Question 1

The Federal Reserve

Accepted Answer

A)  was created in 1913. 
B)  is the U.S.'s central bank. 
C)  has other duties in addition to controlling the money supply. 
D)  All of the above are correct. 
A)  was created in 1913. 
B)  is the U.S.'s central bank. 
C)  has other duties in addition to controlling the money supply. 
D)  All of the above are correct.

Question 2

If the money multiplier is 3 and the Fed wants to increase the money supply by $900,000, it could

Accepted Answer

A)  buy $300,000 worth of bonds. 
B)  buy $225,000 worth of bonds. 
C)  sell $300,000 worth of bonds. 
D)  sell $225,000 worth of bonds. 
A)  buy $300,000 worth of bonds. 
B)  buy $225,000 worth of bonds. 
C)  sell $300,000 worth of bonds. 
D)  sell $225,000 worth of bonds.

Question 3

Which of the following is correct?

Accepted Answer

A)  The Federal Reserve has 14 regional banks. The Board of Governors has 12 members who serve 7-year terms. 
B)  The Federal Reserve has 14 regional banks. The Board of Governors has 7 members who serve 14-year terms. 
C)  The Federal Reserve has 12 regional banks. The Board of Governors has 12 members who serve 7-year terms. 
D)  The Federal Reserve has 12 regional banks. The Board of Governors has 7 members who serve 14-year terms. 
A)  The Federal Reserve has 14 regional banks. The Board of Governors has 12 members who serve 7-year terms. 
B)  The Federal Reserve has 14 regional banks. The Board of Governors has 7 members who serve 14-year terms. 
C)  The Federal Reserve has 12 regional banks. The Board of Governors has 12 members who serve 7-year terms. 
D)  The Federal Reserve has 12 regional banks. The Board of Governors has 7 members who serve 14-year terms.

Question 4

Money is

Accepted Answer

A)  the most liquid asset and a perfect store of value. 
B)  the most liquid asset but an imperfect store of value. 
C)  not the most liquid asset but a perfect store of value. 
D)  neither the most liquid asset and nor a perfect store of value. 
A)  the most liquid asset and a perfect store of value. 
B)  the most liquid asset but an imperfect store of value. 
C)  not the most liquid asset but a perfect store of value. 
D)  neither the most liquid asset and nor a perfect store of value.

Question 5

Which of the following is not correct?

Accepted Answer

A)  The regional Federal Reserve Banks play a role in regulating banks and ensuring the health of the banking system. 
B)  The President of the New York Federal Reserve Regional Bank always gets to vote on the decisions made by the Federal Open Market Committee. 
C)  U.S. monetary policy is made by the Federal Open Market Committee. 
D)  The Federal Open Market Committee meets every 12 weeks. 
A)  The regional Federal Reserve Banks play a role in regulating banks and ensuring the health of the banking system. 
B)  The President of the New York Federal Reserve Regional Bank always gets to vote on the decisions made by the Federal Open Market Committee. 
C)  U.S. monetary policy is made by the Federal Open Market Committee. 
D)  The Federal Open Market Committee meets every 12 weeks.

Question 6

When we say that trade is roundabout we mean that

Accepted Answer

A)  people sometimes trade goods for goods. 
B)  trades require a double coincidence of wants. 
C)  currency is accepted primarily to make further trades. 
D)  people must spend time searching for the products they wish to purchase. 
A)  people sometimes trade goods for goods. 
B)  trades require a double coincidence of wants. 
C)  currency is accepted primarily to make further trades. 
D)  people must spend time searching for the products they wish to purchase.

Question 7

If the Fed raised the reserve requirement, the demand for reserves would

Accepted Answer

A)  increase, so the federal funds rate would fall. 
B)  increase, so the federal funds rate would rise. 
C)  decrease, so the federal funds rate would fall. 
D)  decrease, so the federal funds rate would rise. 
A)  increase, so the federal funds rate would fall. 
B)  increase, so the federal funds rate would rise. 
C)  decrease, so the federal funds rate would fall. 
D)  decrease, so the federal funds rate would rise.

Question 8

Are credit cards and debit cards money? What's the difference between credit and debit cards?

Accepted Answer

Neither credit cards nor debit cards are

Question 9

Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 8 percent, and excess reserves amount to $5 billion. What is the level of deposits?

