Question 1

The Federal Open Market Committee meets approximately

Accepted Answer

A)  every three weeks 
B)  every six weeks 
C)  every 3 months 
D)  every 6 months. 
A)  every three weeks 
B)  every six weeks 
C)  every 3 months 
D)  every 6 months. B

Question 2

In order for currency to be widely used as a medium of exchange, it is sufficient for the government to designate it as legal tender.

Accepted Answer

A) True 
 B)False  False

Question 3

Money

Accepted Answer

A)  is more efficient than barter. 
B)  makes trades easier. 
C)  allows greater specialization. 
D)  All of the above are correct. 
A)  is more efficient than barter. 
B)  makes trades easier. 
C)  allows greater specialization. 
D)  All of the above are correct. D

Question 4

When you purchase school supplies at the book store using cash, you are using money as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 5

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold

Accepted Answer

A)  fewer reserves, so the money multiplier will fall. 
B)  fewer reserves, so the money multiplier will rise. 
C)  more reserves, so the money multiplier will fall. 
D)  more reserves, so the money multiplier will rise. 
A)  fewer reserves, so the money multiplier will fall. 
B)  fewer reserves, so the money multiplier will rise. 
C)  more reserves, so the money multiplier will fall. 
D)  more reserves, so the money multiplier will rise.

Question 6

During wars the public tends to hold relatively more currency and relatively fewer deposits. This decision makes reserves

Accepted Answer

A)  and the money supply increase. 
B)  and the money supply decrease. 
C)  increase, but leaves the money supply unchanged. 
D)  decrease, but leaves the money supply unchanged. 
A)  and the money supply increase. 
B)  and the money supply decrease. 
C)  increase, but leaves the money supply unchanged. 
D)  decrease, but leaves the money supply unchanged.

Question 7

Which of the following is a store of value?

Accepted Answer

A)  currency 
B)  U.S. government bonds 
C)  fine art 
D)  All of the above are correct. 
A)  currency 
B)  U.S. government bonds 
C)  fine art 
D)  All of the above are correct.

Question 8

Money is the only asset that functions as a store of value.

Accepted Answer

A) True 
 B)False

Question 9

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 10

Table 29-3. An economy starts with $50,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $45,750. The T-account of the bank is shown below.  
-Refer to Table 29-3. If all banks in the economy have the same reserve ratio as this bank, then the value of the economy's money multiplier is

Accepted Answer

A)  9.33. 
B)  1.09. 
C)  10.76. 
D)  11.76. 
A)  9.33. 
B)  1.09. 
C)  10.76. 
D)  11.76.

Question 11

Credit cards are a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 12

Why is the Chairman of the Federal Reserve often referred to as the "second most powerful person in the United States?"

Accepted Answer

The Fed's policy decisions influence the

Question 13

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 14

You believe the dollars you have today will be accepted in the future in exchange for goods and services. Which function of money does this illustrate?

Accepted Answer

The answer of You believe the dollars you have today...

Question 15

An increase in the reserve requirement increases reserves and decreases the money supply.

Accepted Answer

A) True 
 B)False

Question 16

What does it mean for the Fed to be the "lender of last resort?"

Accepted Answer

When banks cannot borrow in the market p

Question 17

If the reserve ratio is 5 percent, then $600 of additional reserves can create up to

Accepted Answer

A)  $30 of new money. 
B)  $3,000 of new money. 
C)  $12,000 of new money. 
D)  None of the above is correct. 
A)  $30 of new money. 
B)  $3,000 of new money. 
C)  $12,000 of new money. 
D)  None of the above is correct.

Question 18

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 19

Describe the role of bank leverage in bank insolvency during times of falling asset prices.

Accepted Answer

As bank asset values fall, the effect on

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 29: The Monetary System

The Federal Open Market Committee meets approximately

In order for currency to be widely used as a medium of exchange, it is sufficient for the government to designate it as legal tender.

Money

When you purchase school supplies at the book store using cash, you are using money as a medium of exchange.

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold

During wars the public tends to hold relatively more currency and relatively fewer deposits. This decision makes reserves

Which of the following is a store of value?

Money is the only asset that functions as a store of value.

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

Credit cards are a medium of exchange.

Why is the Chairman of the Federal Reserve often referred to as the "second most powerful person in the United States?"

You believe the dollars you have today will be accepted in the future in exchange for goods and services. Which function of money does this illustrate?

An increase in the reserve requirement increases reserves and decreases the money supply.

What does it mean for the Fed to be the "lender of last resort?"

If the reserve ratio is 5 percent, then $600 of additional reserves can create up to

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

Describe the role of bank leverage in bank insolvency during times of falling asset prices.

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

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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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