Question 1

Which of the following lists is included in what economists call "money"?

Accepted Answer

A)  cash 
B)  cash and stocks and bonds 
C)  cash and stocks and bonds and real estate 
D)  cash and stocks and bonds and real estate and all other assets 
A)  cash 
B)  cash and stocks and bonds 
C)  cash and stocks and bonds and real estate 
D)  cash and stocks and bonds and real estate and all other assets

Question 2

Which of the following statements regarding the Federal Open Market Committee is correct?

Accepted Answer

A)  Only the five voting regional Fed presidents attend the meetings. 
B)  All regional Fed presidents attend and vote at the meetings. 
C)  All regional Fed presidents attend the meetings, but only five get to vote. 
D)  Regional Fed presidents may neither attend nor vote the meetings. 
A)  Only the five voting regional Fed presidents attend the meetings. 
B)  All regional Fed presidents attend and vote at the meetings. 
C)  All regional Fed presidents attend the meetings, but only five get to vote. 
D)  Regional Fed presidents may neither attend nor vote the meetings.

Question 3

In the special case of the 100 percent-reserve banking, the money multiplier is

Accepted Answer

A)  1 and banks create money. 
B)  1 and banks do not create money. 
C)  2 and banks create money 
D)  2 and banks do not create money. 
A)  1 and banks create money. 
B)  1 and banks do not create money. 
C)  2 and banks create money 
D)  2 and banks do not create money.

Question 4

In many circumstances, prisoners are not allowed to possess cash. Does this mean there is no money in prison? Explain.

Accepted Answer

No.
Any good that provides the three fun

Question 5

You use U.S. currency to pay the owner of a restaurant for a delicious meal. The currency

Accepted Answer

A)  has no intrinsic value. The exchange is an example of barter. 
B)  has no intrinsic value. The exchange is not an example of barter. 
C)  has intrinsic value. The exchange is not an example of barter. 
D)  has intrinsic value. The exchange is not an example of barter. 
A)  has no intrinsic value. The exchange is an example of barter. 
B)  has no intrinsic value. The exchange is not an example of barter. 
C)  has intrinsic value. The exchange is not an example of barter. 
D)  has intrinsic value. The exchange is not an example of barter.

Question 6

Money market mutual funds are included in

Accepted Answer

A)  M1 but not M2. 
B)  M1 and M2. 
C)  M2 but not M1. 
D)  neither M1 nor M2. 
A)  M1 but not M2. 
B)  M1 and M2. 
C)  M2 but not M1. 
D)  neither M1 nor M2.

Question 7

In measuring the stock of money in the U.S., M1 includes

Accepted Answer

A)  traveler's checks. 
B)  savings deposits. 
C)  credit cards 
D)  none of the above. 
A)  traveler's checks. 
B)  savings deposits. 
C)  credit cards 
D)  none of the above.

Question 8

One of the features of money is its store of value. However, most people do not hold their wealth as currency. Given that currency is the most liquid type of asset, why don't people hold all their wealth as currency?

Accepted Answer

Currency is not a perfect store of value

Question 9

Which of the following is included in both M1 and M2?

Accepted Answer

A)  currency 
B)  demand deposits 
C)  other checkable deposits 
D)  All of the above are correct. 
A)  currency 
B)  demand deposits 
C)  other checkable deposits 
D)  All of the above are correct.

Question 10

What does the "double coincidence of wants" refer to?

Accepted Answer

"Double coincidence of wants" refers to

Question 11

If the reserve ratio is 8 percent, then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

Accepted Answer

A)  $48,000. 
B)  $75,000. 
C)  $55,200. 
D)  $10,800. 
A)  $48,000. 
B)  $75,000. 
C)  $55,200. 
D)  $10,800.

Question 12

Commodity money is

Accepted Answer

A)  backed by gold. 
B)  the principal type of money in use today. 
C)  money with intrinsic value. 
D)  receipts created in international trade that are used as a medium of exchange. 
A)  backed by gold. 
B)  the principal type of money in use today. 
C)  money with intrinsic value. 
D)  receipts created in international trade that are used as a medium of exchange.

