Question 1

When you see a mansion and think to yourself that it must be worth a million dollars,you are using money to perform which function?

Accepted Answer

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

Question 2

Which of the following are considered money?
I.electronic checks
Ii.paper checks
Iii.the deposit transferred using an e-check

Accepted Answer

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

Question 3

If the Fed sells government securities to a member of the nonbank public,then the resulting effect on the quantity of money is

Accepted Answer

A) much larger than if the securities were sold to a bank. 
B) much smaller than if the securities were sold to a bank. 
C) the same as if the securities were sold to a bank. 
D) that there is no change in the quantity of money. 
E) None of the above answers is correct. 
A) much larger than if the securities were sold to a bank. 
B) much smaller than if the securities were sold to a bank. 
C) the same as if the securities were sold to a bank. 
D) that there is no change in the quantity of money. 
E) None of the above answers is correct.

Question 4

Money market mutual funds

Accepted Answer

A) are included in M2 but not M1. 
B) are included in M1 but not M2. 
C) are included in M1 and M2. 
D) are the largest part of the monetary base. 
E) None of the above is correct. 
A) are included in M2 but not M1. 
B) are included in M1 but not M2. 
C) are included in M1 and M2. 
D) are the largest part of the monetary base. 
E) None of the above is correct.

Question 5

When Zane deposits $20,000 cash in his checkable deposit at the Citicorp and the Citicorp's desired reserves increase by $5,000,the desired reserve ratio is

Accepted Answer

A) 5 percent. 
B) 75 percent. 
C) 25 percent. 
D) 20 percent. 
E) $5,000. 
A) 5 percent. 
B) 75 percent. 
C) 25 percent. 
D) 20 percent. 
E) $5,000.

Question 6

If the Fed buys government securities from the non-bank public,then

Accepted Answer

A) reserves at banks decrease. 
B) loans at banks decrease. 
C) deposits at banks increase and banks' reserves decrease. 
D) deposits at banks increase and banks' reserves increase. 
E) deposits at banks decrease and banks' reserves increase. 
A) reserves at banks decrease. 
B) loans at banks decrease. 
C) deposits at banks increase and banks' reserves decrease. 
D) deposits at banks increase and banks' reserves increase. 
E) deposits at banks decrease and banks' reserves increase.

Question 7

Does the Federal Reserve conduct both the nation's monetary policy and its fiscal policy?

Accepted Answer

The Federal Reserve does not c

Question 8

When you use currency to buy lunch,money is performing which function?

Accepted Answer

A) medium of exchange 
B) unit of purchase 
C) store of value 
D) barter token 
E) unit of currency 
A) medium of exchange 
B) unit of purchase 
C) store of value 
D) barter token 
E) unit of currency

Question 9

M1 is defined as a measure of money including,in part,

Accepted Answer

A) checkable deposits and currency. 
B) time deposits and currency. 
C) currency and savings deposits. 
D) time deposits and money market fund deposits. 
E) the lines of credit on credit cards and currency. 
A) checkable deposits and currency. 
B) time deposits and currency. 
C) currency and savings deposits. 
D) time deposits and money market fund deposits. 
E) the lines of credit on credit cards and currency.

Question 10

In 2008,the Fed created a new policy tool called

Accepted Answer

A) quantitative easing,which allowed the Fed to buy private securities as well as government securities. 
B) quantitative easing,which required the Fed to pay interest on required reserves. 
C) open market operations,which required the Fed to buy securities from only the federal government. 
D) federal funds zero-rate,which required the Fed to lower the rate to near zero percent. 
E) interest rate reductions,which allowed the Fed to lower interest rates paid to banks. 
A) quantitative easing,which allowed the Fed to buy private securities as well as government securities. 
B) quantitative easing,which required the Fed to pay interest on required reserves. 
C) open market operations,which required the Fed to buy securities from only the federal government. 
D) federal funds zero-rate,which required the Fed to lower the rate to near zero percent. 
E) interest rate reductions,which allowed the Fed to lower interest rates paid to banks.

