Question 1

What does the "double coincidence of wants" refer to?

Accepted Answer

"Double coincidence of wants" refers to

Question 2

The Soviet government in the 1980's never abandoned the ruble as the official currency. However, the people of Moscow preferred to accept

Accepted Answer

A)  cigarettes in exchange for goods and services, because they were convinced that cigarettes were going to soon become hard to come by. 
B)  American dollars in exchange for goods and services, because rubles were extremely hard to come by. 
C)  goods such as cigarettes or American dollars in exchange for goods and services, reminding us of the fact that government decree by itself is not sufficient for the success of a commodity money. 
D)  All of the above are correct. 
A)  cigarettes in exchange for goods and services, because they were convinced that cigarettes were going to soon become hard to come by. 
B)  American dollars in exchange for goods and services, because rubles were extremely hard to come by. 
C)  goods such as cigarettes or American dollars in exchange for goods and services, reminding us of the fact that government decree by itself is not sufficient for the success of a commodity money. 
D)  All of the above are correct.

Question 3

If the reserve requirement is 10 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $500, it

Accepted Answer

A)  must increase required reserves by $50. 
B)  will initially see reserves increase by $500. 
C)  will be able to use this deposit to make new loans amounting to $450. 
D)  All of the above are correct. 
A)  must increase required reserves by $50. 
B)  will initially see reserves increase by $500. 
C)  will be able to use this deposit to make new loans amounting to $450. 
D)  All of the above are correct.

Question 4

Commodity money is

Accepted Answer

A)  backed by gold. 
B)  the principal type of money in use today. 
C)  money with intrinsic value. 
D)  receipts created in international trade that are used as a medium of exchange. 
A)  backed by gold. 
B)  the principal type of money in use today. 
C)  money with intrinsic value. 
D)  receipts created in international trade that are used as a medium of exchange.

Question 5

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 6

An important function of the U.S. Federal Reserve is to

Accepted Answer

A)  set the debt ceiling. 
B)  fund Congressional spending. 
C)  control the supply of money. 
D)  mint coins. 
A)  set the debt ceiling. 
B)  fund Congressional spending. 
C)  control the supply of money. 
D)  mint coins.

Question 7

The manager of the bank where you work tells you that your bank has $6 million in excess reserves. She also tells you that the bank has $400 million in deposits and $362 million dollars in loans. Given this information you find that the reserve requirement must be

Accepted Answer

A)  44/400. 
B)  6/362. 
C)  38/400. 
D)  32/400. 
A)  44/400. 
B)  6/362. 
C)  38/400. 
D)  32/400.

Question 8

Scenario 29-1.
The monetary policy of Namdian is determined by the Namdian Central Bank. The local currency is the dia. Namdian banks collectively hold 100 million dias of required reserves, 25 million dias of excess reserves, 250 million dias of Namdian Treasury Bonds, and their customers hold 1,000 million dias of deposits. Namdians prefer to use only demand deposits and so the money supply consists of demand deposits.
-Refer to Scenario 29-1. Assuming the only other item Namdian banks have on their balance sheets is loans, what is the value of existing loans made by Namdian banks?

Accepted Answer

A)  625 million dias 
B)  875 million dias 
C)  1,125 million dias 
D)  None of the above is correct. 
A)  625 million dias 
B)  875 million dias 
C)  1,125 million dias 
D)  None of the above is correct.

Question 9

Bank capital is

Accepted Answer

A)  the machinery, structures, and equipment of the bank. 
B)  the resources that owners have put into the bank. 
C)  the reserves of the bank. 
D)  the bank's total assets. 
A)  the machinery, structures, and equipment of the bank. 
B)  the resources that owners have put into the bank. 
C)  the reserves of the bank. 
D)  the bank's total assets.

Question 10

Suppose that in a country people gain more confidence in the banking system and so hold relatively less currency and more deposits. As a result, bank reserves will

Accepted Answer

A)  decrease and the money supply will eventually decrease. 
B)  decrease and the money supply will eventually increase. 
C)  increase and the money supply will eventually decrease. 
D)  increase and the money supply will eventually increase. 
A)  decrease and the money supply will eventually decrease. 
B)  decrease and the money supply will eventually increase. 
C)  increase and the money supply will eventually decrease. 
D)  increase and the money supply will eventually increase.

