Question 1

Which of the following is not included in M1?

Accepted Answer

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

Question 2

If a bank desires to hold no excess reserves, the reserve requirement is 8 percent, and it receives a new deposit of $500,

Accepted Answer

A)  its required reserves increase by $40. 
B)  its total reserves initially increase by $460. 
C)  it will be able to make a new loan of up to $492. 
D)  All of the above are correct. 
A)  its required reserves increase by $40. 
B)  its total reserves initially increase by $460. 
C)  it will be able to make a new loan of up to $492. 
D)  All of the above are correct.

Question 3

If the reserve ratio is 15 percent, the money multiplier is

Accepted Answer

A)  6.7. 
A)  7.7. 
B)  5.7. 
C)  15. 
A)  6.7. 
A)  7.7. 
B)  5.7. 
C)  15.

Question 4

Treasury Bonds are

Accepted Answer

A)  both a store of value and a medium of exchange. 
B)  a store of value, but not a medium of exchange 
C)  a medium of exchange, but not a store of value. 
D)  neither a store of value nor a medium of exchange. 
A)  both a store of value and a medium of exchange. 
B)  a store of value, but not a medium of exchange 
C)  a medium of exchange, but not a store of value. 
D)  neither a store of value nor a medium of exchange.

Question 5

Are credit cards and debit cards money? What's the difference between credit and debit cards?

Accepted Answer

Neither credit cards nor debit cards are

Question 6

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 7

When the Fed decreases the discount rate, banks will

Accepted Answer

A)  borrow more from the Fed and lend more to the public. The money supply increases. 
B)  borrow more from the Fed and lend less to the public. The money supply decreases. 
C)  borrow less from the Fed and lend more to the public. The money supply increases. 
D)  borrow less from the Fed and lend less to the public. The money supply decreases. 
A)  borrow more from the Fed and lend more to the public. The money supply increases. 
B)  borrow more from the Fed and lend less to the public. The money supply decreases. 
C)  borrow less from the Fed and lend more to the public. The money supply increases. 
D)  borrow less from the Fed and lend less to the public. The money supply decreases.

Question 8

Table 29-8  
-Refer to Table 29-8. This bank's leverage ratio is

Accepted Answer

A)  2. 
B)  50. 
C)  13.3. 
D)  7.5. 
A)  2. 
B)  50. 
C)  13.3. 
D)  7.5.

Question 9

Just after the terrorist attack on September 11, 2001, the Fed stood ready to lend financial institutions funds. When the Fed did this, it was acting in its role of lender of last resort.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

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

Question 11

The use of money allows trade to be roundabout.

Accepted Answer

A) True 
 B)False

Question 12

The agency responsible for regulating the money supply in the United States is

Accepted Answer

A)  the Comptroller of the Currency. 
B)  the U.S. Treasury. 
C)  the Federal Reserve. 
D)  the U.S. Bank. 
A)  the Comptroller of the Currency. 
B)  the U.S. Treasury. 
C)  the Federal Reserve. 
D)  the U.S. Bank.

Question 13

Table 29-5.  
-Refer to Table 29-5. If the bank faces a reserve requirement of 6 percent, then the bank

Accepted Answer

A)  is in a position to make a new loan of $12,000. 
B)  is in a position to make a new loan of $18,000. 
C)  has excess reserves of $12,000. 
D)  None of the above is correct. 
A)  is in a position to make a new loan of $12,000. 
B)  is in a position to make a new loan of $18,000. 
C)  has excess reserves of $12,000. 
D)  None of the above is correct.

Question 14

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 15

Table 29-6.  
-Refer to Table 29-6. Assume there is a reserve requirement and the Bank of Pleasantville is exactly in compliance with that requirement. Assume the same is true for all other banks. Lastly, assume people hold only deposits and no currency. What is the money multiplier?

Accepted Answer

A)  6 
B)  16.7 
C)  15.6 
D)  6.4 
A)  6 
B)  16.7 
C)  15.6 
D)  6.4

Question 16

The ease with which an asset can be converted into the economy's medium of exchange is known as__________________.

Accepted Answer

The answer of The ease with which an asset can...

Question 17

Banks are able to create money only when

Accepted Answer

A)  interest rates are above 2%. 
B)  the Fed sells U.S. government bonds. 
C)  the reserve ratio is 100%. 
D)  only a fraction of deposits are held in reserve. 
A)  interest rates are above 2%. 
B)  the Fed sells U.S. government bonds. 
C)  the reserve ratio is 100%. 
D)  only a fraction of deposits are held in reserve.

Question 18

A bank loans Greg's Ice Cream $250,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is

Accepted Answer

A)  a liability for the bank and an asset for Greg's Ice Cream. The loan increases the money supply. 
B)  a liability for the bank and an asset for Greg's Ice Cream. The loan does not increase the money supply. 
C)  an asset for the bank and a liability for Greg's Ice Cream. The loan increases the money supply. 
D)  an asset for the bank and a liability for Greg's Ice Cream. The loan does not increase the money supply. 
A)  a liability for the bank and an asset for Greg's Ice Cream. The loan increases the money supply. 
B)  a liability for the bank and an asset for Greg's Ice Cream. The loan does not increase the money supply. 
C)  an asset for the bank and a liability for Greg's Ice Cream. The loan increases the money supply. 
D)  an asset for the bank and a liability for Greg's Ice Cream. The loan does not increase the money supply.

Question 19

List two examples of commodity money.

Accepted Answer

Commodity money refers to mone

Question 20

Which of the following defer payments?

Accepted Answer

A)  credit cards and debit cards 
B)  neither credit cards nor debit cards 
C)  credit cards but not debit cards 
D)  debit cards but not credit cards 
A)  credit cards and debit cards 
B)  neither credit cards nor debit cards 
C)  credit cards but not debit cards 
D)  debit cards but not credit cards

Exam 29: The Monetary System

Which of the following is not included in M1?

If a bank desires to hold no excess reserves, the reserve requirement is 8 percent, and it receives a new deposit of $500,

If the reserve ratio is 15 percent, the money multiplier is A) 6.7.

Treasury Bonds are

Are credit cards and debit cards money? What's the difference between credit and debit cards?

When the Fed makes open-market purchases bank

When the Fed decreases the discount rate, banks will

Table 29-8 -Refer to Table 29-8. This bank's leverage ratio is

Just after the terrorist attack on September 11, 2001, the Fed stood ready to lend financial institutions funds. When the Fed did this, it was acting in its role of lender of last resort.

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

The use of money allows trade to be roundabout.

The agency responsible for regulating the money supply in the United States is

Table 29-5. -Refer to Table 29-5. If the bank faces a reserve requirement of 6 percent, then the bank

The Fed's policy decisions have an important influence on

Table 29-6. -Refer to Table 29-6. Assume there is a reserve requirement and the Bank of Pleasantville is exactly in compliance with that requirement. Assume the same is true for all other banks. Lastly, assume people hold only deposits and no currency. What is the money multiplier?

The ease with which an asset can be converted into the economy's medium of exchange is known as__________________.

Banks are able to create money only when

A bank loans Greg's Ice Cream $250,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is

List two examples of commodity money.

Which of the following defer payments?

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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