Question 1

When a commercial bank receives a deposit,it must keep part of the deposit as cash reserves to satisfy its

Accepted Answer

A) securities and loans. 
B) required reserves. 
C) excess reserves. 
D) interbank loans. 
E) loan requirements. 
A) securities and loans. 
B) required reserves. 
C) excess reserves. 
D) interbank loans. 
E) loan requirements.

Question 2

The Fed sells $300 million U.S.government securities to commercial banks.This action leads to ________ in Fed assets and ________ in Fed liabilities.

Accepted Answer

A) a $300 million increase;a $300 million increase 
B) a $300 million increase;a $300 million decrease 
C) no change;no change 
D) a $300 million decrease;a $300 million decrease in 
E) a $300 million decrease;a $300 million increase 
A) a $300 million increase;a $300 million increase 
B) a $300 million increase;a $300 million decrease 
C) no change;no change 
D) a $300 million decrease;a $300 million decrease in 
E) a $300 million decrease;a $300 million increase

Question 3

If the Fed increases the discount rate,commercial banks pay a ________ interest rate if they borrow money from the Fed and will therefore ________.

Accepted Answer

A) higher;borrow less money from the Fed and make fewer loans to consumers 
B) higher;borrow more money from the Fed and make more loans to consumers 
C) lower;borrow more money from the Fed and make more loans to consumers 
D) lower;borrow less money from the Fed and make fewer loans to consumers 
E) higher;deposit more money into their reserves at the Fed 
A) higher;borrow less money from the Fed and make fewer loans to consumers 
B) higher;borrow more money from the Fed and make more loans to consumers 
C) lower;borrow more money from the Fed and make more loans to consumers 
D) lower;borrow less money from the Fed and make fewer loans to consumers 
E) higher;deposit more money into their reserves at the Fed

Question 4

Assume the desired reserve ratio is 10 percent,banks loan all excess reserves and the currency drain is zero.If the Fed sells $100 million of U.S.government securities to Boise Bank,the monetary base increases by

Accepted Answer

A) $1 million. 
B) $10 million. 
C) $100 million. 
D) $1,000 million. 
E) $90 million. 
A) $1 million. 
B) $10 million. 
C) $100 million. 
D) $1,000 million. 
E) $90 million.

Question 5

Suppose the currency drain is 20 ratio percent and the desired reserve ratio is 10 percent.
a.What does the money multiplier equal?
b.If the Fed purchases $10 million of U.S.government securities,by how much will the quantity of money increase or decrease?

Accepted Answer

a.The money multiplier is 4.00.The money

Question 6

An official measure of money in the United States is M1,which includes the sum of

Accepted Answer

A) checkable deposits plus small time deposits. 
B) currency plus checkable deposits. 
C) currency plus credit card transactions. 
D) currency plus traveler's checks plus time deposits. 
E) currency plus traveler's checks plus checkable deposits plus small time deposits plus money market funds and other deposits. 
A) checkable deposits plus small time deposits. 
B) currency plus checkable deposits. 
C) currency plus credit card transactions. 
D) currency plus traveler's checks plus time deposits. 
E) currency plus traveler's checks plus checkable deposits plus small time deposits plus money market funds and other deposits.

Question 7

The M2 multiplier in the United States is currently about

Accepted Answer

A) 1. 
B) 4. 
C) 16. 
D) 50. 
E) 23. 
A) 1. 
B) 4. 
C) 16. 
D) 50. 
E) 23.

Question 8

When the Fed purchases government securities,

Accepted Answer

A) excess reserves in the banking system increase,leading to more loans being made. 
B) required reserves in the banking system increase,leading to more loans being made. 
C) excess reserves in the banking system decrease,leading to fewer loans being made. 
D) required reserves in the banking system decrease,leading to fewer loans being made. 
E) the monetary base does not change. 
A) excess reserves in the banking system increase,leading to more loans being made. 
B) required reserves in the banking system increase,leading to more loans being made. 
C) excess reserves in the banking system decrease,leading to fewer loans being made. 
D) required reserves in the banking system decrease,leading to fewer loans being made. 
E) the monetary base does not change.

Question 9

If the currency drain ratio is zero,which of the following situations leads to the greatest total increase in the quantity of money?

