Question 1

Money functioning as a medium of exchange results in an increase in transactions costs.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is false?

Accepted Answer

A) ​The money supply will tend to rise when the Fed pays a lower interest rate on bank reserves. 
B) ​If banks never wanted to hold excess reserves, decreasing the interest rate the Fed pays on reserves would increase the money supply. 
C) ​If banks hold excess reserves, the actual money multiplier would be less than potential money expansion. 
D) ​All of the above are true 
A) ​The money supply will tend to rise when the Fed pays a lower interest rate on bank reserves. 
B) ​If banks never wanted to hold excess reserves, decreasing the interest rate the Fed pays on reserves would increase the money supply. 
C) ​If banks hold excess reserves, the actual money multiplier would be less than potential money expansion. 
D) ​All of the above are true

Question 3

The problem of double coincidence of wants is associated with:

Accepted Answer

A) ​paper money. 
B) ​insurance. 
C) ​credit cards. 
D) ​barter system. 
A) ​paper money. 
B) ​insurance. 
C) ​credit cards. 
D) ​barter system.

Question 4

Most of the key decisions of the Federal Reserve are actually made by its Federal Open Market Committee.

Accepted Answer

A) True 
 B)False

Question 5

There are 12 Federal Reserve Banks in the Federal Reserve System.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following backs our money supply?

Accepted Answer

A) ​The words "This note is legal tender." 
B) ​The faith in the government 
C) ​The faith that people will take it in exchange for goods and services 
D) ​Precious metals 
A) ​The words "This note is legal tender." 
B) ​The faith in the government 
C) ​The faith that people will take it in exchange for goods and services 
D) ​Precious metals

Question 7

Which of the following assets is most liquid?

Accepted Answer

A) ​funds in a checking account 
B) ​a car 
C) ​ten acres of land 
D) ​a television 
A) ​funds in a checking account 
B) ​a car 
C) ​ten acres of land 
D) ​a television

Question 8

An increase in the excess reserves banks want to hold, together with people taking currency out of their demand deposit accounts, 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 9

Suppose the banking system as a whole has $600 billion in deposits and $66 billion in reserves, with a reserve ratio of 11 percent. What happens to the stock of money if the Fed lowers reserve requirements by changing the reserve ratio to 10 percent?

Accepted Answer

Under the revised reserve requirements,

Question 10

Which of the following is true?

Accepted Answer

A) ​Demand deposits and other checkable deposits have replaced paper and metallic currency as the major source of money used for transactions in the United States. 
B) ​Credit cards are not money; they are substitutes for the use of money in exchange. 
C) ​Most of the money that we use for day-to-day transactions is not official legal tender. 
D) ​all of the above 
A) ​Demand deposits and other checkable deposits have replaced paper and metallic currency as the major source of money used for transactions in the United States. 
B) ​Credit cards are not money; they are substitutes for the use of money in exchange. 
C) ​Most of the money that we use for day-to-day transactions is not official legal tender. 
D) ​all of the above

Question 11

Which of the following is true?

Accepted Answer

A) ​The FDIC sets the reserve requirements for commercial banks. 
B) ​The Federal Reserve System guarantees the deposits in almost all banks up to a limit of $1,000,000 per account. 
C) ​If a bank should fail, the FDIC guarantees that depositors can get their funds up to a limit of $250,000 per account. 
D) ​all of the above 
A) ​The FDIC sets the reserve requirements for commercial banks. 
B) ​The Federal Reserve System guarantees the deposits in almost all banks up to a limit of $1,000,000 per account. 
C) ​If a bank should fail, the FDIC guarantees that depositors can get their funds up to a limit of $250,000 per account. 
D) ​all of the above

Question 12

Rapid inflation makes holding a large amount of money:

Accepted Answer

A) ​wiser, because you will generally need more and more to buy the goods and services you want. 
B) ​less wise, because the opportunity cost of holding money is high. 
C) ​less wise, because someone might steal it, or it might be destroyed. 
D) ​wiser, because the opportunity cost of holding money is high. 
A) ​wiser, because you will generally need more and more to buy the goods and services you want. 
B) ​less wise, because the opportunity cost of holding money is high. 
C) ​less wise, because someone might steal it, or it might be destroyed. 
D) ​wiser, because the opportunity cost of holding money is high.