Accepted Answer

A)  $5,000 billion 
B)  $4,937.5 billion 
C)  $5,062.5 billion 
D)  $4,995 billion 
A)  $5,000 billion 
B)  $4,937.5 billion 
C)  $5,062.5 billion 
D)  $4,995 billion

Question 10

Table 29-4.
  
-Refer to Table 29-4. If $800 is deposited into the First Bank of Fairfield, and the bank takes no other actions, its

Accepted Answer

A)  reserves will increase by $100. 
B)  liabilities will increase by $800. 
C)  assets will decrease by $800. 
D)  loans will increase by $800. 
A)  reserves will increase by $100. 
B)  liabilities will increase by $800. 
C)  assets will decrease by $800. 
D)  loans will increase by $800.

Question 11

If the reserve ratio is 12 percent, then the money multiplier is

Accepted Answer

A)  9.3. 
B)  8.3. 
C)  7.3. 
D)  12. 
A)  9.3. 
B)  8.3. 
C)  7.3. 
D)  12.

Question 12

The "yardstick" people use to post prices and record debts is called

Accepted Answer

A)  a medium of exchange. 
B)  a unit of account. 
C)  a store of value. 
D)  liquidity. 
A)  a medium of exchange. 
B)  a unit of account. 
C)  a store of value. 
D)  liquidity.

Question 13

When conducting an open-market sale, the Fed

Accepted Answer

A)  buys government bonds, and in so doing increases the money supply. 
B)  buys government bonds, and in so doing decreases the money supply. 
C)  sells government bonds, and in so doing increases the money supply. 
D)  sells government bonds, and in so doing decreases the money supply. 
A)  buys government bonds, and in so doing increases the money supply. 
B)  buys government bonds, and in so doing decreases the money supply. 
C)  sells government bonds, and in so doing increases the money supply. 
D)  sells government bonds, and in so doing decreases the money supply.

Question 14

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

Accepted Answer

Long terms allow Fed Board of

Question 15

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 16

What is meant by the term "lender of last resort?" In what circumstances might the Fed be a lender of last resort?

Accepted Answer

A "lender of last resort" is a lender to

Question 17

The Federal Reserve was created

Accepted Answer

A)  in 1913 by Congress 
B)  as a result of the Great Depression 
C)  according to the standards enforced by NATO 
D)  by President Kennedy 
A)  in 1913 by Congress 
B)  as a result of the Great Depression 
C)  according to the standards enforced by NATO 
D)  by President Kennedy

Question 18

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 19

Scenario 29-2.
The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the taz. Aggregate banking statistics show that collectively the banks of Tazi hold 300 million tazes of required reserves, 75 million tazes of excess reserves, have issued 7,500 million tazes of deposits, and hold 225 million tazes of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank.
-Refer to Scenario 29-2. Suppose the Bank of Tazi purchased 50 million tazes of Tazian Treasury Bonds from the banks. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much does the money supply change?

Accepted Answer

A)  625 million tazes 
B)  1,000 million tazes 
C)  1,250 million tazes 
D)  None of the above is correct. 
A)  625 million tazes 
B)  1,000 million tazes 
C)  1,250 million tazes 
D)  None of the above is correct.

Question 20

U.S. dollars are an example of commodity money and hides used to make trades are an example of fiat money.

Accepted Answer

A) True 
 B)False

Exam 21: The Monetary System

The Federal Reserve

If the money multiplier is 3 and the Fed wants to increase the money supply by $900,000, it could

Which of the following is correct?

Money is

Which of the following is not correct?

When we say that trade is roundabout we mean that

If the Fed raised the reserve requirement, the demand for reserves would

Are credit cards and debit cards money? What's the difference between credit and debit cards?

Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 8 percent, and excess reserves amount to $5 billion. What is the level of deposits?

Table 29-4. -Refer to Table 29-4. If $800 is deposited into the First Bank of Fairfield, and the bank takes no other actions, its

If the reserve ratio is 12 percent, then the money multiplier is

The "yardstick" people use to post prices and record debts is called

When conducting an open-market sale, the Fed

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

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

What is meant by the term "lender of last resort?" In what circumstances might the Fed be a lender of last resort?

The Federal Reserve was created

Money

U.S. dollars are an example of commodity money and hides used to make trades are an example of fiat money.

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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