Question 1

If the Fed buys a U.S. government bond from a member of the public,

Accepted Answer

A) ​the banking system has more reserves and the money supply tends to grow. 
B) ​the banking system has less reserves and the money supply tends to grow. 
C) ​the banking system has more reserves and the money supply tends to fall. 
D) ​the banking system has less reserves and the money supply tends to fall. 
A) ​the banking system has more reserves and the money supply tends to grow. 
B) ​the banking system has less reserves and the money supply tends to grow. 
C) ​the banking system has more reserves and the money supply tends to fall. 
D) ​the banking system has less reserves and the money supply tends to fall.

Question 2

Which of the following is not one of the functions of money?

Accepted Answer

A) ​unit of account 
B) ​means of deferred payment 
C) ​encouraging people to barter 
D) ​medium of exchange 
A) ​unit of account 
B) ​means of deferred payment 
C) ​encouraging people to barter 
D) ​medium of exchange

Question 3

If Billy Bob's National Bank of Slingblade confronts a 10 percent reserve requirement and has excess reserves of $20,000, what is the maximum amount of additional loans that the bank can extend?

Accepted Answer

A) ​$2,000 
B) ​$18,000 
C) ​$20,000 
D) ​$200,000 
A) ​$2,000 
B) ​$18,000 
C) ​$20,000 
D) ​$200,000

Question 4

Exhibit 17-2
​
A bank's assets consist of $1,000,000 in total reserves, $2,100,000 in loans, and a building worth $1,200,000. Its liabilities and capital consist of $3,000,000 in demand deposits and $1,300,000 in capital.
-Refer to Exhibit 17-2. If the required reserve ratio is 10 percent, what is the level of the bank's excess reserves? How much money could the excess reserves be used to create in the banking system as a result?

Accepted Answer

A) ​$700,000; $700,000 
B) ​$700,000; $7,000,000 
C) ​$300,000; $300,000 
D) ​$300,000; $3,000,000 
A) ​$700,000; $700,000 
B) ​$700,000; $7,000,000 
C) ​$300,000; $300,000 
D) ​$300,000; $3,000,000

Question 5

The Fed is part of the executive branch of the federal government.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is not a form of money?

Accepted Answer

A) ​checkable deposits 
B) ​travelers' checks 
C) ​currency 
D) ​credit cards 
A) ​checkable deposits 
B) ​travelers' checks 
C) ​currency 
D) ​credit cards

Question 7

If the Fed paid a higher interest rate to banks on their reserves at the Fed, excess reserves in the banking system would tend to fall.

Accepted Answer

A) True 
 B)False

Question 8

Suppose you found $2,000 hidden in your mattress and deposited it in a demand deposit account at your bank. If the reserve requirement was 25 percent, the deposit would directly create ____ in excess reserves and ultimately lead to a ____ total increase in the money supply, if all banks in the system lend out 100 percent of their excess reserves.

Accepted Answer

A) ​$2,000; $8,000 
B) ​$2,000; $6,000 
C) ​$1,500; $8,000 
D) ​$1,500; $6,000 
A) ​$2,000; $8,000 
B) ​$2,000; $6,000 
C) ​$1,500; $8,000 
D) ​$1,500; $6,000

Question 9

A gold standard is:

Accepted Answer

A) ​a measurement of the importance of a good; it indicates high quality. 
B) ​the basis for monetary exchange internationally. 
C) ​an internationally recognized means for defining currency exchange rates. 
D) ​a system where currency (e.g., the dollar) was defined as equivalent in value to a certain amount of gold. 
A) ​a measurement of the importance of a good; it indicates high quality. 
B) ​the basis for monetary exchange internationally. 
C) ​an internationally recognized means for defining currency exchange rates. 
D) ​a system where currency (e.g., the dollar) was defined as equivalent in value to a certain amount of gold.

Question 10

If a bank had demand deposits of $80 million and it faced a 25 percent required reserve ratio, it would be able to have a maximum amount of how many dollars worth of loans?

