Question 1

In many circumstances, prisoners are not allowed to possess cash. Does this mean there is no money in prison? Explain.

Accepted Answer

No.
Any good that provides the three fun

Question 2

Given the following information, what are the values of M1 and M2? Small time deposits $2,200 billion
Demand deposits and other checkable deposits $1,700 billion
Savings deposits $2,600 billion
Money market mutual funds $1,500 billion
Traveler's checks $60 billion
Large time deposits $1,500 billion
Currency $350 billion
Miscellaneous categories in M2 $75 billion

Accepted Answer

A)  M1 = $4,310 billion, M2 = $6,285 billion. 
B)  M1 = $2,050 billion, M2 = $9,985 billion. 
C)  M1 = $2,110 billion, M2 = $8,485 billion. 
D)  M1 = $3,610 billion, M2 = $9,985 billion. 
A)  M1 = $4,310 billion, M2 = $6,285 billion. 
B)  M1 = $2,050 billion, M2 = $9,985 billion. 
C)  M1 = $2,110 billion, M2 = $8,485 billion. 
D)  M1 = $3,610 billion, M2 = $9,985 billion.

Question 3

Consider five high school students working on homework in study hall.   Which of the following pairs of students has a double coincidence of wants?

Accepted Answer

A)  Rosie and Piper 
B)  Piper and Molly 
C)  Dewey and Molly 
D)  Bob and Dewey 
A)  Rosie and Piper 
B)  Piper and Molly 
C)  Dewey and Molly 
D)  Bob and Dewey

Question 4

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

Accepted Answer

A) True 
 B)False

Question 5

Table 29-5.
  
-Refer to Table 29-5. If the bank is holding $4,000 in excess reserves, then the reserve requirement with which it must comply is

Accepted Answer

A)  17 percent. 
B)  12 percent. 
C)  13 percent. 
D)  14 percent. 
A)  17 percent. 
B)  12 percent. 
C)  13 percent. 
D)  14 percent.

Question 6

Credit cards

Accepted Answer

A)  defer payments. 
B)  are a store of value. 
C)  have led to wider use of currency. 
D)  are part of the money supply. 
A)  defer payments. 
B)  are a store of value. 
C)  have led to wider use of currency. 
D)  are part of the money supply.

Question 7

The New York Federal Reserve Bank

Accepted Answer

A)  president always gets to vote at the FOMC meetings. 
B)  conducts open market transactions. 
C)  is one of 12 regional Federal Reserve Banks. 
D)  All of the above are correct. 
A)  president always gets to vote at the FOMC meetings. 
B)  conducts open market transactions. 
C)  is one of 12 regional Federal Reserve Banks. 
D)  All of the above are correct.

Question 8

Economists argue that the move from barter to money increased trade and production. How is this possible?

Accepted Answer

The use of money allows people

Question 9

A bank's assets equal its liabilities under

Accepted Answer

A)  both 100-percent-reserve banking and fractional-reserve banking. 
B)  100-percent-reserve banking but not under fractional-reserve banking. 
C)  fractional-reserve banking but not under 100-percent-reserve banking. 
D)  neither 100-percent-reserve banking nor fractional-reserve banking. 
A)  both 100-percent-reserve banking and fractional-reserve banking. 
B)  100-percent-reserve banking but not under fractional-reserve banking. 
C)  fractional-reserve banking but not under 100-percent-reserve banking. 
D)  neither 100-percent-reserve banking nor fractional-reserve banking.

Question 10

Reserves are

Accepted Answer

A)  the central bank of the U.S. 
B)  deposits that banks hold in excess of the required amount. 
C)  the purchase of bonds by the Federal Open Market Committee. 
D)  deposits that banks have received but have not yet loaned out. 
A)  the central bank of the U.S. 
B)  deposits that banks hold in excess of the required amount. 
C)  the purchase of bonds by the Federal Open Market Committee. 
D)  deposits that banks have received but have not yet loaned out.

Question 11

M1 includes

Accepted Answer

A)  small time deposits. 
B)  savings deposits. 
C)  other checkable deposits. 
D)  money market mutual funds. 
A)  small time deposits. 
B)  savings deposits. 
C)  other checkable deposits. 
D)  money market mutual funds.

Question 12

Federal Reserve governors are given long terms to insulate them from politics.

