Question 1

Suppose a bank has $3,000 in reserves, $25,000 of deposits, and a 10 percent reserve requirement. What is the amount of excess reserves?

Accepted Answer

The answer of Suppose a bank has $3,000 in reserves,...

Question 2

Bank runs

Accepted Answer

A)  will affect neither the money supply nor the money multiplier. 
B)  increase the money supply. 
C)  can be neither prevented nor mitigated by the Federal Reserve. 
D)  are a problem because banks only hold a fraction of deposits as reserves. 
A)  will affect neither the money supply nor the money multiplier. 
B)  increase the money supply. 
C)  can be neither prevented nor mitigated by the Federal Reserve. 
D)  are a problem because banks only hold a fraction of deposits as reserves.

Question 3

Reserves increase if the Federal Reserve

Accepted Answer

A)  raises the discount rate or auctions more credit. 
B)  raises the discount rate but not if it auctions more credit. 
C)  lowers the discount rate or auctions more credit. 
D)  lowers the discount rate but not if it auctions more credit. 
A)  raises the discount rate or auctions more credit. 
B)  raises the discount rate but not if it auctions more credit. 
C)  lowers the discount rate or auctions more credit. 
D)  lowers the discount rate but not if it auctions more credit.

Question 4

Roundabout trade decreases production.

Accepted Answer

A) True 
 B)False

Question 5

Commodity money is

Accepted Answer

A)  backed by gold. 
B)  the principal type of money in use today. 
C)  money with intrinsic value. 
D)  receipts created in international trade that are used as a medium of exchange. 
A)  backed by gold. 
B)  the principal type of money in use today. 
C)  money with intrinsic value. 
D)  receipts created in international trade that are used as a medium of exchange.

Question 6

An open-market sale

Accepted Answer

A)  increases the number of dollars and the number of bonds in the hands of the public. 
B)  increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public. 
C)  decreases the number of dollars and the number of bonds in the hands of the public. 
D)  decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public. 
A)  increases the number of dollars and the number of bonds in the hands of the public. 
B)  increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public. 
C)  decreases the number of dollars and the number of bonds in the hands of the public. 
D)  decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public.

Question 7

Which of the three functions of money are commonly met by each of the following assets in the U.S. economy?
a. paper dollar
b. precious metals
c. collectibles such as baseball cards, stamps, and antiques

Accepted Answer

a. medium of exchang

Question 8

What is the difference between money and wealth?

Accepted Answer

Money is defined as the set of

Question 9

The Fed sets the interest that borrowers pay on loans from

Accepted Answer

A)  the discount window and the term auction facility 
B)  the discount window but not the term auction facility 
C)  the term auction facility but not the discount window 
D)  neither the discount window nor the term auction facility 
A)  the discount window and the term auction facility 
B)  the discount window but not the term auction facility 
C)  the term auction facility but not the discount window 
D)  neither the discount window nor the term auction facility

Question 10

Table 29-8
  
-Refer to Table 29-8. This bank's leverage ratio is

Accepted Answer

A)  2. 
B)  50. 
C)  13.3. 
D)  7.5. 
A)  2. 
B)  50. 
C)  13.3. 
D)  7.5.

Question 11

Economists use the term "money" to refer to

Accepted Answer

A)  all wealth. 
B)  all assets, including real assets and financial assets. 
C)  all financial assets, but not real assets. 
D)  those types of wealth that are regularly accepted by sellers in exchange for goods and services. 
A)  all wealth. 
B)  all assets, including real assets and financial assets. 
C)  all financial assets, but not real assets. 
D)  those types of wealth that are regularly accepted by sellers in exchange for goods and services.

Question 12

If the reserve ratio is 5 percent, banks do not hold excess reserves, and people do not hold currency, then when the Fed purchases $20 million worth of government bonds, bank reserves

Accepted Answer

A)  increase by $20 million and the money supply eventually increases by $400 million. 
B)  decrease by $20 million and the money supply eventually decreases by $400 million. 
C)  increase by $20 million and the money supply eventually increases by $100 million. 
D)  decrease by $20 million and the money supply eventually decreases by $100 million. 
A)  increase by $20 million and the money supply eventually increases by $400 million. 
B)  decrease by $20 million and the money supply eventually decreases by $400 million. 
C)  increase by $20 million and the money supply eventually increases by $100 million. 
D)  decrease by $20 million and the money supply eventually decreases by $100 million.

