Question 1

The policy tool of "credit easing" refers to the

Accepted Answer

A) Fed's purchase of private securities to stimulate banks' lending. 
B) Fed's requirement that the federal government must lend to directly to home buyers. 
C) federal government's requirement that the Fed must lend directly to home buyers. 
D) Fed's lowering of the federal funds rate to zero. 
E) Treasury's issuance of federal debt to finance home buying. 
A) Fed's purchase of private securities to stimulate banks' lending. 
B) Fed's requirement that the federal government must lend to directly to home buyers. 
C) federal government's requirement that the Fed must lend directly to home buyers. 
D) Fed's lowering of the federal funds rate to zero. 
E) Treasury's issuance of federal debt to finance home buying.

Question 2

-The above table gives assets and deposits for a (small)bank.The bank's deposits that are part of M1 are equal to

Accepted Answer

A) $1,600. 
B) $600. 
C) $3,100. 
D) $3,130. 
E) $30. 
A) $1,600. 
B) $600. 
C) $3,100. 
D) $3,130. 
E) $30.

Question 3

When you join the local organic food market and then buy produce each month,money is used as

Accepted Answer

A) only a store of value. 
B) only a unit of account. 
C) a medium of exchange and a store of value. 
D) a medium of exchange and a unit of account. 
E) a store of value and a unit of account. 
A) only a store of value. 
B) only a unit of account. 
C) a medium of exchange and a store of value. 
D) a medium of exchange and a unit of account. 
E) a store of value and a unit of account.

Question 4

Assume the First Bank of Townsville makes a loan of $2,500.This loan will

Accepted Answer

A) increase the quantity of money initially by $2,500. 
B) decrease the quantity of money initially by $2,500. 
C) have no change on the quantity of money,just its composition. 
D) increase the First Bank of Townville's liabilities at the Fed. 
E) increase the First Bank of Townville's reserves. 
A) increase the quantity of money initially by $2,500. 
B) decrease the quantity of money initially by $2,500. 
C) have no change on the quantity of money,just its composition. 
D) increase the First Bank of Townville's liabilities at the Fed. 
E) increase the First Bank of Townville's reserves.

Question 5

Cisco is considering opening a financial institution that accepts savings deposits from only its employees and makes loans to only its employees.The best description of this financial institution is that it is a

Accepted Answer

A) credit union. 
B) commercial bank. 
C) savings and loan association. 
D) savings bank. 
E) federal government chartered credit bank. 
A) credit union. 
B) commercial bank. 
C) savings and loan association. 
D) savings bank. 
E) federal government chartered credit bank.

Question 6

The monetary base is equal to the sum of coins,

Accepted Answer

A) currency and banks' reserves at the Federal Reserve. 
B) currency and checkable deposits at banks. 
C) currency,banks' reserves at the Federal Reserve and checkable deposits at banks. 
D) and checkable deposits at banks. 
E) U.S.government securities owned by the Federal Reserve and Federal Reserve notes. 
A) currency and banks' reserves at the Federal Reserve. 
B) currency and checkable deposits at banks. 
C) currency,banks' reserves at the Federal Reserve and checkable deposits at banks. 
D) and checkable deposits at banks. 
E) U.S.government securities owned by the Federal Reserve and Federal Reserve notes.

Question 7

________ increases the size of the money multiplier.

Accepted Answer

A) An increase in the currency drain ratio 
B) An open market purchase of government securities by the Fed 
C) A reduction in the desired reserve ratio 
D) An open market sale of government securities by the Fed 
E) An increase in the size of open market operations 
A) An increase in the currency drain ratio 
B) An open market purchase of government securities by the Fed 
C) A reduction in the desired reserve ratio 
D) An open market sale of government securities by the Fed 
E) An increase in the size of open market operations

Question 8

When a bank receives deposits,

Accepted Answer

A) it must hold the entire amount as reserves in case of withdrawal. 
B) the Fed requires it to hold only a small percentage as reserves. 
C) it and it alone decides how much it will hold as reserves. 
D) its liabilities increase in amount but its assets do not change. 
E) its assets increase in amount but its liabilities do not change. 
A) it must hold the entire amount as reserves in case of withdrawal. 
B) the Fed requires it to hold only a small percentage as reserves. 
C) it and it alone decides how much it will hold as reserves. 
D) its liabilities increase in amount but its assets do not change. 
E) its assets increase in amount but its liabilities do not change.

Question 9

Explain what is included in M1 and M2.Is all of M1 money? Is all of M2 money?

Accepted Answer

M1 is equal to the sum of currency held

Question 10

Barter requires the

Accepted Answer

A) use of commodity money as a medium of payment. 
B) use of fiat money as a medium of exchange. 
C) the triple non-coincidence of wants. 
D) exchange of goods and services directly for other goods and services. 
E) use of money as a unit of account. 
A) use of commodity money as a medium of payment. 
B) use of fiat money as a medium of exchange. 
C) the triple non-coincidence of wants. 
D) exchange of goods and services directly for other goods and services. 
E) use of money as a unit of account.

Question 11

Open market operations are the

Accepted Answer

A) purchase or sale of government securities by the Fed. 
B) lending of reserves to the banking system by the Fed. 
C) borrowing of reserves by the Fed from the banking system. 
D) minimum percentage of loans that banks must retain as reserves in the open market. 
E) purchase or sale of gold by the Fed. 
A) purchase or sale of government securities by the Fed. 
B) lending of reserves to the banking system by the Fed. 
C) borrowing of reserves by the Fed from the banking system. 
D) minimum percentage of loans that banks must retain as reserves in the open market. 
E) purchase or sale of gold by the Fed.