Question 13

Suppose banks decide to hold fewer excess reserves relative to deposits. Other things the same, this action will cause the

Accepted Answer

A)  money supply to fall. To reduce the impact of this the Fed could sell Treasury bonds. 
B)  money supply to fall. To reduce the impact of this the Fed could buy Treasury bonds. 
C)  money supply to rise. To reduce the impact of this the Fed could sell Treasury bonds. 
D)  money supply to rise. To reduce the impact of this the Fed could buy Treasury bonds. 
A)  money supply to fall. To reduce the impact of this the Fed could sell Treasury bonds. 
B)  money supply to fall. To reduce the impact of this the Fed could buy Treasury bonds. 
C)  money supply to rise. To reduce the impact of this the Fed could sell Treasury bonds. 
D)  money supply to rise. To reduce the impact of this the Fed could buy Treasury bonds.

Question 14

Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A bank has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have to lend out if it decides to hold only required reserves?

Accepted Answer

A)  $27,000 
B)  $27,190 
C)  $26,190 
D)  $9,000 
A)  $27,000 
B)  $27,190 
C)  $26,190 
D)  $9,000

Question 15

In a fractional-reserve banking system, a decrease in reserve requirements

Accepted Answer

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

Question 16

A bank operates with reserves of $100, loans of $300 and securities of $100. The bank's only liability is deposits of $400 since it has zero debt. Calculate the bank's leverage ratio.

Accepted Answer

Since Assets - Liabilities equals Bank C

Question 17

On a bank's T­account, which are part of the bank's assets?

Accepted Answer

A)  both deposits made by its customers and reserves 
B)  deposits made by its customers but not reserves 
C)  reserves but not deposits made by its customers 
D)  neither deposits made by its customers nor reserves 
A)  both deposits made by its customers and reserves 
B)  deposits made by its customers but not reserves 
C)  reserves but not deposits made by its customers 
D)  neither deposits made by its customers nor reserves

Question 18

Because of the multiple tools at its disposal, the Fed can control the money supply very precisely.

Accepted Answer

A) True 
 B)False

Question 19

The money supply of Granov is $10,000 in a 100-percent-reserve banking system. If the Central Bank of Granov decreases the reserve requirement ratio to 10 percent, the money supply could increase by no more than $9,000.

Accepted Answer

A) True 
 B)False

Question 20

If the federal funds rate were below 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 reduce reserves. 
B)  buying bonds. This buying would increase reserves. 
C)  selling bonds. This selling would reduce reserves. 
D)  selling bonds. This selling would increase reserves. 
A)  buying bonds. This buying would reduce reserves. 
B)  buying bonds. This buying would increase reserves. 
C)  selling bonds. This selling would reduce reserves. 
D)  selling bonds. This selling would increase reserves.

Exam 29: The Monetary System

Which of the following lists is included in what economists call "money"?

Which of the following statements regarding the Federal Open Market Committee is correct?

In the special case of the 100 percent-reserve banking, the money multiplier is

In many circumstances, prisoners are not allowed to possess cash. Does this mean there is no money in prison? Explain.

You use U.S. currency to pay the owner of a restaurant for a delicious meal. The currency

Money market mutual funds are included in

In measuring the stock of money in the U.S., M1 includes

One of the features of money is its store of value. However, most people do not hold their wealth as currency. Given that currency is the most liquid type of asset, why don't people hold all their wealth as currency?

Which of the following is included in both M1 and M2?

What does the "double coincidence of wants" refer to?

If the reserve ratio is 8 percent, then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

Commodity money is

Suppose banks decide to hold fewer excess reserves relative to deposits. Other things the same, this action will cause the

Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A bank has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have to lend out if it decides to hold only required reserves?

In a fractional-reserve banking system, a decrease in reserve requirements

A bank operates with reserves of $100, loans of $300 and securities of $100. The bank's only liability is deposits of $400 since it has zero debt. Calculate the bank's leverage ratio.

On a bank's T­account, which are part of the bank's assets?

Because of the multiple tools at its disposal, the Fed can control the money supply very precisely.

The money supply of Granov is $10,000 in a 100-percent-reserve banking system. If the Central Bank of Granov decreases the reserve requirement ratio to 10 percent, the money supply could increase by no more than $9,000.

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

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

Filters

On a bank's Taccount, which are part of the bank's assets?