Question 1

Credit cards

Accepted Answer

A)  defer payments. 
B)  are a store of value. 
C)  have led to wider use of currency. 
D)  are part of the money supply. 
A)  defer payments. 
B)  are a store of value. 
C)  have led to wider use of currency. 
D)  are part of the money supply.

Question 2

What makes the New York Federal Reserve regional bank so important?

Accepted Answer

The president of the New York Federal Re

Question 3

What is the Term Auction Facility?

Accepted Answer

The Term Auction Facility is the market

Question 4

You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money?

Accepted Answer

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

Question 5

What is bank insolvancy?

Accepted Answer

Bank insolvancy is when bank c

Question 6

A bank has a 10 percent reserve requirement, $36,000 in loans, and has loaned out all it can given the reserve requirement.

Accepted Answer

A)  It has $3,600 in deposits. 
B)  It has $32,400 in deposits. 
C)  It has $39,600 in deposits. 
D)  It has $40,000 in deposits. 
A)  It has $3,600 in deposits. 
B)  It has $32,400 in deposits. 
C)  It has $39,600 in deposits. 
D)  It has $40,000 in deposits.

Question 7

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 8

Suppose a bank is operating with a leverage ratio of 20. What is the maximum decrease in the market value of assets before the bank becomes insolvent?

Accepted Answer

A leverage ratio of 20 implies each perc

Question 9

A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve. Its deposits amount to

Accepted Answer

A)  $114. 
B)  $2,166. 
C)  $2,400. 
D)  $45,600. 
A)  $114. 
B)  $2,166. 
C)  $2,400. 
D)  $45,600.

Question 10

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 11

Which of the following is not included in M1?

Accepted Answer

A)  a $5 bill in your wallet 
B)  $100 in your checking account 
C)  $500 in your savings account 
D)  All of the above are included in M1. 
A)  a $5 bill in your wallet 
B)  $100 in your checking account 
C)  $500 in your savings account 
D)  All of the above are included in M1.

Question 12

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 13

When the Fed sells government bonds,

Accepted Answer

A)  the money supply increases and the federal funds rate increases. 
B)  the money supply increases and the federal funds rate decreases. 
C)  the money supply decreases and the federal funds rate increases. 
D)  the money supply decreases and the federal funds rate decreases. 
A)  the money supply increases and the federal funds rate increases. 
B)  the money supply increases and the federal funds rate decreases. 
C)  the money supply decreases and the federal funds rate increases. 
D)  the money supply decreases and the federal funds rate decreases.

Question 14

An open-market sale

Accepted Answer

A)  increases the number of dollars and the number of bonds in the hands of the public. 
B)  increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public. 
C)  decreases the number of dollars and the number of bonds in the hands of the public. 
D)  decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public. 
A)  increases the number of dollars and the number of bonds in the hands of the public. 
B)  increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public. 
C)  decreases the number of dollars and the number of bonds in the hands of the public. 
D)  decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public.

Question 15

The amount of currency per person in the United States is about

Accepted Answer

A)  $110. 
B)  $300. 
C)  $2,450. 
D)  $4,490. 
A)  $110. 
B)  $300. 
C)  $2,450. 
D)  $4,490.

Question 16

The is the interest rate at which banks make overnight loans to other banks.

Accepted Answer

The answer of The is the interest rate at which...

Question 17

Describe the role of the Federal Deposit Insurance Corporation FDIC).

Accepted Answer

The FDIC is the primary mechanism by whi

Question 18

In many circumstances, prisoners are not allowed to possess cash. Does this mean there is no money in prison? Explain.

Accepted Answer

No.
Any good that provides the three fun

Question 19

The Federal Reserve was created

Accepted Answer

A)  in 1913 by Congress 
B)  as a result of the Great Depression 
C)  according to the standards enforced by NATO 
D)  by President Kennedy 
A)  in 1913 by Congress 
B)  as a result of the Great Depression 
C)  according to the standards enforced by NATO 
D)  by President Kennedy

Question 20

Which of the following both increase the money supply?

Accepted Answer

A)  an increase in the discount rate and an increase in the interest rate on reserves 
B)  an increase in the discount rate and a decrease in the interest rate on reserves 
C)  a decrease in the discount rate and an increase in the interest rate on reserves 
D)  a decrease in the discount rate and a decrease in the interest rate on reserves 
A)  an increase in the discount rate and an increase in the interest rate on reserves 
B)  an increase in the discount rate and a decrease in the interest rate on reserves 
C)  a decrease in the discount rate and an increase in the interest rate on reserves 
D)  a decrease in the discount rate and a decrease in the interest rate on reserves

Exam 16: The Monetary System

Credit cards

What makes the New York Federal Reserve regional bank so important?

What is the Term Auction Facility?

You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money?

What is bank insolvancy?

A bank has a 10 percent reserve requirement, $36,000 in loans, and has loaned out all it can given the reserve requirement.

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

Suppose a bank is operating with a leverage ratio of 20. What is the maximum decrease in the market value of assets before the bank becomes insolvent?

A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve. Its deposits amount to

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,

Which of the following is not included in M1?

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

When the Fed sells government bonds,

An open-market sale

The amount of currency per person in the United States is about

The is the interest rate at which banks make overnight loans to other banks.

Describe the role of the Federal Deposit Insurance Corporation FDIC).

In many circumstances, prisoners are not allowed to possess cash. Does this mean there is no money in prison? Explain.

The Federal Reserve was created

Which of the following both increase the money supply?

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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