Question 1

What gives money value under a fiat system?

Accepted Answer

A)  Fiat money is backed by gold. 
B)  The supply of fiat money is controlled by the government. 
C)  Fiat money is also a commodity. 
D)  Fiat money is the same as Treasury bonds. 
A)  Fiat money is backed by gold. 
B)  The supply of fiat money is controlled by the government. 
C)  Fiat money is also a commodity. 
D)  Fiat money is the same as Treasury bonds.

Question 2

Refer to the information provided in Figure 10.1 below to answer the questions that follow.   Figure 10.1
-Refer to Figure 10.1. The movement from C to B could be cause by

Accepted Answer

A)  a decrease in the interest rate. 
B)  an increase in the interest rate. 
C)  a decrease in nominal income. 
D)  an increase in nominal income. 
A)  a decrease in the interest rate. 
B)  an increase in the interest rate. 
C)  a decrease in nominal income. 
D)  an increase in nominal income.

Question 3

The three-month Treasury bill rate is the

Accepted Answer

A)  most widely followed short-term interest rate. 
B)  same as the prime rate. 
C)  interest rate the Fed charges commercial banks for borrowing. 
D)  interest rate used by commercial banks to loan to other commercial banks. 
A)  most widely followed short-term interest rate. 
B)  same as the prime rate. 
C)  interest rate the Fed charges commercial banks for borrowing. 
D)  interest rate used by commercial banks to loan to other commercial banks.

Question 4

The discount rate is

Accepted Answer

A)  the interest rate commercial banks charge each other for borrowing funds. 
B)  the interest rate commercial banks charge their new customers. 
C)  the interest rate the Fed charges commercial banks for borrowing funds. 
D)  the interest rate commercial banks charge their most creditworthy customers. 
A)  the interest rate commercial banks charge each other for borrowing funds. 
B)  the interest rate commercial banks charge their new customers. 
C)  the interest rate the Fed charges commercial banks for borrowing funds. 
D)  the interest rate commercial banks charge their most creditworthy customers.

Question 5

An open-market ________ of securities by the Fed results in an increase in reserves and an increase in the ________ money.

Accepted Answer

A)  sale; demand for 
B)  sale; supply of 
C)  purchase; demand for 
D)  purchase; supply of 
A)  sale; demand for 
B)  sale; supply of 
C)  purchase; demand for 
D)  purchase; supply of

Question 6

If a bank is "loaned up," it has no ________ and thus can make no ________.

Accepted Answer

A)  required reserves; deposits 
B)  assets; liabilities 
C)  demand deposits; withdrawals 
D)  excess reserves; more loans 
A)  required reserves; deposits 
B)  assets; liabilities 
C)  demand deposits; withdrawals 
D)  excess reserves; more loans

Question 7

Among the members of the Federal Open Market Committee

Accepted Answer

A)  is the Secretary of the Treasury. 
B)  is the Comptroller of the Currency. 
C)  are the seven members of the Board of Governors of the Fed. 
D)  is the Chair of the Senate Banking Committee. 
A)  is the Secretary of the Treasury. 
B)  is the Comptroller of the Currency. 
C)  are the seven members of the Board of Governors of the Fed. 
D)  is the Chair of the Senate Banking Committee.

Question 8

If the Fed buys government securities, then there is

Accepted Answer

A)  an increase in the supply of money. 
B)  a decrease in the supply of money. 
C)  a decrease in the discount rate. 
D)  an increase in the required reserve ratio. 
A)  an increase in the supply of money. 
B)  a decrease in the supply of money. 
C)  a decrease in the discount rate. 
D)  an increase in the required reserve ratio.

Question 9

Which of the following represents an action by the Federal Reserve that is designed to decrease the money supply?

Accepted Answer

A)  buying government securities in the open market 
B)  an increase in the required reserve ratio 
C)  an increase in federal spending 
D)  a decrease in the discount rate 
A)  buying government securities in the open market 
B)  an increase in the required reserve ratio 
C)  an increase in federal spending 
D)  a decrease in the discount rate

Question 10

An open-market sale of securities by the Fed results in ________ in reserves and ________ in the supply of money.

Accepted Answer

A)  an increase; a decrease 
B)  an increase; an increase 
C)  a decrease; an increase 
D)  a decrease; a decrease 
A)  an increase; a decrease 
B)  an increase; an increase 
C)  a decrease; an increase 
D)  a decrease; a decrease

Question 11

Which of the following serves as the central bank of the United States?

Accepted Answer

A)  the Federal Reserve System 
B)  the Treasury Department 
C)  the Federal Deposit Insurance Corporation 
D)  the Congress 
A)  the Federal Reserve System 
B)  the Treasury Department 
C)  the Federal Deposit Insurance Corporation 
D)  the Congress

Question 12

Refer to the information provided in Figure 10.2 below to answer the questions that follow.   Figure 10.2
-Refer to Figure 10.2. An increase in nominal income could be represented by a movement from Point ________ to Point ________.

