Question 1

Demand deposits are balances in bank accounts that depositors can access by writing a check or using a debit card.

Accepted Answer

A) True 
 B)False

Question 2

Small time deposits are included in

Accepted Answer

A)  M1 but not M2. 
B)  M2 but not M1. 
C)  M1 and M2. 
D)  neither M1 nor M2. 
A)  M1 but not M2. 
B)  M2 but not M1. 
C)  M1 and M2. 
D)  neither M1 nor M2.

Question 3

The chair of the Board of Governors regularly testifies to Congress about Fed policy.

Accepted Answer

A) True 
 B)False

Question 4

The Federal Reserve

Accepted Answer

A)  is responsible for conducting the nation's monetary policy, and it plays a role in regulating banks. 
B)  is responsible for conducing the nation's monetary policy, but it plays no role in regulating banks. 
C)  is not responsible for conducting the nation's monetary policy, and it plays a role in regulating banks. 
D)  is not responsible for conducing the nation's monetary policy, and it plays no role in regulating banks. 
A)  is responsible for conducting the nation's monetary policy, and it plays a role in regulating banks. 
B)  is responsible for conducing the nation's monetary policy, but it plays no role in regulating banks. 
C)  is not responsible for conducting the nation's monetary policy, and it plays a role in regulating banks. 
D)  is not responsible for conducing the nation's monetary policy, and it plays no role in regulating banks.

Question 5

The confidence you have that a retailer will accept dollars in exchange for goods is based primarily on money

Accepted Answer

A)  being a unit of account. 
B)  being a medium of exchange. 
C)  serving as a store of value. 
D)  having intrinsic value. 
A)  being a unit of account. 
B)  being a medium of exchange. 
C)  serving as a store of value. 
D)  having intrinsic value.

Question 6

Which two of the Ten Principles of Economics imply that the Fed can profoundly affect the economy?

Accepted Answer

1. Prices rise when the govern

Question 7

Demand deposits are a type of

Accepted Answer

A)  checking account. 
B)  time deposit. 
C)  money market mutual fund. 
D)  savings deposit. 
A)  checking account. 
B)  time deposit. 
C)  money market mutual fund. 
D)  savings deposit.

Question 8

During the Great Depression in the early 1930s,

Accepted Answer

A)  bank runs closed many banks. 
B)  the money supply rose sharply. 
C)  the Fed decreased reserve requirements. 
D)  both a and b are correct. 
A)  bank runs closed many banks. 
B)  the money supply rose sharply. 
C)  the Fed decreased reserve requirements. 
D)  both a and b are correct.

Question 9

Scenario 29-2.
The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the taz. Aggregate banking statistics show that collectively the banks of Tazi hold 300 million tazes of required reserves, 75 million tazes of excess reserves, have issued 7,500 million tazes of deposits, and hold 225 million tazes of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank.
-Refer to Scenario 29-2. Suppose the Bank of Tazi loaned the banks of Tazi 10 million tazes. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply change?

Accepted Answer

A)  250 million tazes 
B)  200 million tazes 
C)  125 million tazes 
D)  None of the above is correct. 
A)  250 million tazes 
B)  200 million tazes 
C)  125 million tazes 
D)  None of the above is correct.

Question 10

The members of the Federal Reserve's Board of Governors

Accepted Answer

A)  are elected to office by the public every fourteen years. 
B)  are nominated by the U.S. Senate banking committee and confirmed by the U.S. house of representatives. 
C)  are elected by bankers in each Federal Reserve Region. 
D)  are appointed by the president of the U.S. and confirmed by the U.S. Senate. 
A)  are elected to office by the public every fourteen years. 
B)  are nominated by the U.S. Senate banking committee and confirmed by the U.S. house of representatives. 
C)  are elected by bankers in each Federal Reserve Region. 
D)  are appointed by the president of the U.S. and confirmed by the U.S. Senate.

Question 11

A bank has a 5 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement.

Accepted Answer

A)  It has $25 in reserves and $4,975 in loans. 
B)  It has $250 in reserves and $4,750 in loans. 
C)  It has $1,000 in reserves and $4,000 in loans. 
D)  None of the above is correct. 
A)  It has $25 in reserves and $4,975 in loans. 
B)  It has $250 in reserves and $4,750 in loans. 
C)  It has $1,000 in reserves and $4,000 in loans. 
D)  None of the above is correct.

Question 12

Suppose the required reserve ratio is 20%. What is the maximum amount of total money supply that can be created from an initial deposit of $200? In general, why might the actual amount of total money creation be less than the maximum?