Question 13

There is a positive correlation between a nation's average annual inflation and the degree of independence of its central bank.

Accepted Answer

A) True 
 B)False

Question 14

The interest rate that the Fed charges banks for borrowing funds is called the federal funds rate.

Accepted Answer

A) True 
 B)False

Question 15

If you deposit $500 cash into your account at a commercial bank. If it faces a 10 percent required reserve ratio, as a result of your deposit, the bank will:

Accepted Answer

A) ​have $450 of additional excess reserves. 
B) ​be capable of lending an additional $5,000. 
C) ​be capable of lending an additional $500 
D) ​have $50 of additional excess reserves. 
A) ​have $450 of additional excess reserves. 
B) ​be capable of lending an additional $5,000. 
C) ​be capable of lending an additional $500 
D) ​have $50 of additional excess reserves.

Question 16

U.S. government bonds held by commercial banks are:

Accepted Answer

A) ​government assets and commercial bank assets. 
B) ​government assets and commercial bank liabilities. 
C) ​government liabilities and commercial bank assets. 
D) ​government liabilities and commercial bank liabilities. 
A) ​government assets and commercial bank assets. 
B) ​government assets and commercial bank liabilities. 
C) ​government liabilities and commercial bank assets. 
D) ​government liabilities and commercial bank liabilities.

Question 17

When the U.S. banking system collapsed during 1929-1933, the money supply declined dramatically.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following would most likely reduce the number of bank failures?

Accepted Answer

A) ​an increase in the number of small banks 
B) ​tighter restrictions on interstate banking 
C) ​creating a system of deposit insurance 
D) ​encouraging banks to make more risky loans 
A) ​an increase in the number of small banks 
B) ​tighter restrictions on interstate banking 
C) ​creating a system of deposit insurance 
D) ​encouraging banks to make more risky loans

Question 19

Which of the following is most frequently used when the Fed is attempting to adjust the money supply?

Accepted Answer

A) ​Changing reserve requirements 
B) ​Open market operations 
C) ​Changing the discount rate 
D) ​Moral suasion 
A) ​Changing reserve requirements 
B) ​Open market operations 
C) ​Changing the discount rate 
D) ​Moral suasion

Question 20

The chief function of the Federal Reserve is to be the federal government's tax collection institution.

Accepted Answer

A) True 
 B)False

Exam 17: Income, Poverty and Health Care

Money functioning as a medium of exchange results in an increase in transactions costs.

Which of the following is false?

The problem of double coincidence of wants is associated with:

Most of the key decisions of the Federal Reserve are actually made by its Federal Open Market Committee.

There are 12 Federal Reserve Banks in the Federal Reserve System.

Which of the following backs our money supply?

Which of the following assets is most liquid?

An increase in the excess reserves banks want to hold, together with people taking currency out of their demand deposit accounts, would:

Suppose the banking system as a whole has $600 billion in deposits and $66 billion in reserves, with a reserve ratio of 11 percent. What happens to the stock of money if the Fed lowers reserve requirements by changing the reserve ratio to 10 percent?

Which of the following is true?

Which of the following is true?

Rapid inflation makes holding a large amount of money:

There is a positive correlation between a nation's average annual inflation and the degree of independence of its central bank.

The interest rate that the Fed charges banks for borrowing funds is called the federal funds rate.

If you deposit $500 cash into your account at a commercial bank. If it faces a 10 percent required reserve ratio, as a result of your deposit, the bank will:

U.S. government bonds held by commercial banks are:

When the U.S. banking system collapsed during 1929-1933, the money supply declined dramatically.

Which of the following would most likely reduce the number of bank failures?

Which of the following is most frequently used when the Fed is attempting to adjust the money supply?

The chief function of the Federal Reserve is to be the federal government's tax collection institution.

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