Accepted Answer

A) ​$20 million 
B) ​$40 million 
C) ​$60 million 
D) ​$80 million 
A) ​$20 million 
B) ​$40 million 
C) ​$60 million 
D) ​$80 million

Question 11

If a bank had $200 million in demand deposits and faced a 40 percent reserve requirement, it would be required to hold ____ as reserves and could have a total amount of loans issued up to ____.

Accepted Answer

A) ​$120 million; $80 million 
B) ​$80 million; $120 million 
C) ​$200 million; $500 million 
D) ​$500 million; $200 million 
A) ​$120 million; $80 million 
B) ​$80 million; $120 million 
C) ​$200 million; $500 million 
D) ​$500 million; $200 million

Question 12

The money supply contracts when the Fed:

Accepted Answer

A) ​replaces worn and ripped Federal Reserve notes. 
B) ​sells government securities. 
C) ​borrows from the U.S.Treasury. 
D) ​purchases equities in major U.S.corporations. 
A) ​replaces worn and ripped Federal Reserve notes. 
B) ​sells government securities. 
C) ​borrows from the U.S.Treasury. 
D) ​purchases equities in major U.S.corporations.

Question 13

If a bank had demand deposits of $50 million and it faced a 25 percent required reserve ratio, it would be able to have a maximum amount of how many dollars worth of loans?

Accepted Answer

A) ​$50 million 
B) ​$37.5 million 
C) ​$25 million 
D) ​$12.5 million 
A) ​$50 million 
B) ​$37.5 million 
C) ​$25 million 
D) ​$12.5 million

Question 14

When the required reserve ratio is decreased:

Accepted Answer

A) ​the excess reserves of member banks are reduced, but the money multiplier is not affected. 
B) ​the excess reserves of member banks are reduced, and the money multiplier is increased. 
C) ​the excess reserves of member banks are increased, but the money multiplier is not affected. 
D) ​the excess reserves of member banks are increased, and the money multiplier is increased. 
A) ​the excess reserves of member banks are reduced, but the money multiplier is not affected. 
B) ​the excess reserves of member banks are reduced, and the money multiplier is increased. 
C) ​the excess reserves of member banks are increased, but the money multiplier is not affected. 
D) ​the excess reserves of member banks are increased, and the money multiplier is increased.

Question 15

Which of the following combinations would not produce conflicting effects on the supply of money?

Accepted Answer

A) ​The Fed pays a higher interest rate on bank reserves and increases the required reserve ratio. 
B) ​The Fed conducts an open market purchase and lowers the discount rate. 
C) ​The Fed pays a higher interest rate on bank reserves and conducts an open market sale of government securities. 
D) ​None of the above would produce conflicting effects on the supply of money 
A) ​The Fed pays a higher interest rate on bank reserves and increases the required reserve ratio. 
B) ​The Fed conducts an open market purchase and lowers the discount rate. 
C) ​The Fed pays a higher interest rate on bank reserves and conducts an open market sale of government securities. 
D) ​None of the above would produce conflicting effects on the supply of money

Question 16

If the reserve requirement is 15 percent and a customer makes a new cash deposit of $50,000, how much new excess reserves are created?

Accepted Answer

A) ​$7,500 
B) ​$33,000 
C) ​$67,500 
D) ​$42,500 
A) ​$7,500 
B) ​$33,000 
C) ​$67,500 
D) ​$42,500

Question 17

An increase in demand deposits would ____ M1 and ____ M2.

Accepted Answer

A) ​increase; increase. 
B) ​not change; increase. 
C) ​decrease; decrease. 
D) ​not change; decrease. 
A) ​increase; increase. 
B) ​not change; increase. 
C) ​decrease; decrease. 
D) ​not change; decrease.

Question 18

A combination of an increase in the discount rate and an open market sale of government securities by the Fed would:

Accepted Answer

A) ​increase the money supply. 
B) ​decrease the money supply. 
C) ​leave the money supply unchanged. 
D) ​have an indeterminate effect on the money supply. 
A) ​increase the money supply. 
B) ​decrease the money supply. 
C) ​leave the money supply unchanged. 
D) ​have an indeterminate effect on the money supply.

Question 19

Which of the following did not contribute to the U.S. banking collapse of 1929-1933?