Question 12

The desired reserve ratio is 10 percent.Joe deposits $1,000 in Bank A.Bank A keeps its minimum desired reserves and lends the excess to Fred.Fred spends his loan at J.C.Penney.J.C.Penney deposits the check it receives from Fred in Bank B.Bank B keeps its minimum desired reserves and lends the excess to Mary.How much can Bank B lend to Mary?

Accepted Answer

A) $900 
B) $90 
C) $810 
D) $100 
E) $1,000 
A) $900 
B) $90 
C) $810 
D) $100 
E) $1,000

Question 13

If the currency drain ratio is 30 percent and the desired reserve ratio is 10 percent,the money multiplier is

Accepted Answer

A) 0.80. 
B) 1.25. 
C) 3.25. 
D) 5.00. 
E) 10.0. 
A) 0.80. 
B) 1.25. 
C) 3.25. 
D) 5.00. 
E) 10.0.

Question 14

Banks generally earn the highest interest rate

Accepted Answer

A) on service charges on individuals' checking accounts. 
B) by making loans to business firms. 
C) by making mortgage loans to individuals. 
D) by making credit card loans. 
E) by buying government securities. 
A) on service charges on individuals' checking accounts. 
B) by making loans to business firms. 
C) by making mortgage loans to individuals. 
D) by making credit card loans. 
E) by buying government securities.

Question 15

Which of the following is the best example of money?

Accepted Answer

A) phone card 
B) checkable deposit 
C) credit card 
D) gold 
E) share of Intel stock 
A) phone card 
B) checkable deposit 
C) credit card 
D) gold 
E) share of Intel stock

Question 16

Money performs all of the following functions EXCEPT serving as a
I.medium of exchange.
Ii.unit of account.
Iii.barter mechanism.

Accepted Answer

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

Question 17

What is the discount rate?

Accepted Answer

The discount rate is the inter

Question 18

Which of the following Federal Reserve Banks carries out the decisions of the FOMC?

Accepted Answer

A) the Kansas City Federal Reserve Bank 
B) the New York Federal Reserve Bank 
C) the Dallas Federal Reserve Bank 
D) the San Francisco Federal Reserve Bank 
E) the Atlanta Federal Reserve Bank 
A) the Kansas City Federal Reserve Bank 
B) the New York Federal Reserve Bank 
C) the Dallas Federal Reserve Bank 
D) the San Francisco Federal Reserve Bank 
E) the Atlanta Federal Reserve Bank

Question 19

The Fed buys $25,000 of government securities.The desired reserve ratio is 20 percent and the currency drain ratio is zero.What will be the change in the quantity of money?

Accepted Answer

A) $5,000 
B) $20,000 
C) $25,000 
D) $125,000 
E) $50,000 
A) $5,000 
B) $20,000 
C) $25,000 
D) $125,000 
E) $50,000

Question 20

The Fed purchases $100,000 of U.S.government securities from One Bank.Assuming the desired reserve ratio is 10 percent,banks loan all excess reserves,and the currency drain is 20 percent,how much does the quantity of money increase?

Accepted Answer

The quantity of money increases by (mone

The policy tool of "credit easing" refers to the

-The above table gives assets and deposits for a (small)bank.The bank's deposits that are part of M1 are equal to

When you join the local organic food market and then buy produce each month,money is used as

Assume the First Bank of Townsville makes a loan of $2,500.This loan will

Cisco is considering opening a financial institution that accepts savings deposits from only its employees and makes loans to only its employees.The best description of this financial institution is that it is a

The monetary base is equal to the sum of coins,

________ increases the size of the money multiplier.

When a bank receives deposits,

Explain what is included in M1 and M2.Is all of M1 money? Is all of M2 money?

Barter requires the

Open market operations are the

If the currency drain ratio is 30 percent and the desired reserve ratio is 10 percent,the money multiplier is

Banks generally earn the highest interest rate

Which of the following is the best example of money?

Money performs all of the following functions EXCEPT serving as a I.medium of exchange. Ii.unit of account. Iii.barter mechanism.

What is the discount rate?

Which of the following Federal Reserve Banks carries out the decisions of the FOMC?

The Fed buys $25,000 of government securities.The desired reserve ratio is 20 percent and the currency drain ratio is zero.What will be the change in the quantity of money?

The Fed purchases $100,000 of U.S.government securities from One Bank.Assuming the desired reserve ratio is 10 percent,banks loan all excess reserves,and the currency drain is 20 percent,how much does the quantity of money increase?

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

The policy tool of "credit easing" refers to the

-The above table gives assets and deposits for a (small)bank.The bank's deposits that are part of M1 are equal to

When you join the local organic food market and then buy produce each month,money is used as

Assume the First Bank of Townsville makes a loan of $2,500.This loan will

Cisco is considering opening a financial institution that accepts savings deposits from only its employees and makes loans to only its employees.The best description of this financial institution is that it is a

The monetary base is equal to the sum of coins,

________ increases the size of the money multiplier.

When a bank receives deposits,

Explain what is included in M1 and M2.Is all of M1 money? Is all of M2 money?

Barter requires the

Open market operations are the

If the currency drain ratio is 30 percent and the desired reserve ratio is 10 percent,the money multiplier is

Banks generally earn the highest interest rate

Which of the following is the best example of money?

Money performs all of the following functions EXCEPT serving as a I.medium of exchange. Ii.unit of account. Iii.barter mechanism.

What is the discount rate?

Which of the following Federal Reserve Banks carries out the decisions of the FOMC?

The Fed buys $25,000 of government securities.The desired reserve ratio is 20 percent and the currency drain ratio is zero.What will be the change in the quantity of money?

The Fed purchases $100,000 of U.S.government securities from One Bank.Assuming the desired reserve ratio is 10 percent,banks loan all excess reserves,and the currency drain is 20 percent,how much does the quantity of money increase?

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