Question 1

Credit cards are a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 2

Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the

Accepted Answer

A)   money supply to fall. To reduce the impact of this the Fed could sell Treasury bonds.
B)   money supply to fall. To reduce the impact of this the Fed could buy Treasury bonds.
C)   money supply to rise. To reduce the impact of this the Fed could sell Treasury bonds.
D)   money supply to rise. To reduce the impact of this the Fed could buy Treasury bonds.

Question 3

Table 29-4.
 
-Refer to Table 29-4. Starting from the situation as depicted by the T-account, if someone deposits $500 into the First Bank of Fairfield, and if the bank makes new loans so as to keep its reserve ratio unchanged, then the amount of new loans that it makes will be

Accepted Answer

A)   $40.
B)   $437.50.
C)   $71.42.
D)   $428.57.

Question 4

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 5

List the two main functions performed by the Fed?

Accepted Answer

The Fed performs two main func...

Question 6

Credit card limits 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 7

A bank has $500,000 in deposits and $475,000 in loans. It has loaned out all it can. It has a reserve ratio of

Accepted Answer

A)   2.5 percent.
B)   5 percent.
C)   9.5 percent.
D)   25 percent.

Question 8

Which of the following is not correct?

Accepted Answer

A)   The president of the New York Federal Reserve bank is the only Federal Reserve Regional Bank President who gets to vote at every meeting of the Federal Open Market Committee.
B)   The Fed's policy decisions influence the economy's rate of inflation in the short run and the economy's employment and production in the long run.
C)   The Fed's primary monetary policy tool is open­market operations.
D)   All of the above are correct.

Question 9

If the reserve ratio is 8 percent, then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

Accepted Answer

A)   $48,000.
B)   $75,000.
C)   $55,200.
D)   $10,800.

Question 10

Sam wants to trade eggs for sausage. Sally wants to trade sausage for eggs. Sam and Sally have a double- coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 11

If the reserve ratio is 10 percent, the money multiplier is

Accepted Answer

A)   100.
B)   10.
C)   9/10.
D)   1/10.

Question 12

A bank has $8,000 in deposits and $6,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is

Accepted Answer

A)   2.5 percent.
B)   33.3 percent.
C)   25 percent.
D)   75 percent.

Question 13

During recessions, banks typically choose to hold more excess reserves relative to their deposits. This action

Accepted Answer

A)   increases the money multiplier and increases the money supply.
B)   decreases the money multiplier and decreases the money supply.
C)   does not change the money multiplier, but increases the money supply.
D)   does not change the money multiplier, but decreases the money supply.

Question 14

Table 29-2.
The information in the table pertains to an imaginary economy.
 
-Refer to Table 29-2. What is the M1 money supply?

Accepted Answer

A)   $705 billion
B)   $570 billion
C)   $505 billion
D)   $585 billion

Question 15

Dollar bills, rare paintings, and emerald necklaces are all

Accepted Answer

A)   media of exchange.
B)   units of account.
C)   stores of value.
D)   All of the above are correct.

Question 16

The set of items that serve as media of exchange clearly includes

Accepted Answer

A)   balances that lie behind debit cards.
B)   demand deposits.
C)   other checkable deposits.
D)   All of the above are correct.

Question 17

The reserve requirement is 4 percent, banks hold no excess reserves and people hold no currency. If the Fed sells $10,000 worth of bonds, what happens to the money supply?

Accepted Answer

A)   it increases by $250,000
B)   it increases by $200,000
C)   it decreases by $200,000
D)   it decreases by $250,000

Question 18

What are the functions of money?

Accepted Answer

Medium of exchange, ...

Question 19

Which of the following individuals serve a four-year term?

Accepted Answer

A)   the members of the Board of Governors
B)   the Chair of the Board of Governors
C)   the members of the FOMC
D)   All of the above are correct.

Question 20

Table 29-6.
 
-Refer to Table 29-6. If the Fed's reserve requirement is 5 percent, then what quantity of excess reserves does the Bank of Pleasantville now hold?

Accepted Answer

A)   $500
B)   $250
C)   $2,000
D)   $3,600

Exam 21: The Monetary System

If the reserve ratio is 10 percent, the money multiplier is

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Credit card limits are included in

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The set of items that serve as media of exchange clearly includes

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Table 29-4. -Refer to Table 29-4. Starting from the situation as depicted by the T-account, if someone deposits $500 into the First Bank of Fairfield, and if the bank makes new loans so as to keep its reserve ratio unchanged, then the amount of new loans that it makes will be

Correct AnswerverifiedShow Answer

A bank has $500,000 in deposits and $475,000 in loans. It has loaned out all it can. It has a reserve ratio of

Correct AnswerverifiedShow Answer

During recessions, banks typically choose to hold more excess reserves relative to their deposits. This action

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Sam wants to trade eggs for sausage. Sally wants to trade sausage for eggs. Sam and Sally have a double- coincidence of wants.

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Which of the following individuals serve a four-year term?

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Table 29-2. The information in the table pertains to an imaginary economy. -Refer to Table 29-2. What is the M1 money supply?

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Table 29-6. -Refer to Table 29-6. If the Fed's reserve requirement is 5 percent, then what quantity of excess reserves does the Bank of Pleasantville now hold?

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List the two main functions performed by the Fed?

Correct AnswerverifiedThe Fed performs two main func...View AnswerShow Answer

Which of the following is not correct?

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Credit cards are a medium of exchange.

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

Correct AnswerverifiedShow Answer

A bank has $8,000 in deposits and $6,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is

Correct AnswerverifiedShow Answer

The reserve requirement is 4 percent, banks hold no excess reserves and people hold no currency. If the Fed sells $10,000 worth of bonds, what happens to the money supply?

Correct AnswerverifiedShow Answer

If the reserve ratio is 8 percent, then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

Correct AnswerverifiedShow Answer

Dollar bills, rare paintings, and emerald necklaces are all

Correct AnswerverifiedShow Answer

What are the functions of money?

Correct AnswerverifiedMedium of exchange, ...View AnswerShow Answer

Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the

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The Fed performs two main func...
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Medium of exchange, ...
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