Question 1

In an economy that relies upon barter,

Accepted Answer

A)  trade does not require a double coincidence of wants. 
B)  scarce resources are allocated just as easily as they are in economies that do not rely upon barter. 
C)  there is no item in the economy that is widely accepted in exchange for goods and services. 
D)  All of the above are correct. 
A)  trade does not require a double coincidence of wants. 
B)  scarce resources are allocated just as easily as they are in economies that do not rely upon barter. 
C)  there is no item in the economy that is widely accepted in exchange for goods and services. 
D)  All of the above are correct.

Question 2

If the reserve ratio is 4 percent, then $81,250 of new money can be generated by

Accepted Answer

A)  $325 of new reserves. 
B)  $3,250 of new reserves. 
C)  $20,312.50 of new reserves. 
D)  $2,031,250 of new reserves. 
A)  $325 of new reserves. 
B)  $3,250 of new reserves. 
C)  $20,312.50 of new reserves. 
D)  $2,031,250 of new reserves.

Question 3

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Accepted Answer

Commodity money has "intrinsic value," o

Question 4

At any meeting of the Federal Open Market Committee, that committee's voting members consist of

Accepted Answer

A)  5 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors. 
B)  5 Federal Reserve Regional Bank Presidents and 5 members of the Board of Governors. 
C)  12 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors. 
D)  12 Federal Reserve Regional Bank Presidents and 5 members of the Board of Governors. 
A)  5 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors. 
B)  5 Federal Reserve Regional Bank Presidents and 5 members of the Board of Governors. 
C)  12 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors. 
D)  12 Federal Reserve Regional Bank Presidents and 5 members of the Board of Governors.

Question 5

What does it mean for the Fed to be the "lender of last resort?"

Accepted Answer

When banks cannot borrow in the market p

Question 6

Demand deposits are a type of

Accepted Answer

A)  checking account. 
B)  time deposit. 
C)  money market mutual fund. 
D)  savings deposit. 
A)  checking account. 
B)  time deposit. 
C)  money market mutual fund. 
D)  savings deposit.

Question 7

Which of the following increases when the Fed makes open-market sales?

Accepted Answer

A)  currency and reserves 
B)  currency but not reserves 
C)  reserves but not currency 
D)  neither currency nor reserves 
A)  currency and reserves 
B)  currency but not reserves 
C)  reserves but not currency 
D)  neither currency nor reserves

Question 8

How does the Fed Open Market Committee increase the money supply?

Accepted Answer

The answer of How does the Fed Open Market Committee...

Question 9

Today, bank runs are not a major problem for the U.S. banking system because

Accepted Answer

A)  bank runs are now illegal. 
B)  banks now hold 100 percent of their deposits in reserve. 
C)  banks are now all government-operated. 
D)  the federal government now guarantees the safety of deposits at most banks. 
A)  bank runs are now illegal. 
B)  banks now hold 100 percent of their deposits in reserve. 
C)  banks are now all government-operated. 
D)  the federal government now guarantees the safety of deposits at most banks.

Question 10

The federal funds rate is the

Accepted Answer

A)  percentage of face value that the Federal Reserve is willing to pay for Treasury Securities. 
B)  percentage of deposits that banks must hold as reserves. 
C)  interest rate at which the Federal Reserve makes short-term loans to banks. 
D)  interest rate at which banks lend reserves to each other overnight. 
A)  percentage of face value that the Federal Reserve is willing to pay for Treasury Securities. 
B)  percentage of deposits that banks must hold as reserves. 
C)  interest rate at which the Federal Reserve makes short-term loans to banks. 
D)  interest rate at which banks lend reserves to each other overnight.

Question 11

The existence of money makes trade easier. How is it that money can also increase the standard of living?

Accepted Answer

The existence of money means the economy

Question 12

To increase the money supply, the Fed can

Accepted Answer

A)  buy government bonds or increase the discount rate. 
B)  buy government bonds or decrease the discount rate. 
C)  sell government bonds or increase the discount rate. 
D)  sell government bonds or decrease the discount rate. 
A)  buy government bonds or increase the discount rate. 
B)  buy government bonds or decrease the discount rate. 
C)  sell government bonds or increase the discount rate. 
D)  sell government bonds or decrease the discount rate.