Question 11

If the monetary base does not change and the desired reserve ratio increases,the money multiplier ________ and the quantity of money ________.

Accepted Answer

A) increases;increases 
B) increases;decreases 
C) decreases;increases 
D) decreases;decreases 
E) decreases;does not change 
A) increases;increases 
B) increases;decreases 
C) decreases;increases 
D) decreases;decreases 
E) decreases;does not change

Question 12

C/D is the currency drain ratio and R/D is the desired reserve ratio.The money multiplier equals

Accepted Answer

A)    . 
B)    . 
C)    . 
D)    . 
E)    . 
A)    . 
B)    . 
C)    . 
D)    . 
E)    .

Question 13

Debit cards and e-checks are not money because

Accepted Answer

A) they can be forged easily. 
B) they can fail their purpose of being mediums of exchange as a result of technical difficulties. 
C) they are just instruments to transfer money between people. 
D) not all banks offer them and not all businesses accept them. 
E) they are not regulated by the government. 
A) they can be forged easily. 
B) they can fail their purpose of being mediums of exchange as a result of technical difficulties. 
C) they are just instruments to transfer money between people. 
D) not all banks offer them and not all businesses accept them. 
E) they are not regulated by the government.

Question 14

Suppose the Federal Reserve buys $50 million worth of securities from a commercial bank.As a result,the monetary base ________,and the quantity of money will ________ $50 million due to the ________.

Accepted Answer

A) increases;increase by more than;money multiplier 
B) decreases;decrease by more than;money multiplier 
C) increases;increase by more than;expenditure multiplier 
D) decreases;decrease by less than;expenditure multiplier 
E) increases;decrease by;currency drain 
A) increases;increase by more than;money multiplier 
B) decreases;decrease by more than;money multiplier 
C) increases;increase by more than;expenditure multiplier 
D) decreases;decrease by less than;expenditure multiplier 
E) increases;decrease by;currency drain

Question 15

When people make deposits of currency into a bank,the quantity of M1

Accepted Answer

A) immediately decreases by the amount of the deposit. 
B) immediately increases by the amount of the deposit. 
C) does not immediately change. 
D) immediately changes but whether it increases or decreases depends on whether the bank had excess reserves or did not have excess reserves. 
E) changes only if the deposit is an open market operation. 
A) immediately decreases by the amount of the deposit. 
B) immediately increases by the amount of the deposit. 
C) does not immediately change. 
D) immediately changes but whether it increases or decreases depends on whether the bank had excess reserves or did not have excess reserves. 
E) changes only if the deposit is an open market operation.

Question 16

A commercial bank is defined as

Accepted Answer

A) any institution that accepts deposits. 
B) a firm that is chartered to accept deposits and make loans. 
C) the institution that sets regulations for commercial activities. 
D) a firm that obtains funds by selling shares and then buys U.S.Treasury bills. 
E) any institution that makes loans. 
A) any institution that accepts deposits. 
B) a firm that is chartered to accept deposits and make loans. 
C) the institution that sets regulations for commercial activities. 
D) a firm that obtains funds by selling shares and then buys U.S.Treasury bills. 
E) any institution that makes loans.

Question 17

When the Fed ________,the quantity of banks' reserves decreases.

Accepted Answer

A) hikes taxes 
B) buys government securities 
C) sells government securities 
D) lowers the required reserve ratio 
E) raises the required reserve ratio 
A) hikes taxes 
B) buys government securities 
C) sells government securities 
D) lowers the required reserve ratio 
E) raises the required reserve ratio

Question 18

If currency outside of banks is $800 billion;traveler's checks are $10 billion;checkable deposits owned by individuals and businesses are $700 billion;savings deposits are $4,000 billion;small time deposits are $1,000 billion;and money market funds and other deposits are $800 billion,then M2 equals ________ billion.

Accepted Answer

A) $7,310 
B) $5,800 
C) $2,510 
D) $1,510 
E) $710 
A) $7,310 
B) $5,800 
C) $2,510 
D) $1,510 
E) $710

Question 19

Suppose the currency drain ratio is 25 percent and the desired reserve ratio is 20 percent.The money multiplier equals

Accepted Answer

A) 4.00. 
B) 3.00. 
C) 2.78. 
D) 2.00. 
E) 5.42. 
A) 4.00. 
B) 3.00. 
C) 2.78. 
D) 2.00. 
E) 5.42.