Accepted Answer

A)  A; C 
B)  A; B 
C)  B; A 
D)  B; D 
A)  A; C 
B)  A; B 
C)  B; A 
D)  B; D

Question 13

Suppose the required reserve ratio is 10%. A $75 million cash deposit will allow commercial banks to create at most

Accepted Answer

A)  $750,000. 
B)  $7.5 million. 
C)  $75 million. 
D)  $750 million. 
A)  $750,000. 
B)  $7.5 million. 
C)  $75 million. 
D)  $750 million.

Question 14

The Fed is a division of the Department of the Treasury.

Accepted Answer

A) True 
 B)False

Question 15

Refer to the information provided in Figure 10.1 below to answer the questions that follow.   Figure 10.1
-Refer to Figure 10.1. A movement from Point A to Point C can be caused by

Accepted Answer

A)  a decrease in nominal income. 
B)  an increase in nominal income. 
C)  a decrease in the interest rate. 
D)  an increase in the interest rate. 
A)  a decrease in nominal income. 
B)  an increase in nominal income. 
C)  a decrease in the interest rate. 
D)  an increase in the interest rate.

Question 16

An increase in the required reserve ratio

Accepted Answer

A)  will increase the money supply. 
B)  will decrease the money supply. 
C)  will not change the money supply. 
D)  will decrease the discount rate. 
A)  will increase the money supply. 
B)  will decrease the money supply. 
C)  will not change the money supply. 
D)  will decrease the discount rate.

Question 17

In an economy that uses fiat money, there is no need for double coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 18

Related to the Economics in Practice on p. 202: If the estate in the Chekhov play Uncle Vanya is earning 2 percent and a less risky investment is also earning 2 percent, the price of the estate would ________ to make the two investments financially equivalent.

Accepted Answer

A)  have to fall 
B)  have to rise 
C)  have to not change, since the return on investment is the same 
D)  none of the above 
A)  have to fall 
B)  have to rise 
C)  have to not change, since the return on investment is the same 
D)  none of the above

Question 19

When you use money to fill your car with gas every week, you are using money as a unit of account.

Accepted Answer

A) True 
 B)False

Question 20

Related to the Economics in Practice on p. 202: If the estate in the Chekhov play Uncle Vanya is earning 2 percent, yet a potential buyer wants to earn more than 2 percent, the sales price of the estate would have to

Accepted Answer

A)  fall. 
B)  rise. 
C)  double. 
D)  no price will bring a higher return 
A)  fall. 
B)  rise. 
C)  double. 
D)  no price will bring a higher return

Exam 10: Money, the Federal Reserve, and the Interest Rate

What gives money value under a fiat system?

Refer to the information provided in Figure 10.1 below to answer the questions that follow. Figure 10.1 -Refer to Figure 10.1. The movement from C to B could be cause by

The three-month Treasury bill rate is the

The discount rate is

An open-market ________ of securities by the Fed results in an increase in reserves and an increase in the ________ money.

If a bank is "loaned up," it has no ________ and thus can make no ________.

Among the members of the Federal Open Market Committee

If the Fed buys government securities, then there is

Which of the following represents an action by the Federal Reserve that is designed to decrease the money supply?

An open-market sale of securities by the Fed results in ________ in reserves and ________ in the supply of money.

Which of the following serves as the central bank of the United States?

Refer to the information provided in Figure 10.2 below to answer the questions that follow. Figure 10.2 -Refer to Figure 10.2. An increase in nominal income could be represented by a movement from Point ________ to Point ________.

Suppose the required reserve ratio is 10%. A $75 million cash deposit will allow commercial banks to create at most

The Fed is a division of the Department of the Treasury.

Refer to the information provided in Figure 10.1 below to answer the questions that follow. Figure 10.1 -Refer to Figure 10.1. A movement from Point A to Point C can be caused by

An increase in the required reserve ratio

In an economy that uses fiat money, there is no need for double coincidence of wants.

Related to the Economics in Practice on p. 202: If the estate in the Chekhov play Uncle Vanya is earning 2 percent and a less risky investment is also earning 2 percent, the price of the estate would ________ to make the two investments financially equivalent.

When you use money to fill your car with gas every week, you are using money as a unit of account.

Related to the Economics in Practice on p. 202: If the estate in the Chekhov play Uncle Vanya is earning 2 percent, yet a potential buyer wants to earn more than 2 percent, the sales price of the estate would have to

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Cost Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

An open-market of securities by the Fed results in an increase in reserves and an increase in the money.

If a bank is "loaned up," it has no and thus can make no .

An open-market sale of securities by the Fed results in in reserves and in the supply of money.

Refer to the information provided in Figure 10.2 below to answer the questions that follow. Figure 10.2 -Refer to Figure 10.2. An increase in nominal income could be represented by a movement from Point to Point .