Question 1

Who was reappointed Chair of the Board of Governors in 2009 by President Barrack Obama?

Accepted Answer

A)  Ben Bernanke 
B)  Christina Romer 
C)  Timothy Geithner 
D)  Bernie Madoff 
A)  Ben Bernanke 
B)  Christina Romer 
C)  Timothy Geithner 
D)  Bernie Madoff

Question 2

Which of the following is correct concerning the FOMC?

Accepted Answer

A)  the members of the Board of Governors have the majority of the votes 
B)  the New York Federal Reserve Bank District President is always a voting member 
C)  all Federal Reserve Bank presidents attend the meetings 
D)  All of the above are correct. 
A)  the members of the Board of Governors have the majority of the votes 
B)  the New York Federal Reserve Bank District President is always a voting member 
C)  all Federal Reserve Bank presidents attend the meetings 
D)  All of the above are correct.

Question 3

Which of the following will not help to prevent bank runs?

Accepted Answer

A)  government insurance of deposits 
B)  fractional reserve banking 
C)  100% reserve banking 
D)  All of the above prevent bank runs. 
A)  government insurance of deposits 
B)  fractional reserve banking 
C)  100% reserve banking 
D)  All of the above prevent bank runs.

Question 4

Sandra routinely uses currency to purchase her groceries. She is using money as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 5

In a system of 100-percent-reserve banking,

Accepted Answer

A)  banks do not make loans. 
B)  currency is the only form of money. 
C)  deposits are banks' only assets. 
D)  All of the above are correct. 
A)  banks do not make loans. 
B)  currency is the only form of money. 
C)  deposits are banks' only assets. 
D)  All of the above are correct.

Question 6

Which of the following statements regarding the Federal Open Market Committee is correct?

Accepted Answer

A)  Only the five voting regional Fed presidents attend the meetings. 
B)  All regional Fed presidents attend and vote at the meetings. 
C)  All regional Fed presidents attend the meetings, but only five get to vote. 
D)  Regional Fed presidents may neither attend nor vote the meetings. 
A)  Only the five voting regional Fed presidents attend the meetings. 
B)  All regional Fed presidents attend and vote at the meetings. 
C)  All regional Fed presidents attend the meetings, but only five get to vote. 
D)  Regional Fed presidents may neither attend nor vote the meetings.

Question 7

The federal funds rate is the interest rate that

Accepted Answer

A)  banks charge one another for loans. 
B)  banks charge the Fed for loans. 
C)  the Fed charges banks for loans. 
D)  the Fed charges Congress for loans. 
A)  banks charge one another for loans. 
B)  banks charge the Fed for loans. 
C)  the Fed charges banks for loans. 
D)  the Fed charges Congress for loans.

Question 8

Demand 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 9

A bank operates with reserves of $100, loans of $300 and securities of $100. The bank's only liability is deposits of $400 since it has zero debt. Calculate the bank's leverage ratio.

Accepted Answer

Since Assets - Liabilities equals Bank C

Question 10

Other things the same if reserve requirements are decreased, the reserve ratio

Accepted Answer

A)  decreases, the money multiplier increases, and the money supply decreases. 
B)  increases, the money multiplier increases, and the money supply increases. 
C)  decreases, the money multiplier increases, and the money supply increases. 
D)  increases, the money multiplier increases, and the money supply decreases. 
A)  decreases, the money multiplier increases, and the money supply decreases. 
B)  increases, the money multiplier increases, and the money supply increases. 
C)  decreases, the money multiplier increases, and the money supply increases. 
D)  increases, the money multiplier increases, and the money supply decreases.

Question 11

In a fractional-reserve banking system, a decrease in reserve requirements

Accepted Answer

A)  increases both the money multiplier and the money supply. 
B)  decreases both the money multiplier and the money supply. 
C)  increases the money multiplier, but decreases the money supply. 
D)  decreases the money multiplier, but increases the money supply. 
A)  increases both the money multiplier and the money supply. 
B)  decreases both the money multiplier and the money supply. 
C)  increases the money multiplier, but decreases the money supply. 
D)  decreases the money multiplier, but increases the money supply.

Question 12

The reserve ratio is 10 percent, banks do not hold excess reserves, and people hold only deposits and no currency. When the Fed sells $20 million worth of bonds to the public, bank reserves

Accepted Answer

A)  increase by $20 million and the money supply eventually increases by $20 million. 
B)  increase by $20 million and the money supply eventually increases by $200 million. 
C)  decrease by $2 million and the money supply eventually increases by $20 million. 
D)  decrease by $20 million and the money supply eventually decreases by $200 million. 
A)  increase by $20 million and the money supply eventually increases by $20 million. 
B)  increase by $20 million and the money supply eventually increases by $200 million. 
C)  decrease by $2 million and the money supply eventually increases by $20 million. 
D)  decrease by $20 million and the money supply eventually decreases by $200 million.

