Question 1

For purposes of analyzing the money stock and its relationship to relevant economic variables, money is best thought of as

Accepted Answer

A)  those items that can be readily accessed and used to buy goods and services. 
B)  currency only. 
C)  currency plus all bank accounts. 
D)  currency plus all bank accounts plus bonds. 
A)  those items that can be readily accessed and used to buy goods and services. 
B)  currency only. 
C)  currency plus all bank accounts. 
D)  currency plus all bank accounts plus bonds.

Question 2

If the reserve ratio is 20 percent, then $100 of new reserves can generate

Accepted Answer

A)  $60 of new money in the economy. 
B)  $250 of new money in the economy. 
C)  $500 of new money in the economy. 
D)  $2,000 of new money in the economy. 
A)  $60 of new money in the economy. 
B)  $250 of new money in the economy. 
C)  $500 of new money in the economy. 
D)  $2,000 of new money in the economy.

Question 3

Currently, bank runs are a major problem for the U.S. banking system and the Fed.

Accepted Answer

A) True 
 B)False

Question 4

If R represents the reserve ratio for all banks in the economy, then the money multiplier is

Accepted Answer

A)  1/(1-R). 
B)  1/R. 
C)  1/(1+R). 
D)  (1+R)/R. 
A)  1/(1-R). 
B)  1/R. 
C)  1/(1+R). 
D)  (1+R)/R.

Question 5

Money, such as gold, with some intrinsic value is called . Money with no intrinsic value is called .

Accepted Answer

commodity

Question 6

A bank has a 20 percent reserve requirement, $8,000 in loans, and has loaned out all it can given the reserve requirement.

Accepted Answer

A)  It has $6,400 in deposits. 
B)  It has $10,000 in deposits. 
C)  It has $9,600 in deposits. 
D)  It has $1,600 in deposits. 
A)  It has $6,400 in deposits. 
B)  It has $10,000 in deposits. 
C)  It has $9,600 in deposits. 
D)  It has $1,600 in deposits.

Question 7

If the reserve ratio is 10 percent, $1,400 of additional reserves can create up to

Accepted Answer

A)  $140 of new money. 
B)  $14,000 of new money. 
C)  $140,000 of new money. 
D)  None of the above is correct. 
A)  $140 of new money. 
B)  $14,000 of new money. 
C)  $140,000 of new money. 
D)  None of the above is correct.

Question 8

How are Federal Reserve Board Governors selected?

Accepted Answer

The Fed Governors are appointed by the p

Question 9

The Federal Reserve primarily uses open-market operations to change the money supply.

Accepted Answer

A) True 
 B)False

Question 10

If the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Accepted Answer

A)  buying bonds. This buying would increase the money supply. 
B)  buying bonds. This buying would reduce the money supply. 
C)  selling bonds. This selling would increase the money supply. 
D)  selling bonds. This selling would reduce the money supply. 
A)  buying bonds. This buying would increase the money supply. 
B)  buying bonds. This buying would reduce the money supply. 
C)  selling bonds. This selling would increase the money supply. 
D)  selling bonds. This selling would reduce the money supply.

Question 11

The Fed can increase 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.

Question 12

Which of the following is not correct?

Accepted Answer

A)  The president of the New York Federal Reserve bank is the only Federal Reserve Regional Bank President who gets to vote at every meeting of the Federal Open Market Committee. 
B)  The Fed's policy decisions influence the economy's rate of inflation in the short run and the economy's employment and production in the long run. 
C)  The Fed's primary monetary policy tool is open­market operations. 
D)  All of the above are correct. 
A)  The president of the New York Federal Reserve bank is the only Federal Reserve Regional Bank President who gets to vote at every meeting of the Federal Open Market Committee. 
B)  The Fed's policy decisions influence the economy's rate of inflation in the short run and the economy's employment and production in the long run. 
C)  The Fed's primary monetary policy tool is open­market operations. 
D)  All of the above are correct.