Question 13

The Federal Open Market Committee meets approximately

Accepted Answer

A)  every three weeks 
B)  every six weeks 
C)  every 3 months 
D)  every 6 months. 
A)  every three weeks 
B)  every six weeks 
C)  every 3 months 
D)  every 6 months.

Question 14

The fractional reserve characteristic of the banking system allows banks to create money and also create wealth from bank deposits. Describe why this statement is or is not true.

Accepted Answer

This statement is not true.
Banks can cr

Question 15

The amount of currency per person in the United States is about

Accepted Answer

A)  $110. 
B)  $300. 
C)  $2,450. 
D)  $4,490. 
A)  $110. 
B)  $300. 
C)  $2,450. 
D)  $4,490.

Question 16

Small time deposits are included in

Accepted Answer

A)  M1 but not M2. 
B)  M2 but not M1. 
C)  M1 and M2. 
D)  neither M1 nor M2. 
A)  M1 but not M2. 
B)  M2 but not M1. 
C)  M1 and M2. 
D)  neither M1 nor M2.

Question 17

The agency responsible for regulating the U.S. monetary system is the

Accepted Answer

A)  U.S. Treasury 
B)  Federal Reserve 
C)  Department of Justice 
D)  Federal Trade Commission 
A)  U.S. Treasury 
B)  Federal Reserve 
C)  Department of Justice 
D)  Federal Trade Commission

Question 18

Which of the following is not a reason the New York Federal Reserve Bank president always gets to vote at the Federal Open Market Committee meetings?

Accepted Answer

A)  New York is the traditional financial center of the U.S. economy. 
B)  All Fed purchases and sales of bonds go through the New York Fed's trading desk. 
C)  New York has higher population than other cities in the U.S. 
D)  All of the above are reasons. 
A)  New York is the traditional financial center of the U.S. economy. 
B)  All Fed purchases and sales of bonds go through the New York Fed's trading desk. 
C)  New York has higher population than other cities in the U.S. 
D)  All of the above are reasons.

Question 19

A problem that the Fed faces when it attempts to control the money supply is that

Accepted Answer

A)  since the U.S. has a fractional-reserve banking system, the amount of money in the economy depends in part on the behavior of depositors and bankers. 
B)  the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools. 
C)  while the Fed has the ability to change the money supply by a large amount, it does not have the ability to change it by a small amount. 
D)  federal legislation in the 1950s stripped the Fed of its power to act as a lender of last resort to banks. 
A)  since the U.S. has a fractional-reserve banking system, the amount of money in the economy depends in part on the behavior of depositors and bankers. 
B)  the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools. 
C)  while the Fed has the ability to change the money supply by a large amount, it does not have the ability to change it by a small amount. 
D)  federal legislation in the 1950s stripped the Fed of its power to act as a lender of last resort to banks.

Question 20

The interest rate that the Fed charges banks that borrow reserves from it is the

Accepted Answer

A)  federal funds rate. 
B)  discount rate. 
C)  reserve requirement. 
D)  prime rate. 
A)  federal funds rate. 
B)  discount rate. 
C)  reserve requirement. 
D)  prime rate.

Exam 21: The Monetary System

Suppose a bank has $3,000 in reserves, $25,000 of deposits, and a 10 percent reserve requirement. What is the amount of excess reserves?

Bank runs

Reserves increase if the Federal Reserve

Roundabout trade decreases production.

Commodity money is

An open-market sale

Which of the three functions of money are commonly met by each of the following assets in the U.S. economy? a. paper dollar b. precious metals c. collectibles such as baseball cards, stamps, and antiques

What is the difference between money and wealth?

The Fed sets the interest that borrowers pay on loans from

Table 29-8 -Refer to Table 29-8. This bank's leverage ratio is

Economists use the term "money" to refer to

If the reserve ratio is 5 percent, banks do not hold excess reserves, and people do not hold currency, then when the Fed purchases $20 million worth of government bonds, bank reserves

The Federal Open Market Committee meets approximately

The fractional reserve characteristic of the banking system allows banks to create money and also create wealth from bank deposits. Describe why this statement is or is not true.

The amount of currency per person in the United States is about

Small time deposits are included in

The agency responsible for regulating the U.S. monetary system is the

Which of the following is not a reason the New York Federal Reserve Bank president always gets to vote at the Federal Open Market Committee meetings?

A problem that the Fed faces when it attempts to control the money supply is that

The interest rate that the Fed charges banks that borrow reserves from it is the

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 Costs of Production

Firms in Competitive Markets

Monopoly

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

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

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