Question 1

Which of the following individuals serve a four-year term?

Accepted Answer

A)  the members of the Board of Governors 
B)  the Chair of the Board of Governors 
C)  the members of the FOMC 
D)  All of the above are correct. 
A)  the members of the Board of Governors 
B)  the Chair of the Board of Governors 
C)  the members of the FOMC 
D)  All of the above are correct.

Question 2

Dollar bills, rare paintings, and emerald necklaces are all

Accepted Answer

A)  media of exchange. 
B)  units of account. 
C)  stores of value. 
D)  All of the above are correct. 
A)  media of exchange. 
B)  units of account. 
C)  stores of value. 
D)  All of the above are correct.

Question 3

Sam wants to trade eggs for sausage. Sally wants to trade sausage for eggs. Sam and Sally have a double- coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 4

Credit card limits 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 5

If the reserve ratio is 10 percent, the money multiplier is

Accepted Answer

A)  100. 
B)  10. 
C)  9/10. 
D)  1/10. 
A)  100. 
B)  10. 
C)  9/10. 
D)  1/10.

Question 6

During recessions, banks typically choose to hold more excess reserves relative to their deposits. This action

Accepted Answer

A)  increases the money multiplier and increases the money supply. 
B)  decreases the money multiplier and decreases the money supply. 
C)  does not change the money multiplier, but increases the money supply. 
D)  does not change the money multiplier, but decreases the money supply. 
A)  increases the money multiplier and increases the money supply. 
B)  decreases the money multiplier and decreases the money supply. 
C)  does not change the money multiplier, but increases the money supply. 
D)  does not change the money multiplier, but decreases the money supply.

Question 7

Table 29-6.
  
-Refer to Table 29-6. If the Fed's reserve requirement is 5 percent, then what quantity of excess reserves does the Bank of Pleasantville now hold?

Accepted Answer

A)  $500 
B)  $250 
C)  $2,000 
D)  $3,600 
A)  $500 
B)  $250 
C)  $2,000 
D)  $3,600

Question 8

Credit cards are a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 9

A bank has $500,000 in deposits and $475,000 in loans. It has loaned out all it can. It has a reserve ratio of

Accepted Answer

A)  2.5 percent. 
B)  5 percent. 
C)  9.5 percent. 
D)  25 percent. 
A)  2.5 percent. 
B)  5 percent. 
C)  9.5 percent. 
D)  25 percent.

Question 10

Table 29-2.
The information in the table pertains to an imaginary economy.
  
-Refer to Table 29-2. What is the M1 money supply?

Accepted Answer

A)  $705 billion 
B)  $570 billion 
C)  $505 billion 
D)  $585 billion 
A)  $705 billion 
B)  $570 billion 
C)  $505 billion 
D)  $585 billion

Question 11

Which of the following is not correct?

Accepted Answer

A)  The president of the New York Federal Reserve bank is the only Federal Reserve Regional Bank President who gets to vote at every meeting of the Federal Open Market Committee. 
B)  The Fed's policy decisions influence the economy's rate of inflation in the short run and the economy's employment and production in the long run. 
C)  The Fed's primary monetary policy tool is open­market operations. 
D)  All of the above are correct. 
A)  The president of the New York Federal Reserve bank is the only Federal Reserve Regional Bank President who gets to vote at every meeting of the Federal Open Market Committee. 
B)  The Fed's policy decisions influence the economy's rate of inflation in the short run and the economy's employment and production in the long run. 
C)  The Fed's primary monetary policy tool is open­market operations. 
D)  All of the above are correct.

Question 12

Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the

Accepted Answer

A)  money supply to fall. To reduce the impact of this the Fed could sell Treasury bonds. 
B)  money supply to fall. To reduce the impact of this the Fed could buy Treasury bonds. 
C)  money supply to rise. To reduce the impact of this the Fed could sell Treasury bonds. 
D)  money supply to rise. To reduce the impact of this the Fed could buy Treasury bonds. 
A)  money supply to fall. To reduce the impact of this the Fed could sell Treasury bonds. 
B)  money supply to fall. To reduce the impact of this the Fed could buy Treasury bonds. 
C)  money supply to rise. To reduce the impact of this the Fed could sell Treasury bonds. 
D)  money supply to rise. To reduce the impact of this the Fed could buy Treasury bonds.