Accepted Answer

A) an increase in the monetary base of $100,000 when the desired reserve ratio is 5 percent 
B) an increase in the monetary base of $120,000 when the desired reserve ratio is 10 percent 
C) an increase in the monetary base of $200,000 when the desired reserve ratio is 20 percent 
D) an increase in the monetary base of $250,000 when the desired reserve ratio is 15 percent 
E) an increase in the monetary base of $100,000 when the desired reserve ratio is 50 percent 
A) an increase in the monetary base of $100,000 when the desired reserve ratio is 5 percent 
B) an increase in the monetary base of $120,000 when the desired reserve ratio is 10 percent 
C) an increase in the monetary base of $200,000 when the desired reserve ratio is 20 percent 
D) an increase in the monetary base of $250,000 when the desired reserve ratio is 15 percent 
E) an increase in the monetary base of $100,000 when the desired reserve ratio is 50 percent

Question 10

The store of value function is defined as the

Accepted Answer

A) pricing of goods and services in one measure. 
B) exchange of goods and services directly for other goods and services. 
C) holding of money from one transaction to be used later in another transaction. 
D) double coincidence of wants that is used in the debate over barter versus money. 
E) use of money as a medium of exchange. 
A) pricing of goods and services in one measure. 
B) exchange of goods and services directly for other goods and services. 
C) holding of money from one transaction to be used later in another transaction. 
D) double coincidence of wants that is used in the debate over barter versus money. 
E) use of money as a medium of exchange.

Question 11

When the Fed buys a government security,what happens to the monetary base and the quantity of money? Which changes by more or do both change by the same amount?

Accepted Answer

When the Fed buys a government security,

Question 12

Assume First Central Bank has a desired reserve ratio of 15 percent;$80,000 in total deposits,loans equal to $60,000,and has $20,000 in actual reserves.First Central can make additional loans totaling

Accepted Answer

A) $8,000. 
B) $12,000. 
C) $20,000. 
D) $60,000. 
E) $80,000. 
A) $8,000. 
B) $12,000. 
C) $20,000. 
D) $60,000. 
E) $80,000.

Question 13

Suppose the currency drain ratio is 33.33 percent and the desired reserve ratio is 10 percent.The money multiplier equals

Accepted Answer

A) 4.27. 
B) 3.00. 
C) 3.08. 
D) 2.50. 
E) 6.67. 
A) 4.27. 
B) 3.00. 
C) 3.08. 
D) 2.50. 
E) 6.67.

Question 14

If you hold $25 in cash,have $150 in a checking account,and have $250 in a savings account,how much of M2 do you have?

Accepted Answer

All of the assets me

Question 15

If you use a check to pay your monthly rent,

Accepted Answer

A) the check is considered money because you received something in return. 
B) the check is not money because it is just an instruction to your bank to make a payment. 
C) you have used money because the landlord accepted it as a means of payment. 
D) the check becomes money when it arrives at the landlord's bank. 
E) the check is not money because it is not part of M1. 
A) the check is considered money because you received something in return. 
B) the check is not money because it is just an instruction to your bank to make a payment. 
C) you have used money because the landlord accepted it as a means of payment. 
D) the check becomes money when it arrives at the landlord's bank. 
E) the check is not money because it is not part of M1.

Question 16

The process of money creation by the banking system is limited,in part,by the

Accepted Answer

A) number of banks. 
B) desired reserve ratio. 
C) number of depositors. 
D) Comptroller of the Currency. 
E) laws passed each year by the U.S.Congress. 
A) number of banks. 
B) desired reserve ratio. 
C) number of depositors. 
D) Comptroller of the Currency. 
E) laws passed each year by the U.S.Congress.

Question 17

The Citizens First Bank sells $100,000 of government securities to the Fed.This sale immediately

Accepted Answer

A) decreases the quantity of money. 
B) decreases the bank's checkable deposits. 
C) increases the bank's reserves. 
D) decreases the bank's assets. 
E) increases the bank's required reserves. 
A) decreases the quantity of money. 
B) decreases the bank's checkable deposits. 
C) increases the bank's reserves. 
D) decreases the bank's assets. 
E) increases the bank's required reserves.

Question 18

When the Fed ________ securities in an open market operation,banks' reserves ________,and therefore lending ________.

Accepted Answer

A) sells;increase;increases 
B) buys;increase;increases 
C) sells;decrease;increases 
D) buys;decrease;decreases 
E) buys;do not change;does not change 
A) sells;increase;increases 
B) buys;increase;increases 
C) sells;decrease;increases 
D) buys;decrease;decreases 
E) buys;do not change;does not change

Question 19

Which of the following is NOT held as an asset by banks?