Question 13

When the Fed makes open-market purchases bank

Accepted Answer

A)  withdrawals and lending increase. 
B)  withdrawals increase and lending decreases. 
C)  deposits and lending increase. 
D)  deposits increase and lending decreases. 
A)  withdrawals and lending increase. 
B)  withdrawals increase and lending decreases. 
C)  deposits and lending increase. 
D)  deposits increase and lending decreases.

Question 14

Economists argue that the move from barter to money increased trade and production. How is this possible?

Accepted Answer

The use of money allows people

Question 15

Table 29-1.
The information in the table pertains to an imaginary economy.
  
-Refer to Table 29-1. What is the value of M2 in billions of dollars?

Accepted Answer

A)  $9,815 billion 
B)  $8,315 billion 
C)  $7,565 billion 
D)  $7,405 billion 
A)  $9,815 billion 
B)  $8,315 billion 
C)  $7,565 billion 
D)  $7,405 billion

Question 16

Traveler's checks 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 17

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150. If customers deposit $50 into the bank, what is the value of the money supply?

Accepted Answer

A)  $50 
B)  $100 
C)  $150 
D)  $200 
A)  $50 
B)  $100 
C)  $150 
D)  $200

Question 18

When the Fed conducts open-market sales,

Accepted Answer

A)  it sells Treasury securities, which increases the money supply. 
B)  it sells Treasury securities, which decreases the money supply. 
C)  it auctions term loans, which increases the money supply. 
D)  it auctions term loans, which decreases the money supply. 
A)  it sells Treasury securities, which increases the money supply. 
B)  it sells Treasury securities, which decreases the money supply. 
C)  it auctions term loans, which increases the money supply. 
D)  it auctions term loans, which decreases the money supply.

Question 19

If the public decides to hold less currency and more deposits in banks, bank reserves

Accepted Answer

A)  decrease and the money supply eventually decreases. 
B)  decrease but the money supply does not change. 
C)  increase and the money supply eventually increases. 
D)  increase but the money supply does not change. 
A)  decrease and the money supply eventually decreases. 
B)  decrease but the money supply does not change. 
C)  increase and the money supply eventually increases. 
D)  increase but the money supply does not change.

Question 20

Table 29-5.
  
-Refer to Table 29-5. If the bank faces a reserve requirement of 20 percent, then it

Accepted Answer

A)  has $10,000 of excess reserves. 
B)  needs $10,000 more reserves to meet its reserve requirements. 
C)  needs $20,000 more reserves to meet its reserve requirements. 
D)  just meets its reserve requirement. 
A)  has $10,000 of excess reserves. 
B)  needs $10,000 more reserves to meet its reserve requirements. 
C)  needs $20,000 more reserves to meet its reserve requirements. 
D)  just meets its reserve requirement.

Exam 16: The Monetary System

Who was reappointed Chair of the Board of Governors in 2009 by President Barrack Obama?

Which of the following is correct concerning the FOMC?

Which of the following will not help to prevent bank runs?

Sandra routinely uses currency to purchase her groceries. She is using money as a medium of exchange.

In a system of 100-percent-reserve banking,

Which of the following statements regarding the Federal Open Market Committee is correct?

The federal funds rate is the interest rate that

Demand deposits are included in

A bank operates with reserves of $100, loans of $300 and securities of $100. The bank's only liability is deposits of $400 since it has zero debt. Calculate the bank's leverage ratio.

Other things the same if reserve requirements are decreased, the reserve ratio

In a fractional-reserve banking system, a decrease in reserve requirements

The reserve ratio is 10 percent, banks do not hold excess reserves, and people hold only deposits and no currency. When the Fed sells $20 million worth of bonds to the public, bank reserves

When the Fed makes open-market purchases bank

Economists argue that the move from barter to money increased trade and production. How is this possible?

Table 29-1. The information in the table pertains to an imaginary economy. -Refer to Table 29-1. What is the value of M2 in billions of dollars?

Traveler's checks are included in

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150. If customers deposit $50 into the bank, what is the value of the money supply?

When the Fed conducts open-market sales,

If the public decides to hold less currency and more deposits in banks, bank reserves

Table 29-5. -Refer to Table 29-5. If the bank faces a reserve requirement of 20 percent, then it

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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