Question 1

Monetary policy has an important influence on and in the short run.

Accepted Answer

inflation,

Question 2

The legal tender requirement means that

Accepted Answer

A)  people are more likely to accept the dollar as a medium of exchange. 
B)  the government must hold enough gold to redeem all currency. 
C)  people may not make trades with anything else. 
D)  All of the above are correct. 
A)  people are more likely to accept the dollar as a medium of exchange. 
B)  the government must hold enough gold to redeem all currency. 
C)  people may not make trades with anything else. 
D)  All of the above are correct.

Question 3

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 4

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 5

To increase the money supply, the Fed could

Accepted Answer

A)  sell government bonds. 
B)  increase the discount rate. 
C)  decrease the reserve requirement. 
D)  None of the above is correct. 
A)  sell government bonds. 
B)  increase the discount rate. 
C)  decrease the reserve requirement. 
D)  None of the above is correct.

Question 6

When the Federal Reserve sells assets from its portfolio to the public with the intent of changing the money supply,

Accepted Answer

A)  those assets are government bonds and the Fed's reason for selling them is to increase the money supply. 
B)  those assets are government bonds and the Fed's reason for selling them is to decrease the money supply. 
C)  those assets are items that are included in M2 and the Fed's reason for selling them is to increase the money supply. 
D)  those assets are items that are included in M2 and the Fed's reason for selling them is to decrease the money supply. 
A)  those assets are government bonds and the Fed's reason for selling them is to increase the money supply. 
B)  those assets are government bonds and the Fed's reason for selling them is to decrease the money supply. 
C)  those assets are items that are included in M2 and the Fed's reason for selling them is to increase the money supply. 
D)  those assets are items that are included in M2 and the Fed's reason for selling them is to decrease the money supply.

Question 7

The money multiplier equals 1/1 - R), where R represents the reserve ratio.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A)  demand deposits. 
B)  short-term bonds. 
C)  credit cards. 
D)  All of the above are correct. 
A)  demand deposits. 
B)  short-term bonds. 
C)  credit cards. 
D)  All of the above are correct.

Question 9

Which of the following does the Federal Reserve not do?

Accepted Answer

A)  conduct monetary policy 
B)  act as a lender of last resort 
C)  convert Federal Reserve Notes into gold 
D)  serve as a bank regulator 
A)  conduct monetary policy 
B)  act as a lender of last resort 
C)  convert Federal Reserve Notes into gold 
D)  serve as a bank regulator

Question 10

Which of the following is not a central bank?

Accepted Answer

A)  The Bank of England 
B)  The Bank of Japan 
C)  The Bank of America 
D)  The Federal Reserve 
A)  The Bank of England 
B)  The Bank of Japan 
C)  The Bank of America 
D)  The Federal Reserve

Question 11

According to economists, "money" means the same thing as "wealth".

Accepted Answer

A) True 
 B)False

Question 12

When the Fed buys 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 13

Reserves decrease if the Federal Reserve

Accepted Answer

A)  raises the discount rate or auctions more credit. 
B)  raises the discount rate but not if it auctions more credit. 
C)  lowers the discount rate or auctions more credit. 
D)  lowers the discount rate but not if it auctions more credit. 
A)  raises the discount rate or auctions more credit. 
B)  raises the discount rate but not if it auctions more credit. 
C)  lowers the discount rate or auctions more credit. 
D)  lowers the discount rate but not if it auctions more credit.

Question 14

Table 29-9
Metropolis National Bank is currently holding 2% of its deposits as excess reserves.
  
-Refer to Table 29-9. Metropolis National Bank is currently holding 2% of deposits as excess reserves. What is the reserve requirement?

Accepted Answer

A)  12 percent 
B)  10 percent 
C)  8 percent 
D)  6 percent 
A)  12 percent 
B)  10 percent 
C)  8 percent 
D)  6 percent

Question 15

Marc puts prices on surfboards and skateboards at his sporting goods store. He is using money as a unit of account.

Accepted Answer

A) True 
 B)False

Question 16

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 17

If the reserve ratio is 5 percent, then $1,000 of additional reserves can create up to

Accepted Answer

A)  $5,500 of new money. 
B)  $5,000 of new money. 
C)  $4,000 of new money. 
D)  None of the above is correct. 
A)  $5,500 of new money. 
B)  $5,000 of new money. 
C)  $4,000 of new money. 
D)  None of the above is correct.

Question 18

The members of the Federal Reserve's Board of Governors

Accepted Answer

A)  are appointed by the president of the U.S. and confirmed by the U.S. Senate. 
B)  serve six-year terms. 
C)  are also the presidents of the regional Federal Reserve banks. 
D)  share power equally, with no governor having any more influence or power than any other governor. 
A)  are appointed by the president of the U.S. and confirmed by the U.S. Senate. 
B)  serve six-year terms. 
C)  are also the presidents of the regional Federal Reserve banks. 
D)  share power equally, with no governor having any more influence or power than any other governor.

Question 19

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

Accepted Answer

When the reserve requirement is less tha

Question 20

First National Bank FNB) has a reserve ratio of 20 percent, a required reserve ratio of 10 percent, and deposits of $1,000. If FNB receives an additional deposit of $100,

Accepted Answer

A)  then it has required reserves of $210 and holds excess reserves of $10. 
B)  then it has required reserves of $10 and holds excess reserves of $20. 
C)  then it has required reserves of $110 and holds excess reserves of $190. 
D)  then it has required reserves of $110 and holds excess reserves of $0. 
A)  then it has required reserves of $210 and holds excess reserves of $10. 
B)  then it has required reserves of $10 and holds excess reserves of $20. 
C)  then it has required reserves of $110 and holds excess reserves of $190. 
D)  then it has required reserves of $110 and holds excess reserves of $0.

Exam 16: The Monetary System

Monetary policy has an important influence on and in the short run.

The legal tender requirement means that

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

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

To increase the money supply, the Fed could

When the Federal Reserve sells assets from its portfolio to the public with the intent of changing the money supply,

The money multiplier equals 1/1 - R), where R represents the reserve ratio.

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

Which of the following does the Federal Reserve not do?

Which of the following is not a central bank?

According to economists, "money" means the same thing as "wealth".

When the Fed buys government bonds,

Reserves decrease if the Federal Reserve

Table 29-9 Metropolis National Bank is currently holding 2% of its deposits as excess reserves. -Refer to Table 29-9. Metropolis National Bank is currently holding 2% of deposits as excess reserves. What is the reserve requirement?

Marc puts prices on surfboards and skateboards at his sporting goods store. He is using money as a unit of account.

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

If the reserve ratio is 5 percent, then $1,000 of additional reserves can create up to

The members of the Federal Reserve's Board of Governors

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

First National Bank FNB) has a reserve ratio of 20 percent, a required reserve ratio of 10 percent, and deposits of $1,000. If FNB receives an additional deposit of $100,

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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