Accepted Answer

A) True 
 B)False

Question 13

When colonists in Virginia used tobacco as money, their money

Accepted Answer

A)  was commodity money. 
B)  had no intrinsic value. 
C)  was fiat money. 
D)  had no store of value. 
A)  was commodity money. 
B)  had no intrinsic value. 
C)  was fiat money. 
D)  had no store of value.

Question 14

Given the following information, what are the values of M1 and M2? Small time deposits $600 billion
Demand deposits and other checkable deposits $400 billion
Savings deposits $800 billion
Money market mutual funds $700 billion
Traveler's checks $30 billion
Large time deposits $400 billion
Currency $250 billion
Miscellaneous categories in M2 $20 billion

Accepted Answer

A)  M1 = $650 billion, M2 = $2,830 billion. 
B)  M1 = $400 billion, M2 = $3,080 billion. 
C)  M1 = $680 billion, M2 = $2,800 billion. 
D)  M1 = $680 billion, M2 = $3,200 billion. 
A)  M1 = $650 billion, M2 = $2,830 billion. 
B)  M1 = $400 billion, M2 = $3,080 billion. 
C)  M1 = $680 billion, M2 = $2,800 billion. 
D)  M1 = $680 billion, M2 = $3,200 billion.

Question 15

In a system of 100-percent-reserve banking, the purpose of a bank is to

Accepted Answer

A)  make loans to households. 
B)  influence the money supply. 
C)  give depositors a safe place to keep their money. 
D)  buy and sell gold. 
A)  make loans to households. 
B)  influence the money supply. 
C)  give depositors a safe place to keep their money. 
D)  buy and sell gold.

Question 16

To increase the money supply, the Fed could

Accepted Answer

A)  sell government bonds. 
B)  increase the discount rate. 
C)  decrease the reserve requirement. 
D)  None of the above is correct. 
A)  sell government bonds. 
B)  increase the discount rate. 
C)  decrease the reserve requirement. 
D)  None of the above is correct.

Question 17

Which of the following is correct?

Accepted Answer

A)  The Fed can control the money supply precisely. 
B)  The amount of money in the economy does not depend on the behavior of depositors. 
C)  The amount of money in the economy depends in part on the behavior of banks. 
D)  None of the above is correct. 
A)  The Fed can control the money supply precisely. 
B)  The amount of money in the economy does not depend on the behavior of depositors. 
C)  The amount of money in the economy depends in part on the behavior of banks. 
D)  None of the above is correct.

Question 18

The banking system currently has $100 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the Fed lowers the reserve requirement to 5 percent and at the same time buys $10 billion worth of bonds, then by how much does the money supply change?

Accepted Answer

A)  It rises by $200 billion. 
B)  It rises by $800 billion. 
C)  It rises by $1,200 billion. 
D)  None of the above is correct. 
A)  It rises by $200 billion. 
B)  It rises by $800 billion. 
C)  It rises by $1,200 billion. 
D)  None of the above is correct.

Question 19

The Fed purchases $200 worth of government bonds from the public. The reserve requirement is 12.5 percent, people hold no currency, and the banking system keeps no excess reserves. The U.S. money supply eventually increases by

Accepted Answer

A)  $25. 
B)  between $200 and $300. 
C)  $1,600. 
D)  $2,500. 
A)  $25. 
B)  between $200 and $300. 
C)  $1,600. 
D)  $2,500.

Question 20

Which of the following is not included in M1?

Accepted Answer

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

Exam 21: The Monetary System

In many circumstances, prisoners are not allowed to possess cash. Does this mean there is no money in prison? Explain.

Consider five high school students working on homework in study hall. Which of the following pairs of students has a double coincidence of wants?

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

Table 29-5. -Refer to Table 29-5. If the bank is holding $4,000 in excess reserves, then the reserve requirement with which it must comply is

Credit cards

The New York Federal Reserve Bank

Economists argue that the move from barter to money increased trade and production. How is this possible?

A bank's assets equal its liabilities under

Reserves are

M1 includes

Federal Reserve governors are given long terms to insulate them from politics.

When colonists in Virginia used tobacco as money, their money

In a system of 100-percent-reserve banking, the purpose of a bank is to

To increase the money supply, the Fed could

Which of the following is correct?

The Fed purchases $200 worth of government bonds from the public. The reserve requirement is 12.5 percent, people hold no currency, and the banking system keeps no excess reserves. The U.S. money supply eventually increases by

Which of the following is not included in M1?

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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