Question 11

If the reserve ratio is 5 percent, then $500 of additional reserves can create up to

Accepted Answer

A)  $10,500 of new money. 
B)  $10,000 of new money. 
C)  $9,500 of new money. 
D)  $2,500 of new money. 
A)  $10,500 of new money. 
B)  $10,000 of new money. 
C)  $9,500 of new money. 
D)  $2,500 of new money.

Question 12

Why is the Chairman of the Federal Reserve often referred to as the "second most powerful person in the United States?"

Accepted Answer

The Fed's policy decisions influence the

Question 13

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 14

Credit cards

Accepted Answer

A)  represent the largest component of M1. 
B)  are not included in M1 but are included in M2. 
C)  are a form of money unique to the U.S. 
D)  are not considered money. 
A)  represent the largest component of M1. 
B)  are not included in M1 but are included in M2. 
C)  are a form of money unique to the U.S. 
D)  are not considered money.

Question 15

Consider five individuals with different occupations.   In a barter system which of the following pairs has a double coincidence of wants?

Accepted Answer

A)  Allen and Eric 
B)  Diedre and Calvin 
C)  Both A and B are correct. 
D)  None of the above are correct. 
A)  Allen and Eric 
B)  Diedre and Calvin 
C)  Both A and B are correct. 
D)  None of the above are correct.

Question 16

If people decide to hold less currency relative to deposits, the money supply

Accepted Answer

A)  falls. The Fed could lessen the impact of this by buying Treasury bonds. 
B)  falls. The Fed could lessen the impact of this by selling Treasury bonds. 
C)  rises. The Fed could lessen the impact of this by buying Treasury bonds. 
D)  rises. The Fed could lessen the impact of this by selling Treasury bonds. 
A)  falls. The Fed could lessen the impact of this by buying Treasury bonds. 
B)  falls. The Fed could lessen the impact of this by selling Treasury bonds. 
C)  rises. The Fed could lessen the impact of this by buying Treasury bonds. 
D)  rises. The Fed could lessen the impact of this by selling Treasury bonds.

Question 17

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 18

The Federal Reserve is a privately operated commercial bank.

Accepted Answer

A) True 
 B)False

Question 19

At any given time, the voting members of the Federal Open Market Committee include

Accepted Answer

A)  five of the presidents of the regional Federal Reserve banks. 
B)  the president of the Federal Reserve Bank of New York. 
C)  the seven members of the Board of Governors. 
D)  All of the above are correct. 
A)  five of the presidents of the regional Federal Reserve banks. 
B)  the president of the Federal Reserve Bank of New York. 
C)  the seven members of the Board of Governors. 
D)  All of the above are correct.

Question 20

Which of the following defer payments?

Accepted Answer

A)  credit cards and debit cards 
B)  neither credit cards nor debit cards 
C)  credit cards but not debit cards 
D)  debit cards but not credit cards 
A)  credit cards and debit cards 
B)  neither credit cards nor debit cards 
C)  credit cards but not debit cards 
D)  debit cards but not credit cards

Exam 16: The Monetary System

What does the "double coincidence of wants" refer to?

The Soviet government in the 1980's never abandoned the ruble as the official currency. However, the people of Moscow preferred to accept

If the reserve requirement is 10 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $500, it

Commodity money is

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

An important function of the U.S. Federal Reserve is to

The manager of the bank where you work tells you that your bank has $6 million in excess reserves. She also tells you that the bank has $400 million in deposits and $362 million dollars in loans. Given this information you find that the reserve requirement must be

Bank capital is

Suppose that in a country people gain more confidence in the banking system and so hold relatively less currency and more deposits. As a result, bank reserves will

If the reserve ratio is 5 percent, then $500 of additional reserves can create up to

Why is the Chairman of the Federal Reserve often referred to as the "second most powerful person in the United States?"

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

Credit cards

Consider five individuals with different occupations. In a barter system which of the following pairs has a double coincidence of wants?

If people decide to hold less currency relative to deposits, the money supply

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

The Federal Reserve is a privately operated commercial bank.

At any given time, the voting members of the Federal Open Market Committee include

Which of the following defer payments?

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

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

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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