Question 1

M1 equals currency plus demand deposits plus

Accepted Answer

A)  nothing else. 
B)  other checkable deposits. 
C)  traveler's checks plus other checkable deposits. 
D)  traveler's checks plus other checkable deposits plus savings deposits. 
A)  nothing else. 
B)  other checkable deposits. 
C)  traveler's checks plus other checkable deposits. 
D)  traveler's checks plus other checkable deposits plus savings deposits.

Question 2

Consider five individuals with different occupations.   If this economy has money

Accepted Answer

A)  Allen will buy from Betty 
B)  Betty will buy from Calvin 
C)  Eric will buy from Allen 
D)  None of the above are correct. 
A)  Allen will buy from Betty 
B)  Betty will buy from Calvin 
C)  Eric will buy from Allen 
D)  None of the above are correct.

Question 3

Which of the following is correct?

Accepted Answer

A)  A bank's deposits at the Federal Reserve counts as part of the bank's reserves. The Federal Reserve pays interest on these deposits. 
B)  A bank's deposits at the Federal Reserve counts as part of the bank's reserves. The Federal Reserve does not pay interest on these deposits. 
C)  A bank's deposits at the Federal Reserve does not count as part of the bank's reserves. The Federal Reserve pays interest on these deposits. 
D)  A bank's deposits at the Federal Reserve does not count as part of the bank's reserves. The Federal Reserve does not pay interest on these deposits. 
A)  A bank's deposits at the Federal Reserve counts as part of the bank's reserves. The Federal Reserve pays interest on these deposits. 
B)  A bank's deposits at the Federal Reserve counts as part of the bank's reserves. The Federal Reserve does not pay interest on these deposits. 
C)  A bank's deposits at the Federal Reserve does not count as part of the bank's reserves. The Federal Reserve pays interest on these deposits. 
D)  A bank's deposits at the Federal Reserve does not count as part of the bank's reserves. The Federal Reserve does not pay interest on these deposits.

Question 4

Suppose a bank has $3,000 in reserves, $25,000 of deposits, and a 10 percent reserve requirement. What is the amount of excess reserves?

Accepted Answer

The answer of Suppose a bank has $3,000 in reserves,...

Question 5

A central bank's setting or altering) of the money supply is known as

Accepted Answer

A)  open-market operation. 
B)  interest rate policy. 
C)  monetary policy. 
D)  employment policy. 
A)  open-market operation. 
B)  interest rate policy. 
C)  monetary policy. 
D)  employment policy.

Question 6

The ease with which an asset can be converted into the economy's medium of exchange is known as__________________.

Accepted Answer

The answer of The ease with which an asset can...

Question 7

The Fed's control of the money supply is not precise because

Accepted Answer

A)  Congress can also make changes to the money supply. 
B)  there are not always government bonds available for purchase when the Fed wants to perform open-market operations. 
C)  the Fed does not know where all U.S. currency is located. 
D)  the amount of money in the economy depends in part on the behavior of depositors and bankers. 
A)  Congress can also make changes to the money supply. 
B)  there are not always government bonds available for purchase when the Fed wants to perform open-market operations. 
C)  the Fed does not know where all U.S. currency is located. 
D)  the amount of money in the economy depends in part on the behavior of depositors and bankers.

Question 8

In a 100-percent-reserve banking system, if people decided to decrease the amount of currency they held by increasing the amount they held in checkable deposits, then

Accepted Answer

A)  M1 would increase. 
B)  M1 would decrease. 
C)  M1 would not change. 
D)  M1 might rise or fall. 
A)  M1 would increase. 
B)  M1 would decrease. 
C)  M1 would not change. 
D)  M1 might rise or fall.

Question 9

To increase the money supply, the Fed could

Accepted Answer

A)  sell government bonds. 
B)  auction more loans to banks. 
C)  increase the reserve requirement. 
D)  None of the above is correct. 
A)  sell government bonds. 
B)  auction more loans to banks. 
C)  increase the reserve requirement. 
D)  None of the above is correct.

Question 10

Which of the following statements is correct?

Accepted Answer

A)  All items that are included in M1 are included also in M2. 
B)  All items that are included in M2 are included also in M1. 
C)  Credit cards are included in both M1 and M2. 
D)  Savings deposits are included in both M1 and M2. 
A)  All items that are included in M1 are included also in M2. 
B)  All items that are included in M2 are included also in M1. 
C)  Credit cards are included in both M1 and M2. 
D)  Savings deposits are included in both M1 and M2.

Question 11

When a bank loans out $1,000, the money supply

Accepted Answer

A)  does not change. 
B)  decreases. 
C)  increases. 
D)  may do any of the above. 
A)  does not change. 
B)  decreases. 
C)  increases. 
D)  may do any of the above.

