Question 1

When Maria deposits $100 in currency in her checkable deposit at Bank of America,the immediate effect is that the quantity of M1

Accepted Answer

A) decreases. 
B) does not change. 
C) increases. 
D) changes,but the direction of the change depends on whether the deposit was accepted by a thrift institution or a commercial bank. 
E) changes only if Bank of America does not have excess reserves. 
A) decreases. 
B) does not change. 
C) increases. 
D) changes,but the direction of the change depends on whether the deposit was accepted by a thrift institution or a commercial bank. 
E) changes only if Bank of America does not have excess reserves. B

Question 2

The desired reserve ratio is 10 percent.Fly By Night Bank has deposits of $250,000 and reserves of $25,000.What is the amount of its excess reserves?

Accepted Answer

The bank has no excess reserves.It desires to have ($250,000)× (0.10)= $25,000 as desired reserves.Its actual reserves equal $25,000.Therefore its excess reserves equal $25,000 - $25,000,or $0.

Question 3

Credit cards are

Accepted Answer

A) a form of money used to make purchases. 
B) a special ID card that is not money. 
C) a special ID card that is the same as money. 
D) a form of money that is not generally accepted. 
E) included in the M1 measure of money. 
A) a form of money used to make purchases. 
B) a special ID card that is not money. 
C) a special ID card that is the same as money. 
D) a form of money that is not generally accepted. 
E) included in the M1 measure of money. B

Question 4

Explain how the currency drain ratio affects the size of the money multiplier.In your explanation,suppose that in one round of the money creation process a bank gains $1 million in new deposits and reserves.Further suppose that the desired reserve ratio is 10 percent and the currency drain ratio is 50 percent.

Accepted Answer

The currency drain ratio decreases the s

Question 5

The functions of money are

Accepted Answer

A) medium of exchange,unit of account,and store of value. 
B) medium of exchange,the ability to buy goods and services,and the ability to pay off debts. 
C) medium of exchange,the ability to buy goods and services,and checking accounts. 
D) credit cards,checking accounts,currency,and coins. 
E) store of value,use as a barter mechanism,and unit of account. 
A) medium of exchange,unit of account,and store of value. 
B) medium of exchange,the ability to buy goods and services,and the ability to pay off debts. 
C) medium of exchange,the ability to buy goods and services,and checking accounts. 
D) credit cards,checking accounts,currency,and coins. 
E) store of value,use as a barter mechanism,and unit of account.

Question 6

The money multiplier is the

Accepted Answer

A) fraction of the monetary base that is kept in currency. 
B) factor by which a change in the monetary base is multiplied to give the change in the quantity of money. 
C) factor by which a change in the deposits base is multiplied to give the change in the monetary base. 
D) proportion by which a change in the quantity of money changes the monetary base. 
E) number of times that the Fed conducts open market operations in a month. 
A) fraction of the monetary base that is kept in currency. 
B) factor by which a change in the monetary base is multiplied to give the change in the quantity of money. 
C) factor by which a change in the deposits base is multiplied to give the change in the monetary base. 
D) proportion by which a change in the quantity of money changes the monetary base. 
E) number of times that the Fed conducts open market operations in a month.

Question 7

When the Fed buys or sells securities,it is conducting ________ operation.

Accepted Answer

A) a government debt 
B) an open market 
C) a money multiplier 
D) a deposit 
E) a currency 
A) a government debt 
B) an open market 
C) a money multiplier 
D) a deposit 
E) a currency

Question 8

Which of the following is a thrift institution?
I.a credit union
Ii.the Fed
Iii.a savings bank

Accepted Answer

A) i only 
B) ii only 
C) iii only 
D) Both i and iii 
E) i,ii,and iii 
A) i only 
B) ii only 
C) iii only 
D) Both i and iii 
E) i,ii,and iii

Question 9

Suppose the desired reserve ratio is 10 percent.If Urban Bank has total deposits of $1,000 and total assets of $10,000,the amount of desired reserves is

Accepted Answer

A) $100. 
B) $900. 
C) $1,000. 
D) $9,000. 
E) $1,100. 
A) $100. 
B) $900. 
C) $1,000. 
D) $9,000. 
E) $1,100.

Question 10

The Fed makes an open market operation purchase of $200,000.The currency drain ratio is 33.33 percent and the desired reserve ratio is 10 percent.By how much does the quantity of money increase?

Accepted Answer

A) $800,000 
B) $333,333 
C) $2,000,000 
D) $615,416 
E) $465,116 
A) $800,000 
B) $333,333 
C) $2,000,000 
D) $615,416 
E) $465,116

Question 11

The Board of Governors of the Federal Reserve System has

Accepted Answer

A) 12 members appointed by the president of the United States. 
B) 12 members elected by the public. 
C) seven members appointed by the president of the United States. 
D) seven members elected by the public. 
E) seven members appointed to life terms. 
A) 12 members appointed by the president of the United States. 
B) 12 members elected by the public. 
C) seven members appointed by the president of the United States. 
D) seven members elected by the public. 
E) seven members appointed to life terms.

Question 12

Banks create money by

Accepted Answer

A) printing currency. 
B) asking the Fed to print more currency. 
C) lending to the Fed. 
D) making loans. 
E) buying government securities. 
A) printing currency. 
B) asking the Fed to print more currency. 
C) lending to the Fed. 
D) making loans. 
E) buying government securities.

Question 13

How does a currency drain affect the money multiplier?

