Question 1

If the Fed increases the required reserve ratio at a time when banks are holding excess reserves,

Accepted Answer

A) it forces banks to increase the money supply 
B) it forces banks to decrease the money supply 
C) it makes it possible for banks to increase the money supply but does not force them to do so 
D) the money supply will not increase as much as if the Fed left the reserve ratio alone 
E) it is conducting open market operations but not changing the money supply 
A) it forces banks to increase the money supply 
B) it forces banks to decrease the money supply 
C) it makes it possible for banks to increase the money supply but does not force them to do so 
D) the money supply will not increase as much as if the Fed left the reserve ratio alone 
E) it is conducting open market operations but not changing the money supply

Question 2

The Fed operates

Accepted Answer

A) on a balanced budget 
B) at a loss,since Federal Reserve notes and member bank deposits earn no interest 
C) at a profit,since Federal Reserve notes and bank deposits earn no interest,but government securities and loans to commercial banks do 
D) at a profit,since Federal Reserve notes and member bank deposits earn interest 
E) at a loss,since Federal Reserve notes and member bank deposits earn interest,but government securities and loans to commercial banks do not 
A) on a balanced budget 
B) at a loss,since Federal Reserve notes and member bank deposits earn no interest 
C) at a profit,since Federal Reserve notes and bank deposits earn no interest,but government securities and loans to commercial banks do 
D) at a profit,since Federal Reserve notes and member bank deposits earn interest 
E) at a loss,since Federal Reserve notes and member bank deposits earn interest,but government securities and loans to commercial banks do not

Question 3

M1 includes currency held in shoeboxes by people distrustful of banks.

Accepted Answer

A) True 
 B)False

Question 4

Suppose the required reserve ratio is 0.1 and Linda deposits $4,000 in cash at the College State Bank.If the bank held no excess reserves before Linda's deposit and now increases its reserves by $500,which of the following is true?

Accepted Answer

A) The bank must have lent out an additional $4,000. 
B) The $500 are required reserves. 
C) The bank has excess reserves of $100. 
D) Both the bank's assets and its liabilities rise by $500. 
E) The bank has $500 in excess reserves. 
A) The bank must have lent out an additional $4,000. 
B) The $500 are required reserves. 
C) The bank has excess reserves of $100. 
D) Both the bank's assets and its liabilities rise by $500. 
E) The bank has $500 in excess reserves.

Question 5

Which of the following is not money?

Accepted Answer

A) check 
B) coin 
C) currency 
D) debit card 
E) credit card 
A) check 
B) coin 
C) currency 
D) debit card 
E) credit card

Question 6

Banks help to overcome the problem of asymmetric information by

Accepted Answer

A) lending only to students 
B) acquiring expertise in evaluating the credit histories of borrowers 
C) threatening borrowers 
D) offering only one type of loan 
E) providing information to lenders 
A) lending only to students 
B) acquiring expertise in evaluating the credit histories of borrowers 
C) threatening borrowers 
D) offering only one type of loan 
E) providing information to lenders

Question 7

The Fed performs all of the following functions except one.Which is the exception?

Accepted Answer

A) making loans to banks 
B) clearing checks for banks 
C) holding deposits of banks 
D) minting U.S.coins 
E) holding deposits of the U.S.Treasury 
A) making loans to banks 
B) clearing checks for banks 
C) holding deposits of banks 
D) minting U.S.coins 
E) holding deposits of the U.S.Treasury

Question 8

Banks minimize the risk of loss to depositors by

Accepted Answer

A) lending to casino owners 
B) making many different loans to different borrowers 
C) refusing to lend money to the U.S.government 
D) putting all their eggs in one basket 
E) making very long-term loans 
A) lending to casino owners 
B) making many different loans to different borrowers 
C) refusing to lend money to the U.S.government 
D) putting all their eggs in one basket 
E) making very long-term loans

Question 9

A bank finds itself short of required reserves and therefore borrows from another commercial bank.The interest rate on this loan is

Accepted Answer

A) zero 
B) the prime rate 
C) the discount rate 
D) the federal funds rate 
E) the required reserve ratio 
A) zero 
B) the prime rate 
C) the discount rate 
D) the federal funds rate 
E) the required reserve ratio

Question 10

What essential factor enables commercial banks to create money?

