Question 1

Paper dollars

Accepted Answer

A)  are commodity money and gold coins are fiat money. 
B)  are fiat money and gold coins are commodity money. 
C)  and gold coins are both commodity monies. 
D)  and gold coins are both fiat monies. 
A)  are commodity money and gold coins are fiat money. 
B)  are fiat money and gold coins are commodity money. 
C)  and gold coins are both commodity monies. 
D)  and gold coins are both fiat monies.

Question 2

If a bank has a reserve ratio of 8 percent, then

Accepted Answer

A)  government regulation requires the bank to use at least 8 percent of its deposits to make loans. 
B)  the bank's ratio of loans to deposits is 8 percent. 
C)  the bank keeps 8 percent of its deposits as reserves and loans out the rest. 
D)  the bank keeps 8 percent of its assets as reserves and loans out the rest. 
A)  government regulation requires the bank to use at least 8 percent of its deposits to make loans. 
B)  the bank's ratio of loans to deposits is 8 percent. 
C)  the bank keeps 8 percent of its deposits as reserves and loans out the rest. 
D)  the bank keeps 8 percent of its assets as reserves and loans out the rest.

Question 3

When there is a reserve requirement, banks

Accepted Answer

A)  must hold exactly the required quantity of reserves. 
B)  may hold more than, but not less than, the required quantity of reserves. 
C)  may hold less than, but not more than, the required quantity of reserves. 
D)  must seek the Fed's permission whenever they wish to expand or contract their loans to customers. 
A)  must hold exactly the required quantity of reserves. 
B)  may hold more than, but not less than, the required quantity of reserves. 
C)  may hold less than, but not more than, the required quantity of reserves. 
D)  must seek the Fed's permission whenever they wish to expand or contract their loans to customers.

Question 4

Table 29-7.
  
-Refer to Table 29-7. If the Fed requires a reserve ratio of 6 percent, then what quantity of excess reserves does the Bank of Springfield now hold?

Accepted Answer

A)  $9,600 
B)  $10,800 
C)  $10,200 
D)  $9,000 
A)  $9,600 
B)  $10,800 
C)  $10,200 
D)  $9,000

Question 5

At the Federal Reserve,

Accepted Answer

A)  the nation's monetary and fiscal policies are made by the Federal Open Market Committee, which meets about every six weeks. 
B)  the nation's monetary and fiscal policies are made by the Federal Open Market Committee, which meets twice a year. 
C)  the nation's monetary policy is made by the Federal Open Market Committee, which meets about every six weeks. 
D)  the nation's monetary policy is made by the Federal Open Market Committee, which meets twice a year. 
A)  the nation's monetary and fiscal policies are made by the Federal Open Market Committee, which meets about every six weeks. 
B)  the nation's monetary and fiscal policies are made by the Federal Open Market Committee, which meets twice a year. 
C)  the nation's monetary policy is made by the Federal Open Market Committee, which meets about every six weeks. 
D)  the nation's monetary policy is made by the Federal Open Market Committee, which meets twice a year.

Question 6

Which of the following does the Federal Reserve not do?

Accepted Answer

A)  It controls the supply of money. 
B)  It acts as a lender of last resort to banks. 
C)  It makes loans to any qualified business that requests one. 
D)  It tries to ensure the health of the banking system. 
A)  It controls the supply of money. 
B)  It acts as a lender of last resort to banks. 
C)  It makes loans to any qualified business that requests one. 
D)  It tries to ensure the health of the banking system.

Question 7

Today, bank runs are

Accepted Answer

A)  uncommon because of the high reserve requirement. 
B)  uncommon because of FDIC deposit insurance. 
C)  common because of the low reserve requirement. 
D)  common because the FDIC is nearly bankrupt. 
A)  uncommon because of the high reserve requirement. 
B)  uncommon because of FDIC deposit insurance. 
C)  common because of the low reserve requirement. 
D)  common because the FDIC is nearly bankrupt.

Question 8

Which group within the Federal Reserve System meets to discuss changes in the economy and determine monetary policy?

Accepted Answer

A)  the Board of Governors 
B)  the FOMC 
C)  the regional Federal Reserve Bank presidents 
D)  the Central Bank Policy Commission 
A)  the Board of Governors 
B)  the FOMC 
C)  the regional Federal Reserve Bank presidents 
D)  the Central Bank Policy Commission

Question 9

Which of the following is included in M1 and M2?