Accepted Answer

If the currency drain is zero so that al

Question 14

Which of the following are assets of commercial banks?
I.reserves
Ii.loans
Iii.deposits

Accepted Answer

A) i only 
B) ii only 
C) i and ii 
D) ii and iii 
E) i,ii,and iii 
A) i only 
B) ii only 
C) i and ii 
D) ii and iii 
E) i,ii,and iii

Question 15

Open market operations are defined as

Accepted Answer

A) a bank borrowing from the Fed. 
B) the buying and selling of securities by the Fed. 
C) the buying and selling of securities between banks. 
D) the amount banks can lend on each deposit. 
E) a bank making a loan to the Fed. 
A) a bank borrowing from the Fed. 
B) the buying and selling of securities by the Fed. 
C) the buying and selling of securities between banks. 
D) the amount banks can lend on each deposit. 
E) a bank making a loan to the Fed.

Question 16

When we put a price tag on goods and services,we are using money as a

Accepted Answer

A) store of value. 
B) medium of exchange. 
C) barter token. 
D) unit of account. 
E) means of payment. 
A) store of value. 
B) medium of exchange. 
C) barter token. 
D) unit of account. 
E) means of payment.

Question 17

When the Fed engages in open market operations,it is buying or selling

Accepted Answer

A) capital equipment. 
B) U.S.government securities newly issued by the U.S.Treasury. 
C) U.S.government securities. 
D) loans made to banks to meet the legal reserve requirement ratio. 
E) gold. 
A) capital equipment. 
B) U.S.government securities newly issued by the U.S.Treasury. 
C) U.S.government securities. 
D) loans made to banks to meet the legal reserve requirement ratio. 
E) gold.

Question 18

The number by which a change in the monetary base is multiplied to find the resulting change in the quantity of money is called the

Accepted Answer

A) desired reserve ratio. 
B) money multiplier. 
C) currency multiplier. 
D) currency drain. 
E) open market operation. 
A) desired reserve ratio. 
B) money multiplier. 
C) currency multiplier. 
D) currency drain. 
E) open market operation.

Question 19

A public authority that provides banking services to commercial banks and regulates financial institutions and markets is called a

Accepted Answer

A) commercial bank. 
B) thrift institution. 
C) central bank. 
D) money market fund. 
E) mint. 
A) commercial bank. 
B) thrift institution. 
C) central bank. 
D) money market fund. 
E) mint.

Question 20

If you shop for a car online and compare car prices across dealerships,money is functioning as a

Accepted Answer

A) medium of exchange. 
B) unit of account. 
C) means of payment. 
D) store of value. 
E) barter mechanism. 
A) medium of exchange. 
B) unit of account. 
C) means of payment. 
D) store of value. 
E) barter mechanism.

When Maria deposits $100 in currency in her checkable deposit at Bank of America,the immediate effect is that the quantity of M1

The desired reserve ratio is 10 percent.Fly By Night Bank has deposits of $250,000 and reserves of $25,000.What is the amount of its excess reserves?

Credit cards are

The functions of money are

The money multiplier is the

When the Fed buys or sells securities,it is conducting ________ operation.

Which of the following is a thrift institution? I.a credit union Ii.the Fed Iii.a savings bank

Suppose the desired reserve ratio is 10 percent.If Urban Bank has total deposits of $1,000 and total assets of $10,000,the amount of desired reserves is

The Fed makes an open market operation purchase of $200,000.The currency drain ratio is 33.33 percent and the desired reserve ratio is 10 percent.By how much does the quantity of money increase?

The Board of Governors of the Federal Reserve System has

Banks create money by

How does a currency drain affect the money multiplier?

Which of the following are assets of commercial banks? I.reserves Ii.loans Iii.deposits

Open market operations are defined as

When we put a price tag on goods and services,we are using money as a

When the Fed engages in open market operations,it is buying or selling

The number by which a change in the monetary base is multiplied to find the resulting change in the quantity of money is called the

A public authority that provides banking services to commercial banks and regulates financial institutions and markets is called a

If you shop for a car online and compare car prices across dealerships,money is functioning as a

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

Exam 18: Money and the Monetary System

When Maria deposits $100 in currency in her checkable deposit at Bank of America,the immediate effect is that the quantity of M1

The desired reserve ratio is 10 percent.Fly By Night Bank has deposits of $250,000 and reserves of $25,000.What is the amount of its excess reserves?

Credit cards are

The functions of money are

The money multiplier is the

When the Fed buys or sells securities,it is conducting ________ operation.

Which of the following is a thrift institution? I.a credit union Ii.the Fed Iii.a savings bank

Suppose the desired reserve ratio is 10 percent.If Urban Bank has total deposits of $1,000 and total assets of $10,000,the amount of desired reserves is

The Fed makes an open market operation purchase of $200,000.The currency drain ratio is 33.33 percent and the desired reserve ratio is 10 percent.By how much does the quantity of money increase?

The Board of Governors of the Federal Reserve System has

Banks create money by

How does a currency drain affect the money multiplier?

Which of the following are assets of commercial banks? I.reserves Ii.loans Iii.deposits

Open market operations are defined as

When we put a price tag on goods and services,we are using money as a

When the Fed engages in open market operations,it is buying or selling

The number by which a change in the monetary base is multiplied to find the resulting change in the quantity of money is called the

A public authority that provides banking services to commercial banks and regulates financial institutions and markets is called a

If you shop for a car online and compare car prices across dealerships,money is functioning as a

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters