Question 1

The New York Federal Reserve Bank

Accepted Answer

A)   president always gets to vote at the FOMC meetings.
B)   conducts open market transactions.
C)   is one of 12 regional Federal Reserve Banks.
D)   All of the above are correct.

Question 2

Assume that when $100 of new reserves enter the banking system,the money supply ultimately increases by $625.Assume also that no banks hold excess reserves and that the entire money supply consists of bank deposits.If,at a point in time,reserves for all banks amount to $500,then at that same point in time,loans for all banks amount to $2,625.

Accepted Answer

A) True 
 B)False

Question 3

Travelers checks are included in

Accepted Answer

A)   M1 but not M2.
B)   M2 but not M1.
C)   M1 and M2.
D)   neither M1 nor M2.

Question 4

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following best illustrates the unit of account function of money?

Accepted Answer

A)   You list prices for candy sold on your Web site,www.sweettooth.com,in dollars.
B)   You pay for your theater tickets with dollars.
C)   You keep 6 ounces of gold in your safe-deposit box at the bank for emergencies.
D)   None of the above is correct.

Question 6

The banking system currently has $200 billion of reserves,none of which are excess.People hold only deposits and no currency,and the reserve requirement is 4 percent.If the Fed raises the reserve requirement to 10 percent and at the same time buys $50 billion of bonds,then by how much does the money supply change?

Accepted Answer

A)   It rises by $600 billion.
B)   It rises by $125 billion.
C)   It falls by $2,500 billion.
D)   None of the above is correct.

Question 7

If you deposit $100 of currency into a demand deposit at a bank,this action by itself

Accepted Answer

A)   does not change the money supply.
B)   increases the money supply.
C)   decreases the money supply.
D)   has an indeterminate effect on the money supply.

Question 8

The federal funds rate is the interest rate that

Accepted Answer

A)   banks charge one another for loans.
B)   banks charge the Fed for loans.
C)   the Fed charges banks for loans.
D)   the Fed charges Congress for loans.

Question 9

If the reserve ratio for all banks is 10 percent,$1,000 of additional reserves can create up to

Accepted Answer

A)   $100 of new money.
B)   $1,000 of new money.
C)   $10,000 of new money.
D)   None of the above is correct.

Question 10

Writing in The New York Times in 2004,economist Hal R.Varian asserted that dollars are valuable as a result of

Accepted Answer

A)   the fact that they are backed by gold.
B)   the cost incurred by the government when it prints paper currency.
C)   "network effects."
D)   "commodity effects."

Question 11

If people decide to hold more currency relative to deposits,the money supply

Accepted Answer

A)   falls.The larger the reserve ratio is,the more the money supply falls.
B)   falls.The larger the reserve ratio is,the less the money supply falls.
C)   rises.The larger the reserve ratio is,the more the money supply rises.
D)   rises.The larger the reserve ratio is,the less the money supply rises.

Question 12

If the reserve ratio for all banks is 8 percent,then an additional $1,000 of reserves can increase the money supply by as much as

Accepted Answer

A)   $6,400.
B)   $8,000.
C)   $12,500.
D)   $20,000.

Question 13

The money multiplier equals

Accepted Answer

A)   1/R,where R represents the quantity of reserves in the economy.
B)   1/R,where R represents the reserve ratio for all banks in the economy.
C)   1/(1+R) ,where R represents the reserve ratio for all banks in the economy.
D)   1/(1+R) ,where R represents the largest reserve ratio among all banks in the economy.

Question 14

Speaking at a conference in 2002 as a member of the Board of Governors,Ben Bernanke

Accepted Answer

A)   acknowledged that the Fed had been responsible for the Great Depression of the 1930s.
B)   asserted that the Fed was in no way responsible for the Great Depression of the 1930s.
C)   asserted that the Fed should abandon,in the not-too-distant future,its reliance on open-market operations for control of the money supply.
D)   asserted that the Fed should abandon,in the not-too-distant future,its fixation on the federal funds rate.

Question 15

Scenario 29-2.
The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi.The local unit of currency is the Taz.Aggregate banking statistics show that collectively the banks of Tazi hold 300 million Tazes of required reserves,75 million Tazes of excess reserves,have issued 7,500 million Tazes of deposits,and hold 225 million Tazes of Tazian Treasury bonds.Tazians prefer to use only demand deposits and so all money is on deposit at the bank.
-Refer to Scenario 29-2.Assuming the only other thing Tazian banks have on their balance sheets is loans,what is the value of existing loans made by Tazian banks?

Accepted Answer

A)   6,900 million Tazes
B)   7,125 million Tazes
C)   7,350 million Tazes
D)   None of the above is correct.

Question 16

Table 29-6.
Bank of Springfield
 
-Refer to Table 29-6.If the Fed requires a reserve ratio of 6 percent,then what quantity of excess reserves does the Bank of Springfield now hold?

