Question 1

Trace the effects on the money supply when the Fed decreases the discount rate.

Accepted Answer

The discount rate represents the cost of

Question 2

If the reserve ratio is 100-percent, then a new deposit of $1000 into a bank account

Accepted Answer

A)  eventually increases the money supply by $1000. 
B)  leaves the size of the money supply unchanged. 
C)  eventually decreases the size of the money supply by $1000. 
D)  eventually increases the money supply by $2000. 
A)  eventually increases the money supply by $1000. 
B)  leaves the size of the money supply unchanged. 
C)  eventually decreases the size of the money supply by $1000. 
D)  eventually increases the money supply by $2000.

Question 3

As opposed to a payments system based on barter, a payments system based on money

Accepted Answer

A)  requires a double coincidence of wants. 
B)  leads to less specialization. 
C)  makes trades less costly. 
D)  None of the above is correct. 
A)  requires a double coincidence of wants. 
B)  leads to less specialization. 
C)  makes trades less costly. 
D)  None of the above is correct.

Question 4

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 5

All Fed purchases and sales of

Accepted Answer

A)  corporate stocks and bonds are conducted at the New York Fed's trading desk. 
B)  government bonds are conducted at the New York Fed's trading desk. 
C)  real estate and other real assets are conducted by the Federal Open Market Committee. 
D)  All of the above are correct. 
A)  corporate stocks and bonds are conducted at the New York Fed's trading desk. 
B)  government bonds are conducted at the New York Fed's trading desk. 
C)  real estate and other real assets are conducted by the Federal Open Market Committee. 
D)  All of the above are correct.

Question 6

You saved $500 in currency in your piggy bank to purchase a new laptop. The $500 you kept in your piggy bank illustrates money's function as a . The laptop's price is posted as $500. The $500 price illustrates money's function as a . You use the $500 to purchase the laptop. This transaction illustrates money's function as a ______.

Accepted Answer

A)  store of value, medium of exchange, unit of account 
B)  store of value, unit of account, medium of exchange 
C)  medium of exchange, unit of account, store of value 
D)  medium of exchange, store of value, unit of account 
A)  store of value, medium of exchange, unit of account 
B)  store of value, unit of account, medium of exchange 
C)  medium of exchange, unit of account, store of value 
D)  medium of exchange, store of value, unit of account

Question 7

Explain how each of the following changes the money supply.
a. the Fed buys bonds
b. the Fed auctions credit
c. the Fed raises the discount rate
d. the Fed raises the reserve requirement

Accepted Answer

a. If the Fed buys bonds, it pays for th

Question 8

Which list ranks assets from most to least liquid?

Accepted Answer

A)  currency, demand deposits, money market mutual funds 
B)  currency, money market mutual funds, demand deposits 
C)  money market mutual funds, demand deposits, currency 
D)  demand deposits, money market mutual funds, currency 
A)  currency, demand deposits, money market mutual funds 
B)  currency, money market mutual funds, demand deposits 
C)  money market mutual funds, demand deposits, currency 
D)  demand deposits, money market mutual funds, currency

Question 9

Table 29-1.
The information in the table pertains to an imaginary economy.
  
-Refer to Table 29-1. What is the value of M2 in billions of dollars?

Accepted Answer

A)  $9,815 billion 
B)  $8,315 billion 
C)  $7,565 billion 
D)  $7,405 billion 
A)  $9,815 billion 
B)  $8,315 billion 
C)  $7,565 billion 
D)  $7,405 billion

Question 10

If banks hold any amount of their deposits in reserve, then they do not have the ability to influence the money supply.

Accepted Answer

A) True 
 B)False

Question 11

List two examples of commodity money.

Accepted Answer

Commodity money refers to mone

Question 12

The president of each regional Federal Reserve Bank is appointed by

Accepted Answer

A)  the U.S. president with the approval of the Senate. 
B)  the Board of Governors. 
C)  the voting members of the Federal Open Market Committee. 
D)  the board of directors of that regional Federal Reserve Bank. 
A)  the U.S. president with the approval of the Senate. 
B)  the Board of Governors. 
C)  the voting members of the Federal Open Market Committee. 
D)  the board of directors of that regional Federal Reserve Bank.