Accepted Answer

The money multiplier is the reciprocal o

Question 13

The Fed's policy decisions have an important influence on

Accepted Answer

A)  inflation in the long run and employment and production in the short run. 
B)  inflation in the long run and employment and production in the long run. 
C)  inflation in the short run and employment and production in the short run. 
D)  inflation in the short run and employment and production in the long run. 
A)  inflation in the long run and employment and production in the short run. 
B)  inflation in the long run and employment and production in the long run. 
C)  inflation in the short run and employment and production in the short run. 
D)  inflation in the short run and employment and production in the long run.

Question 14

Table 29-8
  
-Refer to Table 29-8. The required reserve ratio is 12 percent. Which of the following is true?

Accepted Answer

A)  This banks reserve ratio is 12 percent. Its excess reserves are $0. 
B)  This banks reserve ratio is 13.3 percent. Its excess reserves are $120. 
C)  This banks reserve ratio is 15 percent. Its excess reserves are $240. 
D)  This banks reserve ratio is 10 percent. Its excess reserves are $300. 
A)  This banks reserve ratio is 12 percent. Its excess reserves are $0. 
B)  This banks reserve ratio is 13.3 percent. Its excess reserves are $120. 
C)  This banks reserve ratio is 15 percent. Its excess reserves are $240. 
D)  This banks reserve ratio is 10 percent. Its excess reserves are $300.

Question 15

Over one time horizon or another, Fed policy decisions influence

Accepted Answer

A)  inflation and employment. 
B)  inflation but not employment. 
C)  employment but not inflation. 
D)  neither inflation nor employment. 
A)  inflation and employment. 
B)  inflation but not employment. 
C)  employment but not inflation. 
D)  neither inflation nor employment.

Question 16

Table 29-7.
  
-Refer to Table 29-7. If the Bank of Springfield has lent out all the money it can given its level of deposits, then what is the reserve requirement?

Accepted Answer

A)  8.1 percent 
B)  11.0 percent 
C)  12.4 percent 
D)  89.0 percent 
A)  8.1 percent 
B)  11.0 percent 
C)  12.4 percent 
D)  89.0 percent

Question 17

You saved $500 in currency in your piggy bank to purchase a new laptop. The $500 you kept in your piggy bank illustrates money's function as a . The laptop's price is posted as $500. The $500 price illustrates money's function as a . You use the $500 to purchase the laptop. This transaction illustrates money's function as a ______.

Accepted Answer

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

Question 18

List two examples of commodity money.

Accepted Answer

Commodity money refers to mone

Question 19

Bank runs

Accepted Answer

A)  will affect neither the money supply nor the money multiplier. 
B)  increase the money supply. 
C)  can be neither prevented nor mitigated by the Federal Reserve. 
D)  are a problem because banks only hold a fraction of deposits as reserves. 
A)  will affect neither the money supply nor the money multiplier. 
B)  increase the money supply. 
C)  can be neither prevented nor mitigated by the Federal Reserve. 
D)  are a problem because banks only hold a fraction of deposits as reserves.

Question 20

If you withdraw $500 from your savings account and deposit it in your checking account, then M1 will change by and M2 will change by .

Accepted Answer

The answer of If you withdraw $500 from your savings...

Exam 16: The Monetary System

Demand deposits are balances in bank accounts that depositors can access by writing a check or using a debit card.

Small time deposits are included in

The chair of the Board of Governors regularly testifies to Congress about Fed policy.

The Federal Reserve

The confidence you have that a retailer will accept dollars in exchange for goods is based primarily on money

Which two of the Ten Principles of Economics imply that the Fed can profoundly affect the economy?

Demand deposits are a type of

During the Great Depression in the early 1930s,

The members of the Federal Reserve's Board of Governors

A bank has a 5 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement.

Suppose the required reserve ratio is 20%. What is the maximum amount of total money supply that can be created from an initial deposit of $200? In general, why might the actual amount of total money creation be less than the maximum?

The Fed's policy decisions have an important influence on

Table 29-8 -Refer to Table 29-8. The required reserve ratio is 12 percent. Which of the following is true?

Over one time horizon or another, Fed policy decisions influence

Table 29-7. -Refer to Table 29-7. If the Bank of Springfield has lent out all the money it can given its level of deposits, then what is the reserve requirement?

List two examples of commodity money.

Bank runs

If you withdraw $500 from your savings account and deposit it in your checking account, then M1 will change by and M2 will change by .

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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