Question 1

Which of the following entities actually executes open-market operations?

Accepted Answer

A)  the Board of Governors 
B)  the New York Federal Reserve Bank 
C)  the Federal Open Market Committee 
D)  the Open Market Committees of the regional Federal Reserve Banks 
A)  the Board of Governors 
B)  the New York Federal Reserve Bank 
C)  the Federal Open Market Committee 
D)  the Open Market Committees of the regional Federal Reserve Banks

Question 2

If the Fed raised the reserve requirement, the demand for reserves would

Accepted Answer

A)  increase, so the federal funds rate would fall. 
B)  increase, so the federal funds rate would rise. 
C)  decrease, so the federal funds rate would fall. 
D)  decrease, so the federal funds rate would rise. 
A)  increase, so the federal funds rate would fall. 
B)  increase, so the federal funds rate would rise. 
C)  decrease, so the federal funds rate would fall. 
D)  decrease, so the federal funds rate would rise.

Question 3

Which group within the Federal Reserve System meets to discuss changes in the economy and determine monetary policy?

Accepted Answer

A)  the Board of Governors 
B)  the FOMC 
C)  the regional Federal Reserve Bank presidents 
D)  the Central Bank Policy Commission 
A)  the Board of Governors 
B)  the FOMC 
C)  the regional Federal Reserve Bank presidents 
D)  the Central Bank Policy Commission

Question 4

A bank has $1000 in deposits and maintains a 12 percent reserve ratio. Its reserves are $ .

Accepted Answer

The answer of A bank has $1000 in deposits and...

Question 5

Gary's wealth is $1 million. Economists would say that Gary has $1 million worth of money.

Accepted Answer

A) True 
 B)False

Question 6

What is bank insolvancy?

Accepted Answer

Bank insolvancy is when bank c

Question 7

The Federal Reserve can alter the size of the money supply by changing reserves or changing reserve requirements.

Accepted Answer

A) True 
 B)False

Question 8

If the reserve requirement is 10 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $500, it

Accepted Answer

A)  must increase required reserves by $50. 
B)  will initially see reserves increase by $500. 
C)  will be able to use this deposit to make new loans amounting to $450. 
D)  All of the above are correct. 
A)  must increase required reserves by $50. 
B)  will initially see reserves increase by $500. 
C)  will be able to use this deposit to make new loans amounting to $450. 
D)  All of the above are correct.

Question 9

Scenario 29-1.
The monetary policy of Namdian is determined by the Namdian Central Bank. The local currency is the dia. Namdian banks collectively hold 100 million dias of required reserves, 25 million dias of excess reserves, 250 million dias of Namdian Treasury Bonds, and their customers hold 1,000 million dias of deposits. Namdians prefer to use only demand deposits and so the money supply consists of demand deposits.
-Refer to Scenario 29-1. Suppose the Central Bank of Namdia loaned the banks of Namdia 5 million dias. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply of Namdia change?

Accepted Answer

A)  60 million dias 
B)  50 million dias 
C)  40 million dias 
D)  None of the above is correct. 
A)  60 million dias 
B)  50 million dias 
C)  40 million dias 
D)  None of the above is correct.

Question 10

The discount rate is the rate the Federal Reserve charges banks for loans. By lowering this rate, the Fed provides banks with a greater incentive to borrow from it.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following individuals serve a four-year term?

Accepted Answer

A)  the members of the Board of Governors 
B)  the Chair of the Board of Governors 
C)  the members of the FOMC 
D)  All of the above are correct. 
A)  the members of the Board of Governors 
B)  the Chair of the Board of Governors 
C)  the members of the FOMC 
D)  All of the above are correct.

Question 12

Which of the following best illustrates the medium of exchange function of money?

Accepted Answer

A)  You keep some money hidden in your shoe. 
B)  You keep track of the value of your assets in terms of currency. 
C)  You pay for your oil change using currency. 
D)  None of the above is correct. 
A)  You keep some money hidden in your shoe. 
B)  You keep track of the value of your assets in terms of currency. 
C)  You pay for your oil change using currency. 
D)  None of the above is correct.

Question 13

What is the Term Auction Facility?

Accepted Answer

The Term Auction Facility is the market

Question 14

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 15

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 16

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 17

The manager of the bank where you work tells you that your bank has $6 million in excess reserves. She also tells you that the bank has $400 million in deposits and $362 million dollars in loans. Given this information you find that the reserve requirement must be

Accepted Answer

A)  44/400. 
B)  6/362. 
C)  38/400. 
D)  32/400. 
A)  44/400. 
B)  6/362. 
C)  38/400. 
D)  32/400.

Question 18

In December 1999 people feared that there might be computer problems at banks as the century changed. Consequently, people wanted to hold relatively more in currency and relatively less in deposits. In anticipation banks raised their reserve ratios to have enough cash on hand to meet depositors' demands. These actions by the public

Accepted Answer

A)  would increase the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds. 
B)  would increase the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds. 
C)  would reduce the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds. 
D)  would reduce the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds. 
A)  would increase the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds. 
B)  would increase the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds. 
C)  would reduce the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds. 
D)  would reduce the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds.

Question 19

The banking system currently has $100 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the Fed lowers the reserve requirement to 5 percent and at the same time buys $10 billion worth of bonds, then by how much does the money supply change?

Accepted Answer

A)  It rises by $200 billion. 
B)  It rises by $800 billion. 
C)  It rises by $1,200 billion. 
D)  None of the above is correct. 
A)  It rises by $200 billion. 
B)  It rises by $800 billion. 
C)  It rises by $1,200 billion. 
D)  None of the above is correct.

Question 20

Consider five individuals with different occupations.   If this economy has money

Accepted Answer

A)  Allen will buy from Betty 
B)  Betty will buy from Calvin 
C)  Eric will buy from Allen 
D)  None of the above are correct. 
A)  Allen will buy from Betty 
B)  Betty will buy from Calvin 
C)  Eric will buy from Allen 
D)  None of the above are correct.

Exam 29: The Monetary System

Which of the following entities actually executes open-market operations?

If the Fed raised the reserve requirement, the demand for reserves would

Which group within the Federal Reserve System meets to discuss changes in the economy and determine monetary policy?

A bank has $1000 in deposits and maintains a 12 percent reserve ratio. Its reserves are $ .

Gary's wealth is $1 million. Economists would say that Gary has $1 million worth of money.

What is bank insolvancy?

The Federal Reserve can alter the size of the money supply by changing reserves or changing reserve requirements.

If the reserve requirement is 10 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $500, it

The discount rate is the rate the Federal Reserve charges banks for loans. By lowering this rate, the Fed provides banks with a greater incentive to borrow from it.

Which of the following individuals serve a four-year term?

Which of the following best illustrates the medium of exchange function of money?

What is the Term Auction Facility?

Traveler's checks are included in

Which of the following is correct concerning the FOMC?

When the Fed conducts open-market sales,

The manager of the bank where you work tells you that your bank has $6 million in excess reserves. She also tells you that the bank has $400 million in deposits and $362 million dollars in loans. Given this information you find that the reserve requirement must be

Consider five individuals with different occupations. If this economy has money

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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