Question 1

If the central bank in some country raised the reserve requirement, then the money multiplier for that country

Accepted Answer

A)  would increase. 
B)  would not change. 
C)  would decrease. 
D)  could do any of the above. 
A)  would increase. 
B)  would not change. 
C)  would decrease. 
D)  could do any of the above.

Question 2

A debit card is more similar to a credit card than to a check.

Accepted Answer

A) True 
 B)False

Question 3

Assume that when $100 of new reserves enter the banking system, the money supply ultimately increases by $625. Assume also that no banks hold excess reserves and that the entire money supply consists of bank deposits. If, at a point in time, reserves for all banks amount to $500, then at that same point in time, loans for all banks amount to $2,625.

Accepted Answer

A) True 
 B)False

Question 4

The money multiplier is when the reserve ratio is 12.5 percent.

Accepted Answer

The answer of The money multiplier is when the reserve...

Question 5

An important function of the U.S. Federal Reserve is to

Accepted Answer

A)  set the debt ceiling. 
B)  fund Congressional spending. 
C)  control the supply of money. 
D)  mint coins. 
A)  set the debt ceiling. 
B)  fund Congressional spending. 
C)  control the supply of money. 
D)  mint coins.

Question 6

If people decide to hold less currency relative to deposits, the money supply

Accepted Answer

A)  falls. The Fed could lessen the impact of this by buying Treasury bonds. 
B)  falls. The Fed could lessen the impact of this by selling Treasury bonds. 
C)  rises. The Fed could lessen the impact of this by buying Treasury bonds. 
D)  rises. The Fed could lessen the impact of this by selling Treasury bonds. 
A)  falls. The Fed could lessen the impact of this by buying Treasury bonds. 
B)  falls. The Fed could lessen the impact of this by selling Treasury bonds. 
C)  rises. The Fed could lessen the impact of this by buying Treasury bonds. 
D)  rises. The Fed could lessen the impact of this by selling Treasury bonds.

Question 7

If the money multiplier decreased from 20 to 12.5, then

Accepted Answer

A)  the Fed increased the reserve ratio from 5 percent to 8 percent. 
B)  the Fed increased the fed funds rate from 5 percent to 8 percent. 
C)  the Fed decreased the reserve ratio from 8 percent to 5 percent. 
D)  the Fed decreased the fed funds rate from 8 percent to 5 percent. 
A)  the Fed increased the reserve ratio from 5 percent to 8 percent. 
B)  the Fed increased the fed funds rate from 5 percent to 8 percent. 
C)  the Fed decreased the reserve ratio from 8 percent to 5 percent. 
D)  the Fed decreased the fed funds rate from 8 percent to 5 percent.

Question 8

The regional Federal Reserve Banks

Accepted Answer

A)  are not allowed to make loans to banks in their region. 
B)  regulate banks in their regions. 
C)  have more voting members on the FOMC than does the Board of Governors. 
D)  are each headed by a member of the Board of Governors. 
A)  are not allowed to make loans to banks in their region. 
B)  regulate banks in their regions. 
C)  have more voting members on the FOMC than does the Board of Governors. 
D)  are each headed by a member of the Board of Governors.

Question 9

If the reserve requirement is 12 percent and banks desire to hold no excess reserves, when a bank receives a new deposit of $1,000,

Accepted Answer

A)  it must increase its required reserves by more than $150. 
B)  its total reserves initially increase by $120. 
C)  it will be able to make new loans up to a maximum of $880. 
D)  None of the above is correct. 
A)  it must increase its required reserves by more than $150. 
B)  its total reserves initially increase by $120. 
C)  it will be able to make new loans up to a maximum of $880. 
D)  None of the above is correct.

Question 10

Name three actions the Fed can take to increase the money supply.

Accepted Answer

Open-market purchases (buy gov

Question 11

Describe how the use of leverage affects the impact of bank investments.

Accepted Answer

Leverage amplifies the impact from chang

Question 12

Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control.

Accepted Answer

First, the Fed does not control the amou

Question 13

When the Fed sells government bonds,

Accepted Answer

A)  the money supply increases and the federal funds rate increases. 
B)  the money supply increases and the federal funds rate decreases. 
C)  the money supply decreases and the federal funds rate increases. 
D)  the money supply decreases and the federal funds rate decreases. 
A)  the money supply increases and the federal funds rate increases. 
B)  the money supply increases and the federal funds rate decreases. 
C)  the money supply decreases and the federal funds rate increases. 
D)  the money supply decreases and the federal funds rate decreases.