Accepted Answer

A) ​The Federal Reserve System and other government agencies did not act quickly or decisively enough. 
B) ​Deposit insurance did not exist at that time. 
C) ​The banking industry consisted of only a few very large banks. 
D) ​The fact that the economy was in a continuous downward spiral during this period undermined depositors' confidence in the solvency of the banks. 
A) ​The Federal Reserve System and other government agencies did not act quickly or decisively enough. 
B) ​Deposit insurance did not exist at that time. 
C) ​The banking industry consisted of only a few very large banks. 
D) ​The fact that the economy was in a continuous downward spiral during this period undermined depositors' confidence in the solvency of the banks.

Question 20

One reason why gold and silver coins have historically served as money is that:

Accepted Answer

A) ​they are easily portable. 
B) ​they can be made of uniform size and quality. 
C) ​they can be divided if necessary for low prices. 
D) ​all of the above are correct. 
A) ​they are easily portable. 
B) ​they can be made of uniform size and quality. 
C) ​they can be divided if necessary for low prices. 
D) ​all of the above are correct.

If the Fed buys a U.S. government bond from a member of the public,

Which of the following is not one of the functions of money?

If Billy Bob's National Bank of Slingblade confronts a 10 percent reserve requirement and has excess reserves of $20,000, what is the maximum amount of additional loans that the bank can extend?

The Fed is part of the executive branch of the federal government.

Which of the following is not a form of money?

If the Fed paid a higher interest rate to banks on their reserves at the Fed, excess reserves in the banking system would tend to fall.

A gold standard is:

If a bank had demand deposits of $80 million and it faced a 25 percent required reserve ratio, it would be able to have a maximum amount of how many dollars worth of loans?

If a bank had $200 million in demand deposits and faced a 40 percent reserve requirement, it would be required to hold as reserves and could have a total amount of loans issued up to .

The money supply contracts when the Fed:

If a bank had demand deposits of $50 million and it faced a 25 percent required reserve ratio, it would be able to have a maximum amount of how many dollars worth of loans?

When the required reserve ratio is decreased:

Which of the following combinations would not produce conflicting effects on the supply of money?

If the reserve requirement is 15 percent and a customer makes a new cash deposit of $50,000, how much new excess reserves are created?

An increase in demand deposits would M1 and M2.

A combination of an increase in the discount rate and an open market sale of government securities by the Fed would:

Which of the following did not contribute to the U.S. banking collapse of 1929-1933?

One reason why gold and silver coins have historically served as money is that:

The Role and Method of Economics

Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Market in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Filters

Exam 17: Income, Poverty and Health Care

If the Fed buys a U.S. government bond from a member of the public,

Which of the following is not one of the functions of money?

If Billy Bob's National Bank of Slingblade confronts a 10 percent reserve requirement and has excess reserves of $20,000, what is the maximum amount of additional loans that the bank can extend?

The Fed is part of the executive branch of the federal government.

Which of the following is not a form of money?

If the Fed paid a higher interest rate to banks on their reserves at the Fed, excess reserves in the banking system would tend to fall.

A gold standard is:

If a bank had demand deposits of $80 million and it faced a 25 percent required reserve ratio, it would be able to have a maximum amount of how many dollars worth of loans?

If a bank had $200 million in demand deposits and faced a 40 percent reserve requirement, it would be required to hold ____ as reserves and could have a total amount of loans issued up to ____.

The money supply contracts when the Fed:

If a bank had demand deposits of $50 million and it faced a 25 percent required reserve ratio, it would be able to have a maximum amount of how many dollars worth of loans?

When the required reserve ratio is decreased:

Which of the following combinations would not produce conflicting effects on the supply of money?

If the reserve requirement is 15 percent and a customer makes a new cash deposit of $50,000, how much new excess reserves are created?

An increase in demand deposits would ____ M1 and ____ M2.

A combination of an increase in the discount rate and an open market sale of government securities by the Fed would:

Which of the following did not contribute to the U.S. banking collapse of 1929-1933?

One reason why gold and silver coins have historically served as money is that:

The Role and Method of Economics

Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Market in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Filters

If a bank had $200 million in demand deposits and faced a 40 percent reserve requirement, it would be required to hold as reserves and could have a total amount of loans issued up to .

An increase in demand deposits would M1 and M2.