Question 1

M1 includes savings deposits.

Accepted Answer

A) True 
 B)False

Question 2

To decrease the money supply, the Fed could

Accepted Answer

A)  sell government bonds. 
B)  increase the discount rate. 
C)  increase the reserve requirement. 
D)  All of the above are correct. 
A)  sell government bonds. 
B)  increase the discount rate. 
C)  increase the reserve requirement. 
D)  All of the above are correct.

Question 3

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 4

Monetary policy is determined by a committee whose voting members include all the presidents of the regional Federal Reserve Banks.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not a reason the New York Federal Reserve Bank president always gets to vote at the Federal Open Market Committee meetings?

Accepted Answer

A)  New York is the traditional financial center of the U.S. economy. 
B)  All Fed purchases and sales of bonds go through the New York Fed's trading desk. 
C)  New York has higher population than other cities in the U.S. 
D)  All of the above are reasons. 
A)  New York is the traditional financial center of the U.S. economy. 
B)  All Fed purchases and sales of bonds go through the New York Fed's trading desk. 
C)  New York has higher population than other cities in the U.S. 
D)  All of the above are reasons.

Question 6

Which of the following is not included in M1?

Accepted Answer

A)  currency 
B)  demand deposits 
C)  traveler's checks 
D)  credit cards 
A)  currency 
B)  demand deposits 
C)  traveler's checks 
D)  credit cards

Question 7

When the Fed conducts open-market purchases,

Accepted Answer

A)  banks buy Treasury securities from Fed, which increases the money supply. 
B)  banks buy Treasury securities from the Fed, which decreases the money supply. 
C)  it buys Treasury securities, which increases the money supply. 
D)  it buys Treasury securities, which decreases the money supply. 
A)  banks buy Treasury securities from Fed, which increases the money supply. 
B)  banks buy Treasury securities from the Fed, which decreases the money supply. 
C)  it buys Treasury securities, which increases the money supply. 
D)  it buys Treasury securities, which decreases the money supply.

Question 8

Credit cards are

Accepted Answer

A)  a medium of exchange. 
B)  counted as part of M2 but not as part of M1. 
C)  important for analyzing the monetary system. 
D)  All of the above are correct. 
A)  a medium of exchange. 
B)  counted as part of M2 but not as part of M1. 
C)  important for analyzing the monetary system. 
D)  All of the above are correct.

Question 9

Which of the following is a liability of a bank and an asset of its customers?

Accepted Answer

A)  deposits of its customers and loans to its customers 
B)  deposits of its customers but not loans to its customers 
C)  loans of its customers but not the deposits of its customers 
D)  neither the deposits of its customers nor the loans to its customers 
A)  deposits of its customers and loans to its customers 
B)  deposits of its customers but not loans to its customers 
C)  loans of its customers but not the deposits of its customers 
D)  neither the deposits of its customers nor the loans to its customers

Question 10

Fractional reserve banking is a system where banks must hold an amount of cash based on a percentage of its loans.

Accepted Answer

A) True 
 B)False

Question 11

In Ugoland, the money supply is $8 million and reserves are $1 million. Assuming that people hold only deposits and no currency, and that banks hold no excess reserves, then the reserve requirement is

Accepted Answer

A)  14 percent. 
B)  12.5 percent. 
C)  8 percent. 
D)  None of the above is correct. 
A)  14 percent. 
B)  12.5 percent. 
C)  8 percent. 
D)  None of the above is correct.

Question 12

The Fed purchases $200 worth of government bonds from the public. The reserve requirement is 12.5 percent, people hold no currency, and the banking system keeps no excess reserves. The U.S. money supply eventually increases by

Accepted Answer

A)  $25. 
B)  between $200 and $300. 
C)  $1,600. 
D)  $2,500. 
A)  $25. 
B)  between $200 and $300. 
C)  $1,600. 
D)  $2,500.

Question 13

The Federal Reserve Board of Governors

Accepted Answer

A)  rotate each four years. 
B)  are appointed by the President and confirmed by the Senate. 
C)  are elected by popular vote. 
D)  hold lifetime appointments. 
A)  rotate each four years. 
B)  are appointed by the President and confirmed by the Senate. 
C)  are elected by popular vote. 
D)  hold lifetime appointments.