Question 20

As a result of the Fed's actions during the 2008 financial crisis and banks' lending policies,

Accepted Answer

A) the M2 money multiplier has fallen from about 9 to about 4. 
B) the M2 money multiplier more than doubled. 
C) the monetary base decreased by 50 percent. 
D) the ratio of currency to M2 deposits more than doubled. 
E) the reserve requirement ratio increased. 
A) the M2 money multiplier has fallen from about 9 to about 4. 
B) the M2 money multiplier more than doubled. 
C) the monetary base decreased by 50 percent. 
D) the ratio of currency to M2 deposits more than doubled. 
E) the reserve requirement ratio increased.

When you see a mansion and think to yourself that it must be worth a million dollars,you are using money to perform which function?

Which of the following are considered money? I.electronic checks Ii.paper checks Iii.the deposit transferred using an e-check

If the Fed sells government securities to a member of the nonbank public,then the resulting effect on the quantity of money is

Money market mutual funds

When Zane deposits $20,000 cash in his checkable deposit at the Citicorp and the Citicorp's desired reserves increase by $5,000,the desired reserve ratio is

If the Fed buys government securities from the non-bank public,then

Does the Federal Reserve conduct both the nation's monetary policy and its fiscal policy?

When you use currency to buy lunch,money is performing which function?

M1 is defined as a measure of money including,in part,

In 2008,the Fed created a new policy tool called

If the monetary base does not change and the desired reserve ratio increases,the money multiplier and the quantity of money .

C/D is the currency drain ratio and R/D is the desired reserve ratio.The money multiplier equals

Debit cards and e-checks are not money because

Suppose the Federal Reserve buys $50 million worth of securities from a commercial bank.As a result,the monetary base ,and the quantity of money will $50 million due to the .

When people make deposits of currency into a bank,the quantity of M1

A commercial bank is defined as

When the Fed ________,the quantity of banks' reserves decreases.

Suppose the currency drain ratio is 25 percent and the desired reserve ratio is 20 percent.The money multiplier equals

As a result of the Fed's actions during the 2008 financial crisis and banks' lending policies,

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 you see a mansion and think to yourself that it must be worth a million dollars,you are using money to perform which function?

Which of the following are considered money? I.electronic checks Ii.paper checks Iii.the deposit transferred using an e-check

If the Fed sells government securities to a member of the nonbank public,then the resulting effect on the quantity of money is

Money market mutual funds

When Zane deposits $20,000 cash in his checkable deposit at the Citicorp and the Citicorp's desired reserves increase by $5,000,the desired reserve ratio is

If the Fed buys government securities from the non-bank public,then

Does the Federal Reserve conduct both the nation's monetary policy and its fiscal policy?

When you use currency to buy lunch,money is performing which function?

M1 is defined as a measure of money including,in part,

In 2008,the Fed created a new policy tool called

If the monetary base does not change and the desired reserve ratio increases,the money multiplier ________ and the quantity of money ________.

C/D is the currency drain ratio and R/D is the desired reserve ratio.The money multiplier equals

Debit cards and e-checks are not money because

Suppose the Federal Reserve buys $50 million worth of securities from a commercial bank.As a result,the monetary base ________,and the quantity of money will ________ $50 million due to the ________.

When people make deposits of currency into a bank,the quantity of M1

A commercial bank is defined as

When the Fed ________,the quantity of banks' reserves decreases.

Suppose the currency drain ratio is 25 percent and the desired reserve ratio is 20 percent.The money multiplier equals

As a result of the Fed's actions during the 2008 financial crisis and banks' lending policies,

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

If the monetary base does not change and the desired reserve ratio increases,the money multiplier and the quantity of money .

Suppose the Federal Reserve buys $50 million worth of securities from a commercial bank.As a result,the monetary base ,and the quantity of money will $50 million due to the .