Accepted Answer

A)  traveler's checks 
B)  savings deposits 
C)  money market mutual funds 
D)  small time deposits 
A)  traveler's checks 
B)  savings deposits 
C)  money market mutual funds 
D)  small time deposits

Question 10

The Federal Deposit Insurance Corporation

Accepted Answer

A)  protects depositors in the event of bank failures. 
B)  has become insolvent in recent years due to a large number of bank failures. 
C)  is part of the Federal Reserve System. 
D)  in practice has seldom been of much use. 
A)  protects depositors in the event of bank failures. 
B)  has become insolvent in recent years due to a large number of bank failures. 
C)  is part of the Federal Reserve System. 
D)  in practice has seldom been of much use.

Question 11

The discount rate is

Accepted Answer

A)  the rate at which public banks lend to other public banks. 
B)  the rate at which the Fed lends to banks. 
C)  the percentage difference between the face value of a Treasury bond and what the Fed pays for it. 
D)  the percentage of deposits banks hold as excess reserves. 
A)  the rate at which public banks lend to other public banks. 
B)  the rate at which the Fed lends to banks. 
C)  the percentage difference between the face value of a Treasury bond and what the Fed pays for it. 
D)  the percentage of deposits banks hold as excess reserves.

Question 12

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

Accepted Answer

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

Question 13

When the Fed purchases government bonds the money supply and the federal funds rate .

Accepted Answer

increases,

Question 14

When banks decide to increase their reserves, the money supply will holding all else constant).

Accepted Answer

The answer of When banks decide to increase their reserves,...

Question 15

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 lower the discount rate. 
B)  money supply to fall. To reduce the impact of this the Fed could raise the discount rate. 
C)  money supply to rise. To reduce the impact of this the Fed could lower the discount rate. 
D)  money supply to rise. To reduce the impact of this the Fed could raise the discount rate. 
A)  money supply to fall. To reduce the impact of this the Fed could lower the discount rate. 
B)  money supply to fall. To reduce the impact of this the Fed could raise the discount rate. 
C)  money supply to rise. To reduce the impact of this the Fed could lower the discount rate. 
D)  money supply to rise. To reduce the impact of this the Fed could raise the discount rate.

Question 16

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Accepted Answer

A) True 
 B)False

Question 17

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 an increase in reserves of $150 for this bank has the potential to increase deposits for all banks by

Accepted Answer

A)  $287.25. 
B)  $1,614.71. 
C)  $1,764.71. 
D)  $2,000 or more. 
A)  $287.25. 
B)  $1,614.71. 
C)  $1,764.71. 
D)  $2,000 or more.

Question 18

Currently, U.S. currency is

Accepted Answer

A)  fiat money with intrinsic value. 
B)  fiat money with no intrinsic value. 
C)  commodity money with intrinsic value. 
D)  commodity money with no intrinsic value. 
A)  fiat money with intrinsic value. 
B)  fiat money with no intrinsic value. 
C)  commodity money with intrinsic value. 
D)  commodity money with no intrinsic value.

Question 19

Which of the following is not a tool of monetary policy?

Accepted Answer

A)  open market operations 
B)  reserve requirements 
C)  changing the discount rate 
D)  increasing the government budget deficit 
A)  open market operations 
B)  reserve requirements 
C)  changing the discount rate 
D)  increasing the government budget deficit

Question 20

Monetary policy is determined by a committee whose voting members include all the presidents of the regional Federal Reserve Banks.

Accepted Answer

A) True 
 B)False

Exam 16: The Monetary System

Paper dollars

If a bank has a reserve ratio of 8 percent, then

When there is a reserve requirement, banks

Table 29-7. -Refer to Table 29-7. If the Fed requires a reserve ratio of 6 percent, then what quantity of excess reserves does the Bank of Springfield now hold?

At the Federal Reserve,

Which of the following does the Federal Reserve not do?

Today, bank runs are

Which group within the Federal Reserve System meets to discuss changes in the economy and determine monetary policy?

Which of the following is included in M1 and M2?

The Federal Deposit Insurance Corporation

The discount rate is

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

When the Fed purchases government bonds the money supply and the federal funds rate .

When banks decide to increase their reserves, the money supply will holding all else constant).

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

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Currently, U.S. currency is

Which of the following is not a tool of monetary policy?

Monetary policy is determined by a committee whose voting members include all the presidents of the regional Federal Reserve Banks.

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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