Question 1

Which of the following tools of monetary policy is used least often?

Accepted Answer

A)  open market operations
B)  setting the required reserve ratio
C)  setting the discount rate
D)  acting as a lender of last resort

Question 2

The primary tool the Federal Reserve uses to increase the money supply is

Accepted Answer

A)  printing more money.
B)  lowering the required reserve ratio.
C)  buying Treasury securities.
D)  lowering the discount rate.

Question 3

The quantity equation states that the

Accepted Answer

A)  money supply divided by the velocity of money equals the price level divided by real output.
B)  money supply times the velocity of money equals the price level times real output.
C)  money supply times the price level equals real output divided by the velocity of money.
D)  money supply times the price level equals real output times the velocity of money.

Question 4

Fiat money is generally issued by

Accepted Answer

A)  private banks.
B)  central banks.
C)  brokerage firms.
D)  major multinational corporations.

Question 5

If a person takes $100 from his/her piggy bank at home and puts it in his/her savings account,then M1 will ________ and M2 will ________.

Accepted Answer

A)  increase; increase
B)  not change; increase
C)  decrease; increase
D)  decrease; not change
E)  increase; decrease

Question 6

In the United States,currency includes

Accepted Answer

A)  gold,silver,and paper money.
B)  checking and savings account deposits.
C)  paper money and coins in circulation.
D)  traveler's checks.

Question 7

Banks can continue to make loans until their

Accepted Answer

A)  actual reserves equal their required reserves.
B)  excess reserves equal their required reserves.
C)  actual reserves equal their excess reserves.
D)  actual reserves equal their checking account balances.

Question 8

Suppose that the bank has the following balance sheet:
  If the required reserve ratio is 10 percent,what is the maximum the bank can loan out? Suppose the bank makes this loan and the borrower spends the money,which is deposited in a different bank.Show the impact of these transactions on the bank's balance sheet.

Accepted Answer

Since the required reserve ratio is 10 p...

Question 9

In countries that have experienced hyperinflation,what role have large government budget deficits played in causing the very high inflation rates?

Accepted Answer

The large government budget deficits lea...

Question 10

Consider the following T-account for National City Bank:  If the required reserve ratio is lowered to 8 percent,how much can National City loan out?

Accepted Answer

A)  $10,000
B)  $8,000
C)  $2,000
D)  $0

Question 11

Hyperinflation is caused by

Accepted Answer

A)  a constant increase in the money supply.
B)  a high rate of growth in the money supply.
C)  real GDP growing more rapidly than the money supply.
D)  the money supply growing more slowly than GDP.

Question 12

A bank is legally required to hold a fraction of its ________ as ________.

Accepted Answer

A)  deposits; required reserves
B)  deposits; excess reserves
C)  loans; excess reserves
D)  loans; required reserves

Question 13

To offset the effect of households and firms deciding to hold more of their money in checking account deposits and less in currency,the Federal Reserve could

Accepted Answer

A)  raise bank taxes.
B)  sell Treasury securities.
C)  raise government spending.
D)  lower the required reserve ratio.

Question 14

An increase in the discount rate ________ bank reserves and ________ the money supply if banks respond appropriately to the change in the rate.

Accepted Answer

A)  increases; increases
B)  increases; decreases
C)  decreases; increases
D)  decreases; decreases

Question 15

Economies where goods and services are traded directly for other goods and services are called ________ economies.

Accepted Answer

A)  trade
B)  barter
C)  direct
D)  seigniorage

Question 16

A good can serve as money only if

Accepted Answer

A)  government mandates that the good must be accepted in payment of debts.
B)  it is declared by authorities to be legal tender.
C)  it has intrinsic value or if it is backed by precious metals.
D)  citizens accept the good as a means of payment for transactions and debts.

Exam 14: Money,Banks,and the Federal Reserve System

To offset the effect of households and firms deciding to hold more of their money in checking account deposits and less in currency,the Federal Reserve could

Correct Answer
verified

Hyperinflation is caused by

Correct Answer
verified

Consider the following T-account for National City Bank: If the required reserve ratio is lowered to 8 percent,how much can National City loan out?

Correct Answer
verified

If a person takes $100 from his/her piggy bank at home and puts it in his/her savings account,then M1 will and M2 will .

Correct Answer
verified

An increase in the discount rate bank reserves and the money supply if banks respond appropriately to the change in the rate.

Correct Answer
verified

A good can serve as money only if

Correct Answer
verified

Fiat money is generally issued by

Correct Answer
verified

In countries that have experienced hyperinflation,what role have large government budget deficits played in causing the very high inflation rates?

Correct Answer
verified
The large government budget deficits lea...
View Answer

The quantity equation states that the

Correct Answer
verified

Economies where goods and services are traded directly for other goods and services are called ________ economies.

Correct Answer
verified

Banks can continue to make loans until their

Correct Answer
verified

In the United States,currency includes

Correct Answer
verified

A bank is legally required to hold a fraction of its as .

Correct Answer
verified

Which of the following tools of monetary policy is used least often?

Correct Answer
verified

The primary tool the Federal Reserve uses to increase the money supply is

Correct Answer
verified

Correct Answer
verified
Since the required reserve ratio is 10 p...
View Answer

Exam 14: Money,Banks,and the Federal Reserve System

To offset the effect of households and firms deciding to hold more of their money in checking account deposits and less in currency,the Federal Reserve could

Correct AnswerverifiedShow Answer

Hyperinflation is caused by

Correct AnswerverifiedShow Answer

Consider the following T-account for National City Bank: If the required reserve ratio is lowered to 8 percent,how much can National City loan out?

Correct AnswerverifiedShow Answer

If a person takes $100 from his/her piggy bank at home and puts it in his/her savings account,then M1 will ________ and M2 will ________.

Correct AnswerverifiedShow Answer

An increase in the discount rate ________ bank reserves and ________ the money supply if banks respond appropriately to the change in the rate.

Correct AnswerverifiedShow Answer

A good can serve as money only if

Correct AnswerverifiedShow Answer

Fiat money is generally issued by

Correct AnswerverifiedShow Answer

In countries that have experienced hyperinflation,what role have large government budget deficits played in causing the very high inflation rates?

Correct AnswerverifiedThe large government budget deficits lea...View AnswerShow Answer

The quantity equation states that the

Correct AnswerverifiedShow Answer

Economies where goods and services are traded directly for other goods and services are called ________ economies.

Correct AnswerverifiedShow Answer

Banks can continue to make loans until their

Correct AnswerverifiedShow Answer

In the United States,currency includes

Correct AnswerverifiedShow Answer

A bank is legally required to hold a fraction of its ________ as ________.

Correct AnswerverifiedShow Answer

Which of the following tools of monetary policy is used least often?

Correct AnswerverifiedShow Answer

The primary tool the Federal Reserve uses to increase the money supply is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedSince the required reserve ratio is 10 p...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If a person takes $100 from his/her piggy bank at home and puts it in his/her savings account,then M1 will and M2 will .

Correct Answer
verified

An increase in the discount rate bank reserves and the money supply if banks respond appropriately to the change in the rate.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The large government budget deficits lea...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

A bank is legally required to hold a fraction of its as .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Since the required reserve ratio is 10 p...
View Answer