Accepted Answer

A)   $1,200
B)   $2,400
C)   $2,880
D)   $4,800

Question 17

In the United States,currency holdings per person average about

Accepted Answer

A)   $60;one explanation for this relatively small average is that many people use credit and debit cards to make transactions.
B)   $60;one explanation for this relatively small average is that U.S.citizens hold a lot of foreign currency.
C)   $3,300;one explanation for this relatively large amount is that criminals probably prefer currency as a medium of exchange.
D)   $3,300;one explanation for this relatively large average is that U.S.citizens hold a lot of foreign currency.

Question 18

In a system of 100-percent-reserve banking,

Accepted Answer

A)   banks do not accept deposits.
B)   banks do not influence the supply of money.
C)   loans are the only asset item for banks.
D)   All of the above are correct.

Question 19

Scenario 29-1.
The monetary policy of Salidiva is determined by the Salidivian Central Bank.The local currency is the salido.Salidivian banks collectively hold 100 million salidos of required reserves,25 million salidos of excess reserves,250 million salidos of Salidivian Treasury Bonds,and their customers hold 1,000 million salidos of deposits.Salidivians prefer to use only demand deposits and so the money supply consists of demand deposits.
-Refer to Scenario 29-1 .Suppose the Central Bank of Salidiva purchases 25 million salidos of Salidivian Treasury Bonds from banks.Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same.By how much would the money supply of Salidiva change?

Accepted Answer

A)   200 million salidos
B)   150 million salidos
C)   100 million salidos
D)   None of the above is correct.

Question 20

A bank's assets equal its liabilities under

Accepted Answer

A)   both 100-percent-reserve banking and fractional-reserve banking.
B)   neither 100-percent-reserve banking nor fractional-reserve banking.
C)   100-percent-reserve banking but not under fractional-reserve banking.
D)   fractional-reserve banking but not under 100-percent-reserve banking.

Exam 29: The Monetary System

Correct Answer
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Which of the following best illustrates the unit of account function of money?

Correct Answer
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Travelers checks are included in

Correct Answer
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Table 29-6. Bank of Springfield -Refer to Table 29-6.If the Fed requires a reserve ratio of 6 percent,then what quantity of excess reserves does the Bank of Springfield now hold?

Correct Answer
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The money multiplier equals

Correct Answer
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Correct Answer
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The federal funds rate is the interest rate that

Correct Answer
verified

If the reserve ratio for all banks is 8 percent,then an additional $1,000 of reserves can increase the money supply by as much as

Correct Answer
verified

If you deposit $100 of currency into a demand deposit at a bank,this action by itself

Correct Answer
verified

Writing in The New York Times in 2004,economist Hal R.Varian asserted that dollars are valuable as a result of

Correct Answer
verified

In a system of 100-percent-reserve banking,

Correct Answer
verified

Correct Answer
verified

If the reserve ratio for all banks is 10 percent,$1,000 of additional reserves can create up to

Correct Answer
verified

A bank's assets equal its liabilities under

Correct Answer
verified

Correct Answer
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If people decide to hold more currency relative to deposits,the money supply

Correct Answer
verified

The New York Federal Reserve Bank

Correct Answer
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Speaking at a conference in 2002 as a member of the Board of Governors,Ben Bernanke

Correct Answer
verified

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

Correct Answer
verified

In the United States,currency holdings per person average about

Correct Answer
verified

Exam 29: The Monetary System

Correct AnswerverifiedShow Answer

Which of the following best illustrates the unit of account function of money?

Correct AnswerverifiedShow Answer

Travelers checks are included in

Correct AnswerverifiedShow Answer

Table 29-6. Bank of Springfield -Refer to Table 29-6.If the Fed requires a reserve ratio of 6 percent,then what quantity of excess reserves does the Bank of Springfield now hold?

Correct AnswerverifiedShow Answer

The money multiplier equals

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The federal funds rate is the interest rate that

Correct AnswerverifiedShow Answer

If the reserve ratio for all banks is 8 percent,then an additional $1,000 of reserves can increase the money supply by as much as

Correct AnswerverifiedShow Answer

If you deposit $100 of currency into a demand deposit at a bank,this action by itself

Correct AnswerverifiedShow Answer

Writing in The New York Times in 2004,economist Hal R.Varian asserted that dollars are valuable as a result of

Correct AnswerverifiedShow Answer

In a system of 100-percent-reserve banking,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the reserve ratio for all banks is 10 percent,$1,000 of additional reserves can create up to

Correct AnswerverifiedShow Answer

A bank's assets equal its liabilities under

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If people decide to hold more currency relative to deposits,the money supply

Correct AnswerverifiedShow Answer

The New York Federal Reserve Bank

Correct AnswerverifiedShow Answer

Speaking at a conference in 2002 as a member of the Board of Governors,Ben Bernanke

Correct AnswerverifiedShow Answer

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

Correct AnswerverifiedShow Answer

In the United States,currency holdings per person average about

Correct AnswerverifiedShow Answer

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