Question 12

The reserve requirement is 12 percent. Lucy deposits $600 into a bank. By how much do excess reserves change?

Accepted Answer

A)  $600 
B)  $528 
C)  $72 
D)  $12 
A)  $600 
B)  $528 
C)  $72 
D)  $12

Question 13

On a bank's T­account, which are part of the bank's assets?

Accepted Answer

A)  both deposits made by its customers and reserves 
B)  deposits made by its customers but not reserves 
C)  reserves but not deposits made by its customers 
D)  neither deposits made by its customers nor reserves 
A)  both deposits made by its customers and reserves 
B)  deposits made by its customers but not reserves 
C)  reserves but not deposits made by its customers 
D)  neither deposits made by its customers nor reserves

Question 14

Which of the following best illustrates the medium of exchange function of money?

Accepted Answer

A)  You keep some money hidden in your shoe. 
B)  You keep track of the value of your assets in terms of currency. 
C)  You pay for your oil change using currency. 
D)  None of the above is correct. 
A)  You keep some money hidden in your shoe. 
B)  You keep track of the value of your assets in terms of currency. 
C)  You pay for your oil change using currency. 
D)  None of the above is correct.

Question 15

Liquidity refers to

Accepted Answer

A)  the ease with which an asset is converted to the medium of exchange. 
B)  the measurement of the intrinsic value of commodity money. 
C)  the measurement of the durability of a good. 
D)  how many time a dollar circulates in a given year. 
A)  the ease with which an asset is converted to the medium of exchange. 
B)  the measurement of the intrinsic value of commodity money. 
C)  the measurement of the durability of a good. 
D)  how many time a dollar circulates in a given year.

Question 16

Table 29-7.
  
-Refer to Table 29-7. Assume the Fed's reserve requirement is 10 percent and that the Bank of Springfield makes new loans so as to make its new reserve ratio 10 percent. From then on, no bank holds any excess reserves. Assume also that people hold only deposits and no currency. Then by what amount does the economy's money supply increase?

Accepted Answer

A)  $37,800 
B)  $18,000 
C)  $2,000 
D)  $16,300 
A)  $37,800 
B)  $18,000 
C)  $2,000 
D)  $16,300

Question 17

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. Assuming that all banks have the same required reserve ratio, and then none want to hold excess reserves what is the value of the money multiplier?

Accepted Answer

A)  8.25 
B)  10 
C)  12 
D)  20 
A)  8.25 
B)  10 
C)  12 
D)  20

Question 18

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

Accepted Answer

A)  falls. The larger the reserve ratio is, the more the money supply falls. 
B)  falls. The larger the reserve ratio is, the less the money supply falls. 
C)  rises. The larger the reserve ratio is, the more the money supply rises. 
D)  rises. The larger the reserve ratio is, the less the money supply rises. 
A)  falls. The larger the reserve ratio is, the more the money supply falls. 
B)  falls. The larger the reserve ratio is, the less the money supply falls. 
C)  rises. The larger the reserve ratio is, the more the money supply rises. 
D)  rises. The larger the reserve ratio is, the less the money supply rises.

Question 19

A debit card is more similar to a credit card than to a check.

Accepted Answer

A) True 
 B)False

Question 20

The primary difference between commodity money and fiat money is that

Accepted Answer

A)  commodity money is a medium of exchange but fiat money is not. 
B)  fiat money is a medium of exchange but commodity money is not. 
C)  commodity money has intrinsic value but fiat money does not. 
D)  fiat money has intrinsic value but commodity money does not. 
A)  commodity money is a medium of exchange but fiat money is not. 
B)  fiat money is a medium of exchange but commodity money is not. 
C)  commodity money has intrinsic value but fiat money does not. 
D)  fiat money has intrinsic value but commodity money does not.

Exam 16: The Monetary System

M1 equals currency plus demand deposits plus

Consider five individuals with different occupations. If this economy has money

Which of the following is correct?

Suppose a bank has $3,000 in reserves, $25,000 of deposits, and a 10 percent reserve requirement. What is the amount of excess reserves?

A central bank's setting or altering) of the money supply is known as

The ease with which an asset can be converted into the economy's medium of exchange is known as__________________.

The Fed's control of the money supply is not precise because

In a 100-percent-reserve banking system, if people decided to decrease the amount of currency they held by increasing the amount they held in checkable deposits, then

To increase the money supply, the Fed could

Which of the following statements is correct?

When a bank loans out $1,000, the money supply

The reserve requirement is 12 percent. Lucy deposits $600 into a bank. By how much do excess reserves change?

On a bank's T­account, which are part of the bank's assets?

Which of the following best illustrates the medium of exchange function of money?

Liquidity refers to

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

A debit card is more similar to a credit card than to a check.

The primary difference between commodity money and fiat money 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

Filters

On a bank's Taccount, which are part of the bank's assets?