Question 13

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 that the Bank of Tazi changes the reserve requirement to 3 percent. Assuming that the banks still want to hold the same percentage of excess reserves what is the value of the money supply after the change in the reserve requirement?

Accepted Answer

A)  9,375 million tazes 
B)  10,000 million tazes 
C)  12,500 million tazes 
D)  None of the above is correct to the nearest million tazes. 
A)  9,375 million tazes 
B)  10,000 million tazes 
C)  12,500 million tazes 
D)  None of the above is correct to the nearest million tazes.

Question 14

A decrease in the money supply might indicate that the Fed had

Accepted Answer

A)  purchased bonds to increase banks reserves. 
B)  purchased bonds to decrease banks reserves. 
C)  sold bonds to increase banks reserves. 
D)  sold bonds to decrease banks reserves. 
A)  purchased bonds to increase banks reserves. 
B)  purchased bonds to decrease banks reserves. 
C)  sold bonds to increase banks reserves. 
D)  sold bonds to decrease banks reserves.

Question 15

When the Fed purchases $1000 worth of government bonds from the public, the U.S. money supply eventually increases by

Accepted Answer

A)  more than $1000. 
B)  exactly $1000. 
C)  less than $1000. 
D)  None of the above are correct. 
A)  more than $1000. 
B)  exactly $1000. 
C)  less than $1000. 
D)  None of the above are correct.

Question 16

Table 29-3. An economy starts with $50,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $45,750. The T-account of the bank is shown below.
  
-Refer to Table 29-3. If all banks in the economy have the same reserve ratio as this bank, then the value of the economy's money multiplier is

Accepted Answer

A)  9.33. 
B)  1.09. 
C)  10.76. 
D)  11.76. 
A)  9.33. 
B)  1.09. 
C)  10.76. 
D)  11.76.

Question 17

If the reserve ratio is 5 percent, then $600 of additional reserves can create up to

Accepted Answer

A)  $30 of new money. 
B)  $3,000 of new money. 
C)  $12,000 of new money. 
D)  None of the above is correct. 
A)  $30 of new money. 
B)  $3,000 of new money. 
C)  $12,000 of new money. 
D)  None of the above is correct.

Question 18

Which list ranks assets from most to least liquid?

Accepted Answer

A)  currency, fine art, stocks 
B)  currency, stocks, fine art 
C)  fine art, currency, stocks 
D)  fine art, stocks, currency 
A)  currency, fine art, stocks 
B)  currency, stocks, fine art 
C)  fine art, currency, stocks 
D)  fine art, stocks, currency

Question 19

The Board of Governors

Accepted Answer

A)  is chaired by the U.S. Secretary of the Treasury. 
B)  members are elected by the U.S. public. 
C)  has 7 members. 
D)  All of the above are correct. 
A)  is chaired by the U.S. Secretary of the Treasury. 
B)  members are elected by the U.S. public. 
C)  has 7 members. 
D)  All of the above are correct.

Question 20

Fiat money

Accepted Answer

A)  is worthless. 
B)  has no intrinsic value. 
C)  may be used as a medium of exchange, but is not legal tender. 
D)  refers to highly liquid assets that do not serve as a medium of exchange. 
A)  is worthless. 
B)  has no intrinsic value. 
C)  may be used as a medium of exchange, but is not legal tender. 
D)  refers to highly liquid assets that do not serve as a medium of exchange.

Exam 21: The Monetary System

In an economy that relies upon barter,

If the reserve ratio is 4 percent, then $81,250 of new money can be generated by

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

At any meeting of the Federal Open Market Committee, that committee's voting members consist of

What does it mean for the Fed to be the "lender of last resort?"

Demand deposits are a type of

Which of the following increases when the Fed makes open-market sales?

How does the Fed Open Market Committee increase the money supply?

Today, bank runs are not a major problem for the U.S. banking system because

The federal funds rate is the

The existence of money makes trade easier. How is it that money can also increase the standard of living?

To increase the money supply, the Fed can

A decrease in the money supply might indicate that the Fed had

When the Fed purchases $1000 worth of government bonds from the public, the U.S. money supply eventually increases by

If the reserve ratio is 5 percent, then $600 of additional reserves can create up to

Which list ranks assets from most to least liquid?

The Board of Governors

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

Filters