Accepted Answer

A) reserves 
B) loans 
C) securities 
D) currency in the banks' vaults 
E) checkable deposits 
A) reserves 
B) loans 
C) securities 
D) currency in the banks' vaults 
E) checkable deposits

Question 20

M2 consists of

Accepted Answer

A) M1 plus traveler's checks. 
B) M1 plus saving deposits,small time deposits,and money market funds. 
C) M1 plus checkable deposits. 
D) M1 plus currency at the banks. 
E) M1 plus Federal Reserve notes. 
A) M1 plus traveler's checks. 
B) M1 plus saving deposits,small time deposits,and money market funds. 
C) M1 plus checkable deposits. 
D) M1 plus currency at the banks. 
E) M1 plus Federal Reserve notes.

When a commercial bank receives a deposit,it must keep part of the deposit as cash reserves to satisfy its

The Fed sells $300 million U.S.government securities to commercial banks.This action leads to in Fed assets and in Fed liabilities.

If the Fed increases the discount rate,commercial banks pay a interest rate if they borrow money from the Fed and will therefore .

Assume the desired reserve ratio is 10 percent,banks loan all excess reserves and the currency drain is zero.If the Fed sells $100 million of U.S.government securities to Boise Bank,the monetary base increases by

Suppose the currency drain is 20 ratio percent and the desired reserve ratio is 10 percent. a.What does the money multiplier equal? b.If the Fed purchases $10 million of U.S.government securities,by how much will the quantity of money increase or decrease?

An official measure of money in the United States is M1,which includes the sum of

The M2 multiplier in the United States is currently about

When the Fed purchases government securities,

If the currency drain ratio is zero,which of the following situations leads to the greatest total increase in the quantity of money?

The store of value function is defined as the

When the Fed buys a government security,what happens to the monetary base and the quantity of money? Which changes by more or do both change by the same amount?

Assume First Central Bank has a desired reserve ratio of 15 percent;$80,000 in total deposits,loans equal to $60,000,and has $20,000 in actual reserves.First Central can make additional loans totaling

Suppose the currency drain ratio is 33.33 percent and the desired reserve ratio is 10 percent.The money multiplier equals

If you hold $25 in cash,have $150 in a checking account,and have $250 in a savings account,how much of M2 do you have?

If you use a check to pay your monthly rent,

The process of money creation by the banking system is limited,in part,by the

The Citizens First Bank sells $100,000 of government securities to the Fed.This sale immediately

When the Fed securities in an open market operation,banks' reserves ,and therefore lending .

Which of the following is NOT held as an asset by banks?

M2 consists of

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 a commercial bank receives a deposit,it must keep part of the deposit as cash reserves to satisfy its

The Fed sells $300 million U.S.government securities to commercial banks.This action leads to ________ in Fed assets and ________ in Fed liabilities.

If the Fed increases the discount rate,commercial banks pay a ________ interest rate if they borrow money from the Fed and will therefore ________.

Assume the desired reserve ratio is 10 percent,banks loan all excess reserves and the currency drain is zero.If the Fed sells $100 million of U.S.government securities to Boise Bank,the monetary base increases by

Suppose the currency drain is 20 ratio percent and the desired reserve ratio is 10 percent. a.What does the money multiplier equal? b.If the Fed purchases $10 million of U.S.government securities,by how much will the quantity of money increase or decrease?

An official measure of money in the United States is M1,which includes the sum of

The M2 multiplier in the United States is currently about

When the Fed purchases government securities,

If the currency drain ratio is zero,which of the following situations leads to the greatest total increase in the quantity of money?

The store of value function is defined as the

When the Fed buys a government security,what happens to the monetary base and the quantity of money? Which changes by more or do both change by the same amount?

Assume First Central Bank has a desired reserve ratio of 15 percent;$80,000 in total deposits,loans equal to $60,000,and has $20,000 in actual reserves.First Central can make additional loans totaling

Suppose the currency drain ratio is 33.33 percent and the desired reserve ratio is 10 percent.The money multiplier equals

If you hold $25 in cash,have $150 in a checking account,and have $250 in a savings account,how much of M2 do you have?

If you use a check to pay your monthly rent,

The process of money creation by the banking system is limited,in part,by the

The Citizens First Bank sells $100,000 of government securities to the Fed.This sale immediately

When the Fed ________ securities in an open market operation,banks' reserves ________,and therefore lending ________.

Which of the following is NOT held as an asset by banks?

M2 consists of

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

The Fed sells $300 million U.S.government securities to commercial banks.This action leads to in Fed assets and in Fed liabilities.

If the Fed increases the discount rate,commercial banks pay a interest rate if they borrow money from the Fed and will therefore .

When the Fed securities in an open market operation,banks' reserves ,and therefore lending .