Question 13

List the two main functions performed by the Fed?

Accepted Answer

The Fed performs two main func

Question 14

The reserve requirement is 4 percent, banks hold no excess reserves and people hold no currency. If the Fed sells $10,000 worth of bonds, what happens to the money supply?

Accepted Answer

A)  it increases by $250,000 
B)  it increases by $200,000 
C)  it decreases by $200,000 
D)  it decreases by $250,000 
A)  it increases by $250,000 
B)  it increases by $200,000 
C)  it decreases by $200,000 
D)  it decreases by $250,000

Question 15

Table 29-4.
  
-Refer to Table 29-4. Starting from the situation as depicted by the T-account, if someone deposits $500 into the First Bank of Fairfield, and if the bank makes new loans so as to keep its reserve ratio unchanged, then the amount of new loans that it makes will be

Accepted Answer

A)  $40. 
B)  $437.50. 
C)  $71.42. 
D)  $428.57. 
A)  $40. 
B)  $437.50. 
C)  $71.42. 
D)  $428.57.

Question 16

What are the functions of money?

Accepted Answer

Medium of exchange,

Question 17

A bank has $8,000 in deposits and $6,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is

Accepted Answer

A)  2.5 percent. 
B)  33.3 percent. 
C)  25 percent. 
D)  75 percent. 
A)  2.5 percent. 
B)  33.3 percent. 
C)  25 percent. 
D)  75 percent.

Question 18

If you deposit $100 of currency into a demand deposit at a bank, this action by itself

Accepted Answer

A)  does not change the money supply. 
B)  increases the money supply. 
C)  decreases the money supply. 
D)  has an indeterminate effect on the money supply. 
A)  does not change the money supply. 
B)  increases the money supply. 
C)  decreases the money supply. 
D)  has an indeterminate effect on the money supply.

Question 19

If the reserve ratio is 8 percent, then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

Accepted Answer

A)  $48,000. 
B)  $75,000. 
C)  $55,200. 
D)  $10,800. 
A)  $48,000. 
B)  $75,000. 
C)  $55,200. 
D)  $10,800.

Question 20

The set of items that serve as media of exchange clearly includes

Accepted Answer

A)  balances that lie behind debit cards. 
B)  demand deposits. 
C)  other checkable deposits. 
D)  All of the above are correct. 
A)  balances that lie behind debit cards. 
B)  demand deposits. 
C)  other checkable deposits. 
D)  All of the above are correct.

Exam 21: The Monetary System

Which of the following individuals serve a four-year term?

Dollar bills, rare paintings, and emerald necklaces are all

Sam wants to trade eggs for sausage. Sally wants to trade sausage for eggs. Sam and Sally have a double- coincidence of wants.

Credit card limits are included in

If the reserve ratio is 10 percent, the money multiplier is

During recessions, banks typically choose to hold more excess reserves relative to their deposits. This action

Table 29-6. -Refer to Table 29-6. If the Fed's reserve requirement is 5 percent, then what quantity of excess reserves does the Bank of Pleasantville now hold?

Credit cards are a medium of exchange.

A bank has $500,000 in deposits and $475,000 in loans. It has loaned out all it can. It has a reserve ratio of

Table 29-2. The information in the table pertains to an imaginary economy. -Refer to Table 29-2. What is the M1 money supply?

Which of the following is not correct?

Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the

List the two main functions performed by the Fed?

The reserve requirement is 4 percent, banks hold no excess reserves and people hold no currency. If the Fed sells $10,000 worth of bonds, what happens to the money supply?

Table 29-4. -Refer to Table 29-4. Starting from the situation as depicted by the T-account, if someone deposits $500 into the First Bank of Fairfield, and if the bank makes new loans so as to keep its reserve ratio unchanged, then the amount of new loans that it makes will be

What are the functions of money?

A bank has $8,000 in deposits and $6,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is

If you deposit $100 of currency into a demand deposit at a bank, this action by itself

If the reserve ratio is 8 percent, then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

The set of items that serve as media of exchange clearly includes

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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