Question 13

Which of the following is not a central bank?

Accepted Answer

A)  The Bank of England 
B)  The Bank of Japan 
C)  The Bank of America 
D)  The Federal Reserve 
A)  The Bank of England 
B)  The Bank of Japan 
C)  The Bank of America 
D)  The Federal Reserve

Question 14

John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account to purchase $2,500 worth of traveler's checks. As a result of these changes,

Accepted Answer

A)  M1 increases by $2,500 and M2 decrease by $2,500. 
B)  M1 increases by $2,500 and M2 stays the same. 
C)  M1 and M2 stay the same. 
D)  M1 decreases by $2,500 and M2 increases by $2,500. 
A)  M1 increases by $2,500 and M2 decrease by $2,500. 
B)  M1 increases by $2,500 and M2 stays the same. 
C)  M1 and M2 stay the same. 
D)  M1 decreases by $2,500 and M2 increases by $2,500.

Question 15

When the federal funds rate is below the target rate, the Fed will bonds.
This action will the money supply.

Accepted Answer

The answer of When the federal funds rate is below...

Question 16

When you purchase school supplies at the book store using cash, you are using money as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 17

A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can given the reserve requirement.

Accepted Answer

A)  It has $80 in reserves and $9,920 in loans. 
B)  It has $800 in reserves and $9,200 in loans. 
C)  It has $1,250 in reserves and $8,750 in loans. 
D)  None of the above is correct. 
A)  It has $80 in reserves and $9,920 in loans. 
B)  It has $800 in reserves and $9,200 in loans. 
C)  It has $1,250 in reserves and $8,750 in loans. 
D)  None of the above is correct.

Question 18

If the Fed increases the reserve ratio from 5 percent to 12.5 percent, then the money multiplier

Accepted Answer

A)  decreases from 20 to 8. 
B)  decreases from 12.5 to 5. 
C)  increases from 8 to 20. 
D)  increases from 5 to 12.5. 
A)  decreases from 20 to 8. 
B)  decreases from 12.5 to 5. 
C)  increases from 8 to 20. 
D)  increases from 5 to 12.5.

Question 19

Which of the following items is not included in the most narrow definition of money, M1?

Accepted Answer

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

Question 20

The Federal Reserve can alter the size of the money supply by changing reserves or changing reserve requirements.

Accepted Answer

A) True 
 B)False

Exam 21: The Monetary System

Trace the effects on the money supply when the Fed decreases the discount rate.

If the reserve ratio is 100-percent, then a new deposit of $1000 into a bank account

As opposed to a payments system based on barter, a payments system based on money

The Fed decreases reserves if it conducts open market

All Fed purchases and sales of

Explain how each of the following changes the money supply. a. the Fed buys bonds b. the Fed auctions credit c. the Fed raises the discount rate d. the Fed raises the reserve requirement

Which list ranks assets from most to least liquid?

Table 29-1. The information in the table pertains to an imaginary economy. -Refer to Table 29-1. What is the value of M2 in billions of dollars?

If banks hold any amount of their deposits in reserve, then they do not have the ability to influence the money supply.

List two examples of commodity money.

The president of each regional Federal Reserve Bank is appointed by

Which of the following is not a central bank?

John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account to purchase $2,500 worth of traveler's checks. As a result of these changes,

When the federal funds rate is below the target rate, the Fed will bonds. This action will the money supply.

When you purchase school supplies at the book store using cash, you are using money as a medium of exchange.

A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can given the reserve requirement.

If the Fed increases the reserve ratio from 5 percent to 12.5 percent, then the money multiplier

Which of the following items is not included in the most narrow definition of money, M1?

The Federal Reserve can alter the size of the money supply by changing reserves or changing reserve requirements.

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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