Question 13

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. Assume that banks desire to continue holding the same ratio of excess reserves to deposits. What is the reserve requirement and what is the reserve ratio?

Accepted Answer

A)  2 percent, 8 percent 
B)  8 percent, 10 percent 
C)  10 percent, 12.5 percent 
D)  None of the above is correct. 
A)  2 percent, 8 percent 
B)  8 percent, 10 percent 
C)  10 percent, 12.5 percent 
D)  None of the above is correct.

Question 14

When there is a reserve requirement, banks

Accepted Answer

A)  must hold exactly the required quantity of reserves. 
B)  may hold more than, but not less than, the required quantity of reserves. 
C)  may hold less than, but not more than, the required quantity of reserves. 
D)  must seek the Fed's permission whenever they wish to expand or contract their loans to customers. 
A)  must hold exactly the required quantity of reserves. 
B)  may hold more than, but not less than, the required quantity of reserves. 
C)  may hold less than, but not more than, the required quantity of reserves. 
D)  must seek the Fed's permission whenever they wish to expand or contract their loans to customers.

Question 15

The Fed increases the reserve requirement, but it wants to offset the effects on the money supply. Which of the following should it do?

Accepted Answer

A)  sell bonds to increase reserves 
B)  sell bonds to decrease reserves 
C)  buy bonds to increase reserves 
D)  buy bonds to decrease reserves 
A)  sell bonds to increase reserves 
B)  sell bonds to decrease reserves 
C)  buy bonds to increase reserves 
D)  buy bonds to decrease reserves

Question 16

What are the functions of money?

Accepted Answer

Medium of exchange,

Question 17

Small time deposits 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 18

Bank runs and the accompanying increase in the money multiplier caused the U.S. money supply to rise by 28 percent from 1929 to 1933.

Accepted Answer

A) True 
 B)False

Question 19

The federal funds rate is the interest rate that

Accepted Answer

A)  banks charge one another for loans. 
B)  banks charge the Fed for loans. 
C)  the Fed charges banks for loans. 
D)  the Fed charges Congress for loans. 
A)  banks charge one another for loans. 
B)  banks charge the Fed for loans. 
C)  the Fed charges banks for loans. 
D)  the Fed charges Congress for loans.

Question 20

If an economy uses silver as money, then that economy's money

Accepted Answer

A)  serves as a store of value but not as a medium of exchange. 
B)  serves as a medium of exchange but not as a unit of account. 
C)  is commodity money. 
D)  has no intrinsic value. 
A)  serves as a store of value but not as a medium of exchange. 
B)  serves as a medium of exchange but not as a unit of account. 
C)  is commodity money. 
D)  has no intrinsic value.

Exam 29: The Monetary System

For purposes of analyzing the money stock and its relationship to relevant economic variables, money is best thought of as

If the reserve ratio is 20 percent, then $100 of new reserves can generate

Currently, bank runs are a major problem for the U.S. banking system and the Fed.

If R represents the reserve ratio for all banks in the economy, then the money multiplier is

Money, such as gold, with some intrinsic value is called . Money with no intrinsic value is called .

A bank has a 20 percent reserve requirement, $8,000 in loans, and has loaned out all it can given the reserve requirement.

If the reserve ratio is 10 percent, $1,400 of additional reserves can create up to

How are Federal Reserve Board Governors selected?

The Federal Reserve primarily uses open-market operations to change the money supply.

If the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

The Fed can increase the money supply by conducting open-market

Which of the following is not correct?

When there is a reserve requirement, banks

The Fed increases the reserve requirement, but it wants to offset the effects on the money supply. Which of the following should it do?

What are the functions of money?

Small time deposits are included in

Bank runs and the accompanying increase in the money multiplier caused the U.S. money supply to rise by 28 percent from 1929 to 1933.

The federal funds rate is the interest rate that

If an economy uses silver as money, then that economy's 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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