Question 1

If the reserve ratio is 10 percent, $1,400 of additional reserves can create up to

Accepted Answer

A)  $140 of new money. 
B)  $14,000 of new money. 
C)  $140,000 of new money. 
D)  None of the above is correct. 
A)  $140 of new money. 
B)  $14,000 of new money. 
C)  $140,000 of new money. 
D)  None of the above is correct.

Question 2

The leverage ratio is calculated as

Accepted Answer

A)  assets minus liabilities. 
B)  assets divided by bank capital 
C)  the reciprocal of the required reserve ratio 
D)  the required reserve ratio multiplied by bank capital. 
A)  assets minus liabilities. 
B)  assets divided by bank capital 
C)  the reciprocal of the required reserve ratio 
D)  the required reserve ratio multiplied by bank capital.

Question 3

List two reasons why the Fed cannot control the exact size of the money supply.

Accepted Answer

1) The Fed cannot control how much money

Question 4

Which of the following is not included in M1?

Accepted Answer

A)  currency 
B)  demand deposits 
C)  traveler's checks 
D)  credit cards 
A)  currency 
B)  demand deposits 
C)  traveler's checks 
D)  credit cards

Question 5

When there is a reserve requirement, banks

Accepted Answer

A)  must hold exactly the required quantity of reserves. 
B)  may hold more than, but not less than, the required quantity of reserves. 
C)  may hold less than, but not more than, the required quantity of reserves. 
D)  must seek the Fed's permission whenever they wish to expand or contract their loans to customers. 
A)  must hold exactly the required quantity of reserves. 
B)  may hold more than, but not less than, the required quantity of reserves. 
C)  may hold less than, but not more than, the required quantity of reserves. 
D)  must seek the Fed's permission whenever they wish to expand or contract their loans to customers.

Question 6

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

Accepted Answer

A)  falls. The larger the reserve ratio is, the more the money supply falls. 
B)  falls. The larger the reserve ratio is, the less the money supply falls. 
C)  rises. The larger the reserve ratio is, the more the money supply rises. 
D)  rises. The larger the reserve ratio is, the less the money supply rises. 
A)  falls. The larger the reserve ratio is, the more the money supply falls. 
B)  falls. The larger the reserve ratio is, the less the money supply falls. 
C)  rises. The larger the reserve ratio is, the more the money supply rises. 
D)  rises. The larger the reserve ratio is, the less the money supply rises.

Question 7

Prisoners sometimes determine a single good to be used as money. This good becomes

Accepted Answer

A)  a medium of exchange and a unit of account. 
B)  a medium of exchange, but not a unit of account. 
C)  a unit of account, but not a medium of exchange. 
D)  neither a unit of account nor a medium of exchange. 
A)  a medium of exchange and a unit of account. 
B)  a medium of exchange, but not a unit of account. 
C)  a unit of account, but not a medium of exchange. 
D)  neither a unit of account nor a medium of exchange.

Question 8

Describe how the use of leverage affects the impact of bank investments.

Accepted Answer

Leverage amplifies the impact from chang

Question 9

The Fed decreases reserves if it conducts open market

Accepted Answer

A)  purchases or auctions term credit. 
B)  purchases but not if it auctions term credit 
C)  sales or auctions term credit 
D)  sales but not if it auctions term credit 
A)  purchases or auctions term credit. 
B)  purchases but not if it auctions term credit 
C)  sales or auctions term credit 
D)  sales but not if it auctions term credit

Question 10

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 11

Other things the same if reserve requirements are decreased, the reserve ratio

Accepted Answer

A)  decreases, the money multiplier increases, and the money supply decreases. 
B)  increases, the money multiplier increases, and the money supply increases. 
C)  decreases, the money multiplier increases, and the money supply increases. 
D)  increases, the money multiplier increases, and the money supply decreases. 
A)  decreases, the money multiplier increases, and the money supply decreases. 
B)  increases, the money multiplier increases, and the money supply increases. 
C)  decreases, the money multiplier increases, and the money supply increases. 
D)  increases, the money multiplier increases, and the money supply decreases.

Question 12

The money supply decreases if

Accepted Answer

A)  households decide to hold relatively more currency and relatively fewer deposits and banks decide to hold relatively more excess reserves and make fewer loans. 
B)  households decide to hold relatively more currency and relatively fewer deposits and banks decide to hold relatively fewer excess reserves and make more loans. 
C)  households decide to hold relatively less currency and relatively more deposits and banks decide to hold relatively more excess reserves and make fewer loans. 
D)  households decide to hold relatively less currency and relatively more deposits and banks decide to hold relatively less excess reserves and make more loans. 
A)  households decide to hold relatively more currency and relatively fewer deposits and banks decide to hold relatively more excess reserves and make fewer loans. 
B)  households decide to hold relatively more currency and relatively fewer deposits and banks decide to hold relatively fewer excess reserves and make more loans. 
C)  households decide to hold relatively less currency and relatively more deposits and banks decide to hold relatively more excess reserves and make fewer loans. 
D)  households decide to hold relatively less currency and relatively more deposits and banks decide to hold relatively less excess reserves and make more loans.