Question 14

Given the following information, what are the values of M1 and M2? Small time deposits $600 billion
Demand deposits and other checkable deposits $400 billion
Savings deposits $800 billion
Money market mutual funds $700 billion
Traveler's checks $30 billion
Large time deposits $400 billion
Currency $250 billion
Miscellaneous categories in M2 $20 billion

Accepted Answer

A)  M1 = $650 billion, M2 = $2,830 billion. 
B)  M1 = $400 billion, M2 = $3,080 billion. 
C)  M1 = $680 billion, M2 = $2,800 billion. 
D)  M1 = $680 billion, M2 = $3,200 billion. 
A)  M1 = $650 billion, M2 = $2,830 billion. 
B)  M1 = $400 billion, M2 = $3,080 billion. 
C)  M1 = $680 billion, M2 = $2,800 billion. 
D)  M1 = $680 billion, M2 = $3,200 billion.

Question 15

Table 29-2.
The information in the table pertains to an imaginary economy.  
-Refer to Table 29-2. What is the M1 money supply?

Accepted Answer

A)  $705 billion 
B)  $570 billion 
C)  $505 billion 
D)  $585 billion 
A)  $705 billion 
B)  $570 billion 
C)  $505 billion 
D)  $585 billion

Question 16

The Fed bonds when it conducts an open-market purchase. This action the money supply.

Accepted Answer

The answer of The Fed bonds when it conducts an...

Question 17

The ease with which an asset can be

Accepted Answer

A)  traded for another asset determines whether or not that asset is a unit of account. 
B)  transported from one place to another determines whether or not that asset could serve as fiat money. 
C)  converted into a store of value determines the liquidity of that asset. 
D)  converted into the economy's medium of exchange determines the liquidity of that asset. 
A)  traded for another asset determines whether or not that asset is a unit of account. 
B)  transported from one place to another determines whether or not that asset could serve as fiat money. 
C)  converted into a store of value determines the liquidity of that asset. 
D)  converted into the economy's medium of exchange determines the liquidity of that asset.

Question 18

Assume that when $100 of new reserves enter the banking system, the money supply ultimately increases by $800. Assume also that no banks hold excess reserves and that the entire money supply consists of bank deposits. If, at a point in time, reserves for all banks amount to $750, then at that same point in time, loans for all banks amount to $6,000.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements is correct?

Accepted Answer

A)  All items that are included in M1 are included also in M2. 
B)  All items that are included in M2 are included also in M1. 
C)  Credit cards are included in both M1 and M2. 
D)  Savings deposits are included in both M1 and M2. 
A)  All items that are included in M1 are included also in M2. 
B)  All items that are included in M2 are included also in M1. 
C)  Credit cards are included in both M1 and M2. 
D)  Savings deposits are included in both M1 and M2.

Question 20

When the Fed conducts open-market purchases,

Accepted Answer

A)  it buys Treasury securities, which increases the money supply. 
B)  it buys Treasury securities, which decreases the money supply. 
C)  it borrows money from member banks, which increases the money supply. 
D)  it lends money to member banks, which decreases the money supply. 
A)  it buys Treasury securities, which increases the money supply. 
B)  it buys Treasury securities, which decreases the money supply. 
C)  it borrows money from member banks, which increases the money supply. 
D)  it lends money to member banks, which decreases the money supply.

Exam 29: The Monetary System

If the central bank in some country raised the reserve requirement, then the money multiplier for that country

A debit card is more similar to a credit card than to a check.

The money multiplier is when the reserve ratio is 12.5 percent.

An important function of the U.S. Federal Reserve is to

If people decide to hold less currency relative to deposits, the money supply

If the money multiplier decreased from 20 to 12.5, then

The regional Federal Reserve Banks

If the reserve requirement is 12 percent and banks desire to hold no excess reserves, when a bank receives a new deposit of $1,000,

Name three actions the Fed can take to increase the money supply.

Describe how the use of leverage affects the impact of bank investments.

Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control.

When the Fed sells government bonds,

Table 29-2. The information in the table pertains to an imaginary economy. -Refer to Table 29-2. What is the M1 money supply?

The Fed bonds when it conducts an open-market purchase. This action the money supply.

The ease with which an asset can be

Which of the following statements is correct?

When the Fed conducts open-market purchases,

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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