Question 14

Suppose banks desire to hold no excess reserves and that the Fed has set a reserve requirement of 6 percent. If you deposit $8,000 into First Raven Bank,

Accepted Answer

A)  First Raven's required reserves increase by $480. 
B)  First Raven will be able to lend out $7,520. 
C)  First Raven's assets and liabilities both will increase by $8,000. 
D)  All of the above are correct. 
A)  First Raven's required reserves increase by $480. 
B)  First Raven will be able to lend out $7,520. 
C)  First Raven's assets and liabilities both will increase by $8,000. 
D)  All of the above are correct.

Question 15

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 16

People can write checks against

Accepted Answer

A)  demand deposits and money market mutual funds 
B)  demand deposits but not money market mutual funds 
C)  money market mutual funds but not demand deposits 
D)  neither demand deposits nor money market mutual funds 
A)  demand deposits and money market mutual funds 
B)  demand deposits but not money market mutual funds 
C)  money market mutual funds but not demand deposits 
D)  neither demand deposits nor money market mutual funds

Question 17

Consider the following traders who meet.   Which, if any, pairs of traders has a double coincidence of wants?

Accepted Answer

A)  Bill with Mike 
B)  Time with Amy 
C)  Bill with Mike, and Tim with Amy 
D)  Bill with Tim, and Mike with Amy 
A)  Bill with Mike 
B)  Time with Amy 
C)  Bill with Mike, and Tim with Amy 
D)  Bill with Tim, and Mike with Amy

Question 18

During recessions, banks typically choose to hold more excess reserves relative to their deposits. This action

Accepted Answer

A)  increases the money multiplier and increases the money supply. 
B)  decreases the money multiplier and decreases the money supply. 
C)  does not change the money multiplier, but increases the money supply. 
D)  does not change the money multiplier, but decreases the money supply. 
A)  increases the money multiplier and increases the money supply. 
B)  decreases the money multiplier and decreases the money supply. 
C)  does not change the money multiplier, but increases the money supply. 
D)  does not change the money multiplier, but decreases the money supply.

Question 19

Which of the following is correct?

Accepted Answer

A)  The Federal Reserve has 14 regional banks. The Board of Governors has 12 members who serve 7-year terms. 
B)  The Federal Reserve has 14 regional banks. The Board of Governors has 7 members who serve 14-year terms. 
C)  The Federal Reserve has 12 regional banks. The Board of Governors has 12 members who serve 7-year terms. 
D)  The Federal Reserve has 12 regional banks. The Board of Governors has 7 members who serve 14-year terms. 
A)  The Federal Reserve has 14 regional banks. The Board of Governors has 12 members who serve 7-year terms. 
B)  The Federal Reserve has 14 regional banks. The Board of Governors has 7 members who serve 14-year terms. 
C)  The Federal Reserve has 12 regional banks. The Board of Governors has 12 members who serve 7-year terms. 
D)  The Federal Reserve has 12 regional banks. The Board of Governors has 7 members who serve 14-year terms.

Question 20

The primary tool used by the Federal Reserve to change the money supply is .

Accepted Answer

open-marke

Exam 29: The Monetary System

M1 includes savings deposits.

To decrease the money supply, the Fed could

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

Monetary policy is determined by a committee whose voting members include all the presidents of the regional Federal Reserve Banks.

Which of the following is not a reason the New York Federal Reserve Bank president always gets to vote at the Federal Open Market Committee meetings?

Which of the following is not included in M1?

When the Fed conducts open-market purchases,

Credit cards are

Which of the following is a liability of a bank and an asset of its customers?

Fractional reserve banking is a system where banks must hold an amount of cash based on a percentage of its loans.

In Ugoland, the money supply is $8 million and reserves are $1 million. Assuming that people hold only deposits and no currency, and that banks hold no excess reserves, then the reserve requirement is

The Fed purchases $200 worth of government bonds from the public. The reserve requirement is 12.5 percent, people hold no currency, and the banking system keeps no excess reserves. The U.S. money supply eventually increases by

The Federal Reserve Board of Governors

Suppose banks desire to hold no excess reserves and that the Fed has set a reserve requirement of 6 percent. If you deposit $8,000 into First Raven Bank,

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

People can write checks against

Consider the following traders who meet. Which, if any, pairs of traders has a double coincidence of wants?

During recessions, banks typically choose to hold more excess reserves relative to their deposits. This action

Which of the following is correct?

The primary tool used by the Federal Reserve to change the money supply is .

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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