Question 1

If a bank desires to hold no excess reserves, the reserve requirement is 8 percent, and it receives a new deposit of $500,

Accepted Answer

A)  its required reserves increase by $40. 
B)  its total reserves initially increase by $460. 
C)  it will be able to make a new loan of up to $492. 
D)  All of the above are correct. 
A)  its required reserves increase by $40. 
B)  its total reserves initially increase by $460. 
C)  it will be able to make a new loan of up to $492. 
D)  All of the above are correct.

Question 2

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 holding 2% of its deposits as excess reserves. Assume that no banks in the economy want to maintain holdings of excess reserves and that people only hold deposits and no currency. The Fed makes open market purchases of $10,000. The person who sold bonds to the Fed deposits all the funds in Metropolis National Bank. If the bank now loans out all its excess reserves, by how much will the money supply increase?

Accepted Answer

A)  $190,000 
B)  $200,000 
C)  $240,000 
D)  None of the above are correct. 
A)  $190,000 
B)  $200,000 
C)  $240,000 
D)  None of the above are correct.

Question 3

If the reserve ratio is 6 percent, then $9,000 of additional reserves can create up to

Accepted Answer

A)  $159,000 of new money. 
B)  $54,000 of new money. 
C)  $150,000 of new money. 
D)  $141,000 of new money. 
A)  $159,000 of new money. 
B)  $54,000 of new money. 
C)  $150,000 of new money. 
D)  $141,000 of new money.

Question 4

Sam wants to trade eggs for sausage. Sally wants to trade sausage for eggs. Sam and Sally have a double- coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 5

Table 29-4.
  
-Refer to Table 29-4. If $800 is deposited into the First Bank of Fairfield, and the bank takes no other actions, its

Accepted Answer

A)  reserves will increase by $100. 
B)  liabilities will increase by $800. 
C)  assets will decrease by $800. 
D)  loans will increase by $800. 
A)  reserves will increase by $100. 
B)  liabilities will increase by $800. 
C)  assets will decrease by $800. 
D)  loans will increase by $800.

Question 6

A bank's reserve ratio is 10 percent and the bank has $5,000 in deposits. Its reserves amount to

Accepted Answer

A)  $50. 
B)  $500. 
C)  $4,500. 
D)  $4,950. 
A)  $50. 
B)  $500. 
C)  $4,500. 
D)  $4,950.

Question 7

Who can vote on Federal Open Market Committee decisions?

Accepted Answer

A)  all of the members of the Board of Governors and all of the Federal Reserve Bank presidents 
B)  all of the members of the Board of Governors and some of the Federal Reserve Bank presidents 
C)  some of the members of the Board of Governors and all of the Federal Reserve Bank presidents 
D)  some of the members of the Board of Governors and some of the Federal Reserve Bank presidents 
A)  all of the members of the Board of Governors and all of the Federal Reserve Bank presidents 
B)  all of the members of the Board of Governors and some of the Federal Reserve Bank presidents 
C)  some of the members of the Board of Governors and all of the Federal Reserve Bank presidents 
D)  some of the members of the Board of Governors and some of the Federal Reserve Bank presidents

Question 8

Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 8 percent, and excess reserves amount to $5 billion. What is the level of deposits?

Accepted Answer

A)  $5,000 billion 
B)  $4,937.5 billion 
C)  $5,062.5 billion 
D)  $4,995 billion 
A)  $5,000 billion 
B)  $4,937.5 billion 
C)  $5,062.5 billion 
D)  $4,995 billion

Question 9

Money

Accepted Answer

A)  is a perfect store of value. 
B)  is the most liquid asset. 
C)  has intrinsic value, regardless of which form it takes. 
D)  All of the above are correct. 
A)  is a perfect store of value. 
B)  is the most liquid asset. 
C)  has intrinsic value, regardless of which form it takes. 
D)  All of the above are correct.

Question 10

As the reserve ratio decreases, the money multiplier

Accepted Answer

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

Question 11

The interest rate charged by the Fed to member banks is called the .

Accepted Answer

The answer of The interest rate charged by the Fed...

Question 12

Money is the most liquid asset available because

Accepted Answer

A)  it is a store of value. 
B)  it is a medium of exchange. 
C)  it is a unit of account. 
D)  it has intrinsic value. 
A)  it is a store of value. 
B)  it is a medium of exchange. 
C)  it is a unit of account. 
D)  it has intrinsic value.

Question 13

Suppose the banking system currently has $300 billion in reserves, the reserve requirement is 5 percent, and excess reserves are $30 billion. What is the level of loans?

