has $444 in reserves and $3,556 in loans. 
D)  None of the above is correct. 
A)  It has $40 in reserves and $3,960 in loans. 
B)  It has $400 in reserves and $3,600 in loans. 
C)  It has $444 in reserves and $3,556 in loans. 
D)  None of the above is correct.

Question 20

Which of the following lists two things that both increase the money supply?

Accepted Answer

A)  make open market purchases,raise the reserve requirement 
B)  make open market purchases,lower the reserve requirement 
C)  make open market sales,raise the reserve requirement 
D)  make open market sales,lower the reserve requirement 
A)  make open market purchases,raise the reserve requirement 
B)  make open market purchases,lower the reserve requirement 
C)  make open market sales,raise the reserve requirement 
D)  make open market sales,lower the reserve requirement

Exam 29: The Monetary System

If the reserve ratio for all banks is 9 percent,then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

Consider four survivors on an island. Which of the following pairs of survivors has a double-coincidence of wants?

The interest rate the Fed charges on loans it makes to banks is called

In a fractional-reserve banking system,a bank

Which of the following is included in both M1 and M2?

Designers of the Federal Reserve System were concerned that the Fed might form policy favorable to one part of the country or to a particular party.What are some ways that the organization of the Fed reflects such concerns?

Consider five high school students working on homework in study hall. Which of the following pairs of students has a double coincidence of wants?

If the reserve ratio is 12.5 percent,then $5,600 of money can be generated by

Which of the following is included in both M1 and M2?

The money multiplier equals 1/(1 - R),where R represents the reserve ratio.

Economists argue that the move from barter to money increased trade and production.How is this possible?

If the reserve ratio for all banks is 5 percent,then $1,000 of additional reserves can create up to

At the Federal Reserve,

The Federal Reserve primarily uses open-market operations to change the money supply.

The series of bank failures in 1907 occurred despite the creation of the Federal Reserve many years earlier.

The ease with which an asset can be

Suppose a bank's reserve ratio is 6.5 percent and the bank has $1,950 in reserve.Its deposits amount to

If the Fed sells government bonds to the public,then reserves

Suppose a bank has a 10 percent reserve requirement,$4,000 in deposits,and has loaned out all it can given the reserve requirement.

Which of the following lists two things that both increase the money supply?

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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