Question 1

If the reserve ratio is 20 percent, then $100 of new reserves can generate

Accepted Answer

A)  $60 of new money in the economy. 
B)  $250 of new money in the economy. 
C)  $500 of new money in the economy. 
D)  $2,000 of new money in the economy. 
A)  $60 of new money in the economy. 
B)  $250 of new money in the economy. 
C)  $500 of new money in the economy. 
D)  $2,000 of new money in the economy.

Question 2

The Fed can reduce the federal funds rate by

Accepted Answer

A)  decreasing the money supply. To decrease the money supply it could sell bonds. 
B)  decreasing the money supply. To decrease the money supply it could buy bonds. 
C)  increasing the money supply. To increase the money supply it could sell bonds. 
D)  increasing the money supply. To increase the money supply it could buy bonds. 
A)  decreasing the money supply. To decrease the money supply it could sell bonds. 
B)  decreasing the money supply. To decrease the money supply it could buy bonds. 
C)  increasing the money supply. To increase the money supply it could sell bonds. 
D)  increasing the money supply. To increase the money supply it could buy bonds.

Question 3

The series of bank failures in 1907 occurred despite the creation of the Federal Reserve many years earlier.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following can the Fed do to change the money supply?

Accepted Answer

A)  change reserves or change the reserve ratio 
B)  change reserves but not change the reserve ratio 
C)  change the reserve ratio but not change the reserve ratio 
D)  neither change reserves nor change the reserve ratio 
A)  change reserves or change the reserve ratio 
B)  change reserves but not change the reserve ratio 
C)  change the reserve ratio but not change the reserve ratio 
D)  neither change reserves nor change the reserve ratio

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

If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the Fed sells $25.5 million worth of bonds to the public, bank reserves

Accepted Answer

A)  increase by $25.5 million and the money supply eventually increases by $382.5 million. 
B)  increase by $25.5 million and the money supply eventually increases by $170 million. 
C)  decrease by $25.5 million and the money supply eventually decreases by $382.5 million. 
D)  decrease by $25.5 million and the money supply eventually decreases by $170 million. 
A)  increase by $25.5 million and the money supply eventually increases by $382.5 million. 
B)  increase by $25.5 million and the money supply eventually increases by $170 million. 
C)  decrease by $25.5 million and the money supply eventually decreases by $382.5 million. 
D)  decrease by $25.5 million and the money supply eventually decreases by $170 million.

Question 7

If the reserve ratio is 12.5 percent, then $2,000 of additional reserves can create up to

Accepted Answer

A)  $8,000 of new money. 
B)  $16,000 of new money. 
C)  $32,000 of new money. 
D)  None of the above is correct. 
A)  $8,000 of new money. 
B)  $16,000 of new money. 
C)  $32,000 of new money. 
D)  None of the above is correct.

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

What is the change in the money supply when the Fed purchases $700 worth of bonds and the required reserve ratio is 14 percent assuming banks hold no excess reserves?

Accepted Answer

The answer of What is the change in the money...

Question 10

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 11

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.

Question 12

Table 29-6.
  
-Refer to Table 29-6. From the table it follows that the Bank of Pleasantville operates in a

Accepted Answer

A)  fractional-reserve banking system, since its reserves are less than its deposits. 
B)  fractional-reserve banking system, since its reserves are less than its loans. 
C)  100-percent-reserve banking system, since its assets are equal to its liabilities. 
D)  100­percent­reserve banking system if the Fed's reserve requirement is 10 percent; otherwise, it operates in a fractional-reserve banking system. 
A)  fractional-reserve banking system, since its reserves are less than its deposits. 
B)  fractional-reserve banking system, since its reserves are less than its loans. 
C)  100-percent-reserve banking system, since its assets are equal to its liabilities. 
D)  100­percent­reserve banking system if the Fed's reserve requirement is 10 percent; otherwise, it operates in a fractional-reserve banking system.