Accepted Answer

A)  $270 billion 
B)  $5,400 billion 
C)  $6,000 billion 
D)  $5,100 billion 
A)  $270 billion 
B)  $5,400 billion 
C)  $6,000 billion 
D)  $5,100 billion

Question 14

The money supply increases when the Fed

Accepted Answer

A)  buys bonds. The increase will be larger, the smaller is the reserve ratio. 
B)  buys bonds. The increase will be larger, the larger is the reserve ratio. 
C)  sells bonds. The increase will be larger, the smaller is the reserve ratio. 
D)  sells bonds. The increase will be larger, the larger is the reserve ratio. 
A)  buys bonds. The increase will be larger, the smaller is the reserve ratio. 
B)  buys bonds. The increase will be larger, the larger is the reserve ratio. 
C)  sells bonds. The increase will be larger, the smaller is the reserve ratio. 
D)  sells bonds. The increase will be larger, the larger is the reserve ratio.

Question 15

The money supply increases when the Fed

Accepted Answer

A)  lowers the discount rate. The increase will be larger the smaller the reserve ratio is. 
B)  lowers the discount rate. The increase will be larger the larger the reserve ratio is. 
C)  raises the discount rate. The increase will be larger the smaller the reserve ratio is. 
D)  raises the discount rate. The increase will be larger the larger the reserve ratio is. 
A)  lowers the discount rate. The increase will be larger the smaller the reserve ratio is. 
B)  lowers the discount rate. The increase will be larger the larger the reserve ratio is. 
C)  raises the discount rate. The increase will be larger the smaller the reserve ratio is. 
D)  raises the discount rate. The increase will be larger the larger the reserve ratio is.

Question 16

If an economy uses silver as money, then that economy's money

Accepted Answer

A)  serves as a store of value but not as a medium of exchange. 
B)  serves as a medium of exchange but not as a unit of account. 
C)  is commodity money. 
D)  has no intrinsic value. 
A)  serves as a store of value but not as a medium of exchange. 
B)  serves as a medium of exchange but not as a unit of account. 
C)  is commodity money. 
D)  has no intrinsic value.

Question 17

In a fractional reserve economy where the required reserve ratio is 10%, must it be the case that an initial deposit of $100 increases the total money supply by $1,000? Explain.

Accepted Answer

No, this is not necessarily the case.
It

Question 18

The discount rate is

Accepted Answer

A)  the interest rate the Fed charges banks. 
B)  one divided by the difference between one and the reserve ratio. 
C)  the interest rate banks receive on reserve deposits with the Fed. 
D)  the interest rate that banks charge on overnight loans to other banks. 
A)  the interest rate the Fed charges banks. 
B)  one divided by the difference between one and the reserve ratio. 
C)  the interest rate banks receive on reserve deposits with the Fed. 
D)  the interest rate that banks charge on overnight loans to other banks.

Question 19

When we say that trade is roundabout we mean that

Accepted Answer

A)  people sometimes trade goods for goods. 
B)  trades require a double coincidence of wants. 
C)  currency is accepted primarily to make further trades. 
D)  people must spend time searching for the products they wish to purchase. 
A)  people sometimes trade goods for goods. 
B)  trades require a double coincidence of wants. 
C)  currency is accepted primarily to make further trades. 
D)  people must spend time searching for the products they wish to purchase.

Question 20

The Fed can decrease the money supply by conducting open-market

Accepted Answer

A)  sales or by raising the discount rate. 
B)  sales or by lowering the discount rate. 
C)  purchases or by raising the discount rate. 
D)  purchases or by lowering the discount rate. 
A)  sales or by raising the discount rate. 
B)  sales or by lowering the discount rate. 
C)  purchases or by raising the discount rate. 
D)  purchases or by lowering the discount rate.

Exam 16: The Monetary System

If a bank desires to hold no excess reserves, the reserve requirement is 8 percent, and it receives a new deposit of $500,

If the reserve ratio is 6 percent, then $9,000 of additional reserves can create up to

Sam wants to trade eggs for sausage. Sally wants to trade sausage for eggs. Sam and Sally have a double- coincidence of wants.

Table 29-4. -Refer to Table 29-4. If $800 is deposited into the First Bank of Fairfield, and the bank takes no other actions, its

A bank's reserve ratio is 10 percent and the bank has $5,000 in deposits. Its reserves amount to

Who can vote on Federal Open Market Committee decisions?

Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 8 percent, and excess reserves amount to $5 billion. What is the level of deposits?

Money

As the reserve ratio decreases, the money multiplier

The interest rate charged by the Fed to member banks is called the .

Money is the most liquid asset available because

Suppose the banking system currently has $300 billion in reserves, the reserve requirement is 5 percent, and excess reserves are $30 billion. What is the level of loans?

The money supply increases when the Fed

The money supply increases when the Fed

If an economy uses silver as money, then that economy's money

In a fractional reserve economy where the required reserve ratio is 10%, must it be the case that an initial deposit of $100 increases the total money supply by $1,000? Explain.

The discount rate is

When we say that trade is roundabout we mean that

The Fed can decrease the money supply by conducting open-market

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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