Accepted Answer

A) required reserves 
B) excess reserves 
C) state and local government securities 
D) U.S.government securities 
E) net worth 
A) required reserves 
B) excess reserves 
C) state and local government securities 
D) U.S.government securities 
E) net worth

Question 11

If a bank's reserves are exactly equal to the required amount of reserves,then it has no excess reserves.

Accepted Answer

A) True 
 B)False

Question 12

The actual money multiplier is smaller than the simple money multiplier because

Accepted Answer

A) the actual multiplier involves M2 rather than M1 
B) cash withdrawals reduce the amount banks can lend out 
C) withdrawals from checkable deposits increase the amount of excess reserves each bank receives 
D) the Fed wants to reduce the money supply 
E) the actual multiplier uses a different measure of reserve requirements 
A) the actual multiplier involves M2 rather than M1 
B) cash withdrawals reduce the amount banks can lend out 
C) withdrawals from checkable deposits increase the amount of excess reserves each bank receives 
D) the Fed wants to reduce the money supply 
E) the actual multiplier uses a different measure of reserve requirements

Question 13

What do commercial banks and thrifts attempt to maximize?

Accepted Answer

A) assets 
B) deposits 
C) loans 
D) profits 
E) utility 
A) assets 
B) deposits 
C) loans 
D) profits 
E) utility

Question 14

To maximize its profit,a bank will

Accepted Answer

A) minimize actual reserves 
B) maximize actual reserves 
C) minimize excess reserves 
D) maximize excess reserves 
E) minimize required reserves 
A) minimize actual reserves 
B) maximize actual reserves 
C) minimize excess reserves 
D) maximize excess reserves 
E) minimize required reserves

If the Fed increases the required reserve ratio at a time when banks are holding excess reserves,

The Fed operates

M1 includes currency held in shoeboxes by people distrustful of banks.

Suppose the required reserve ratio is 0.1 and Linda deposits $4,000 in cash at the College State Bank.If the bank held no excess reserves before Linda's deposit and now increases its reserves by $500,which of the following is true?

Which of the following is not money?

Banks help to overcome the problem of asymmetric information by

The Fed performs all of the following functions except one.Which is the exception?

Banks minimize the risk of loss to depositors by

A bank finds itself short of required reserves and therefore borrows from another commercial bank.The interest rate on this loan is

What essential factor enables commercial banks to create money?

If a bank's reserves are exactly equal to the required amount of reserves,then it has no excess reserves.

The actual money multiplier is smaller than the simple money multiplier because

What do commercial banks and thrifts attempt to maximize?

To maximize its profit,a bank will

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand, supply, and Markets

Introduction to Macroeconomics

Tracking the Useconomy

Unemployment and Inflation

Productivity and Growth

Aaggregate Expenditure and Aggregate Demand

Baggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

International Trade

Externalities and the Environment

International Finance

Economic Development

understanding Graphs

National Income Accounts

The Algebra of Demand-Side Equilibrium

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Exam 15: Banking and the Money Supply

If the Fed increases the required reserve ratio at a time when banks are holding excess reserves,

The Fed operates

M1 includes currency held in shoeboxes by people distrustful of banks.

Suppose the required reserve ratio is 0.1 and Linda deposits $4,000 in cash at the College State Bank.If the bank held no excess reserves before Linda's deposit and now increases its reserves by $500,which of the following is true?

Which of the following is not money?

Banks help to overcome the problem of asymmetric information by

The Fed performs all of the following functions except one.Which is the exception?

Banks minimize the risk of loss to depositors by

A bank finds itself short of required reserves and therefore borrows from another commercial bank.The interest rate on this loan is

What essential factor enables commercial banks to create money?

If a bank's reserves are exactly equal to the required amount of reserves,then it has no excess reserves.

The actual money multiplier is smaller than the simple money multiplier because

What do commercial banks and thrifts attempt to maximize?

To maximize its profit,a bank will

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand, supply, and Markets

Introduction to Macroeconomics

Tracking the Useconomy

Unemployment and Inflation

Productivity and Growth

Aaggregate Expenditure and Aggregate Demand

Baggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

International Trade

Externalities and the Environment

International Finance

Economic Development

understanding Graphs

National Income Accounts

The Algebra of Demand-Side Equilibrium

Filters