Question 13

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 14

If the reserve ratio is 10 percent, $1,400 of additional reserves can create up to

Accepted Answer

A)  $140 of new money. 
B)  $14,000 of new money. 
C)  $140,000 of new money. 
D)  None of the above is correct. 
A)  $140 of new money. 
B)  $14,000 of new money. 
C)  $140,000 of new money. 
D)  None of the above is correct.

Question 15

Table 29-2.
The information in the table pertains to an imaginary economy.
  
-Refer to Table 29-2. What is the M2 money supply?

Accepted Answer

A)  $1,300 billion 
B)  $580 billion 
C)  $880 billion 
D)  $1,000 billion 
A)  $1,300 billion 
B)  $580 billion 
C)  $880 billion 
D)  $1,000 billion

Question 16

Which of the following is both a store of value and regularly used as a medium of exchange?

Accepted Answer

A)  cash and stocks 
B)  cash but not stocks 
C)  stocks but not cash 
D)  neither cash nor stocks 
A)  cash and stocks 
B)  cash but not stocks 
C)  stocks but not cash 
D)  neither cash nor stocks

Question 17

Consider the following traders who meet.   Which, if any, pairs of traders has a double coincidence of wants?

Accepted Answer

A)  Bill with Mike 
B)  Time with Amy 
C)  Bill with Mike, and Tim with Amy 
D)  Bill with Tim, and Mike with Amy 
A)  Bill with Mike 
B)  Time with Amy 
C)  Bill with Mike, and Tim with Amy 
D)  Bill with Tim, and Mike with Amy

Question 18

What does the Fed auction at the Term-Auction Facility?

Accepted Answer

A)  government bonds of a quantity it sets 
B)  government bonds with the quantity determined at the auction 
C)  loans of a quantity it sets 
D)  loans with the quantity determined at the auction 
A)  government bonds of a quantity it sets 
B)  government bonds with the quantity determined at the auction 
C)  loans of a quantity it sets 
D)  loans with the quantity determined at the auction

Question 19

When the Fed conducts open-market purchases,

Accepted Answer

A)  banks buy Treasury securities from Fed, which increases the money supply. 
B)  banks buy Treasury securities from the Fed, which decreases the money supply. 
C)  it buys Treasury securities, which increases the money supply. 
D)  it buys Treasury securities, which decreases the money supply. 
A)  banks buy Treasury securities from Fed, which increases the money supply. 
B)  banks buy Treasury securities from the Fed, which decreases the money supply. 
C)  it buys Treasury securities, which increases the money supply. 
D)  it buys Treasury securities, which decreases the money supply.

Question 20

One surprising thing about the U.S. money stock is that

Accepted Answer

A)  banks hold so much currency relative to the public. 
B)  the public holds so much currency relative to banks. 
C)  there is so little currency per person. 
D)  there is so much currency per person. 
A)  banks hold so much currency relative to the public. 
B)  the public holds so much currency relative to banks. 
C)  there is so little currency per person. 
D)  there is so much currency per person.

Exam 16: The Monetary System

If the reserve ratio is 20 percent, then $100 of new reserves can generate

The Fed can reduce the federal funds rate by

The series of bank failures in 1907 occurred despite the creation of the Federal Reserve many years earlier.

Which of the following can the Fed do to change the money supply?

Which of the following is not correct?

If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the Fed sells $25.5 million worth of bonds to the public, bank reserves

If the reserve ratio is 12.5 percent, then $2,000 of additional reserves can create up to

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

What is the change in the money supply when the Fed purchases $700 worth of bonds and the required reserve ratio is 14 percent assuming banks hold no excess reserves?

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

Fiat money

Table 29-6. -Refer to Table 29-6. From the table it follows that the Bank of Pleasantville operates in a

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?

If the reserve ratio is 10 percent, $1,400 of additional reserves can create up to

Table 29-2. The information in the table pertains to an imaginary economy. -Refer to Table 29-2. What is the M2 money supply?

Which of the following is both a store of value and regularly used as a medium of exchange?

Consider the following traders who meet. Which, if any, pairs of traders has a double coincidence of wants?

What does the Fed auction at the Term-Auction Facility?

When the Fed conducts open-market purchases,

One surprising thing about the U.S. money stock is that

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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