Question 13

The interest rate charged by the Fed to member banks is called the .

Accepted Answer

The answer of The interest rate charged by the Fed...

Question 14

Why do Federal Reserve Board of Governors have long 14 year) terms?

Accepted Answer

Long terms allow Fed Board of

Question 15

To decrease the money supply, the Fed could

Accepted Answer

A)  sell government bonds. 
B)  increase the discount rate. 
C)  increase the reserve requirement. 
D)  All of the above are correct. 
A)  sell government bonds. 
B)  increase the discount rate. 
C)  increase the reserve requirement. 
D)  All of the above are correct.

Question 16

Money

Accepted Answer

A)  is more efficient than barter. 
B)  makes trades easier. 
C)  allows greater specialization. 
D)  All of the above are correct. 
A)  is more efficient than barter. 
B)  makes trades easier. 
C)  allows greater specialization. 
D)  All of the above are correct.

Question 17

In December 1999 people feared that there might be computer problems at banks as the century changed. Consequently, people wanted to hold relatively more in currency and relatively less in deposits. In anticipation banks raised their reserve ratios to have enough cash on hand to meet depositors' demands. These actions by the public

Accepted Answer

A)  would increase the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds. 
B)  would increase the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds. 
C)  would reduce the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds. 
D)  would reduce the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds. 
A)  would increase the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds. 
B)  would increase the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds. 
C)  would reduce the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds. 
D)  would reduce the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds.

Question 18

A bank operates with reserves of $100, loans of $300 and securities of $100. The bank's only liability is deposits of $400 since it has zero debt. Calculate the bank's leverage ratio.

Accepted Answer

Since Assets - Liabilities equals Bank C

Question 19

Which of the following is a liability of a bank and an asset of its customers?

Accepted Answer

A)  deposits of its customers and loans to its customers 
B)  deposits of its customers but not loans to its customers 
C)  loans of its customers but not the deposits of its customers 
D)  neither the deposits of its customers nor the loans to its customers 
A)  deposits of its customers and loans to its customers 
B)  deposits of its customers but not loans to its customers 
C)  loans of its customers but not the deposits of its customers 
D)  neither the deposits of its customers nor the loans to its customers

Question 20

When we measure and record economic value, we use money as the

Accepted Answer

A)  liquid asset. 
B)  medium of exchange. 
C)  unit of account. 
D)  store of value. 
A)  liquid asset. 
B)  medium of exchange. 
C)  unit of account. 
D)  store of value.

If the reserve ratio is 10 percent, $1,400 of additional reserves can create up to

The leverage ratio is calculated as

List two reasons why the Fed cannot control the exact size of the money supply.

Which of the following is not included in M1?

When there is a reserve requirement, banks

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

Prisoners sometimes determine a single good to be used as money. This good becomes

Describe how the use of leverage affects the impact of bank investments.

The Fed decreases reserves if it conducts open market

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

Other things the same if reserve requirements are decreased, the reserve ratio

The money supply decreases if

The interest rate charged by the Fed to member banks is called the .

Why do Federal Reserve Board of Governors have long 14 year) terms?

To decrease the money supply, the Fed could

Money

A bank operates with reserves of $100, loans of $300 and securities of $100. The bank's only liability is deposits of $400 since it has zero debt. Calculate the bank's leverage ratio.

Which of the following is a liability of a bank and an asset of its customers?

When we measure and record economic value, we use money as the

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment and Its Natural Rate

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 Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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Exam 11: The Monetary System

If the reserve ratio is 10 percent, $1,400 of additional reserves can create up to

The leverage ratio is calculated as

List two reasons why the Fed cannot control the exact size of the money supply.

Which of the following is not included in M1?

When there is a reserve requirement, banks

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

Prisoners sometimes determine a single good to be used as money. This good becomes

Describe how the use of leverage affects the impact of bank investments.

The Fed decreases reserves if it conducts open market

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

Other things the same if reserve requirements are decreased, the reserve ratio

The money supply decreases if

The interest rate charged by the Fed to member banks is called the .

Why do Federal Reserve Board of Governors have long 14 year) terms?

To decrease the money supply, the Fed could

Money

A bank operates with reserves of $100, loans of $300 and securities of $100. The bank's only liability is deposits of $400 since it has zero debt. Calculate the bank's leverage ratio.

Which of the following is a liability of a bank and an asset of its customers?

When we measure and record economic value, we use money as the

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment and Its Natural Rate

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 Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters