Question 1

Suppose a bank is operating with a leverage ratio of 20.What is the maximum decrease in the market value of assets before the bank becomes insolvent?

Accepted Answer

A leverage ratio of 20 implies each perc...

Question 2

In a system of 100-percent-reserve banking,the purpose of a bank is to

Accepted Answer

A)   make loans to households.
B)   influence the money supply.
C)   give depositors a safe place to keep their money.
D)   buy and sell gold.E) None of the above
F) B) and D)

Question 3

Commodity money cannot be used as a unit of account.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following both increase the money supply?

Accepted Answer

A)   an increase in the discount rate and an increase in the interest rate on reserves
B)   an increase in the discount rate and a decrease in the interest rate on reserves
C)   a decrease in the discount rate and an increase in the interest rate on reserves
D)   a decrease in the discount rate and a decrease in the interest rate on reservesE) B) and C)
F) A) and C)

Question 5

What is meant by the term "lender of last resort?" In what circumstances might the Fed be a lender of last resort?

Accepted Answer

A "lender of last resort" is a lender to...

Question 6

How are Federal Reserve Board Governors selected?

Accepted Answer

The Fed Governors are appointed by the p...

Question 7

When we say that trade is roundabout we mean that

Accepted Answer

A)   people sometimes trade goods for goods.
B)   trades require a double coincidence of wants.
C)   currency is accepted primarily to make further trades.
D)   people must spend time searching for the products they wish to purchase.E) A) and B)
F) C) and D)

Question 8

Suppose banks desire to hold no excess reserves and that the Fed has set a reserve requirement of 10 percent.If you deposit $9,000 into First Jayhawk Bank,

Accepted Answer

A)   First Jayhawk's required reserves increase by $900.
B)   First Jayhawk will be able to lend out $8,100.
C)   First Jayhawk's assets and liabilities both will increase by $9,000.
D)   All of the above are correct.E) All of the above
F) B) and C)

Question 9

Fiat money

Accepted Answer

A)   has no intrinsic value.
B)   is backed by gold.
C)   is a medium of exchange but not a unit of account.
D)   is any close substitute for currency such as checkable deposits.E) C) and D)
F) B) and C)

Question 10

Most financial assets other than money function as

Accepted Answer

A)   a medium of exchange,a unit of account,and a store of value.
B)   a medium of exchange and a store of value,but not a unit of account.
C)   a store of value and a unit of account,but not a mediuim of exchange.
D)   a store of value,but not a unit of account nor a medium of exchangeE) B) and C)
F) B) and D)

Question 11

Which of the following statements is correct?

Accepted Answer

A)   All items that are included in M1 are included also in M2.
B)   All items that are included in M2 are included also in M1.
C)   Credit cards are included in both M1 and M2.
D)   Savings deposits are included in both M1 and M2.E) A) and D)
F) A) and C)

Question 12

In order for currency to be widely used as a medium of exchange,it is sufficient for the government to designate it as legal tender.

Accepted Answer

A) True 
 B)False

Question 13

You use U.S.currency to pay the owner of a restaurant for a delicious meal.The currency

Accepted Answer

A)   has no intrinsic value.The exchange is an example of barter
B)   has no intrinsic value.The exchange is not an example of barter.
C)   has intrinsic value.The exchange is not an example of barter .
D)   has intrinsic value.The exchange is not an example of barter.E) B) and C)
F) All of the above

Question 14

Table 16-1.The information in the table pertains to an imaginary economy.
 
-Refer to Table 16-1.What is the M1 money supply?

Accepted Answer

A)   $215 billion
B)   $216 billion
C)   $226 billion
D)   $301 billionE) A) and D)
F) A) and C)

Question 15

The president of each regional Federal Reserve Bank is appointed by

Accepted Answer

A)   the U.S.president with the approval of the Senate.
B)   the Board of Governors.
C)   the voting members of the Federal Open Market Committee.
D)   the board of directors of that regional Federal Reserve Bank.E) A) and B)
F) B) and D)

Question 16

Table 16-5.
 
-Refer to Table 16-5.Assume the Fed's reserve requirement is 9 percent and all banks besides the Bank of Pleasantville are exactly in compliance with the 9 percent requirement.Further assume that people hold only deposits and no currency.Starting from the situation as depicted by the T-account,if the Bank of Pleasantville decides to make new loans so as to end up with no excess reserves,then by how much does the money supply eventually increase?

Accepted Answer

A)   $555.00.
B)   $1,200.00.
C)   $1,777.78.
D)   $2,222.22.E) None of the above
F) A) and D)

Question 17

If the reserve requirement is 10 percent,which of the following pairs of changes would both allow a bank to lend out an additional $10,000?

Accepted Answer

A)   the Fed buys a $10,000 bond from the bank or someone deposits $10,000 in the bank
B)   the Fed buys a $10,000 bond from the bank or the Fed lends the bank $10,000
C)   the Fed sells a $10,000 bond to the bank or someone deposits $10,000 in the bank
D)   the Fed sells a $10,000 bond to the bank or the Fed lends the bank $10,000E) C) and D)
F) B) and C)

Question 18

If the reserve ratio is 12.5 percent,then $1,000 of additional reserves can create up to

Accepted Answer

A)   $7,000 of new money.
B)   $8,000 of new money.
C)   $11,500 of new money.
D)   $12,500 of new money.E) None of the above
F) A) and B)

Question 19

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.E) A) and D)
F) A) and B)

Question 20

Which of the following is not included in M1?

Accepted Answer

A)   a $5 bill in your wallet
B)   $100 in your checking account
C)   $500 in your savings account
D)   All of the above are included in M1.E) C) and D)
F) None of the above

Exam 29: The Monetary System

If the reserve requirement is 10 percent,which of the following pairs of changes would both allow a bank to lend out an additional $10,000?

Correct Answer
verified

Commodity money cannot be used as a unit of account.

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Table 16-1.The information in the table pertains to an imaginary economy. -Refer to Table 16-1.What is the M1 money supply?

Correct Answer
verified

In a system of 100-percent-reserve banking,

Correct Answer
verified

Correct Answer
verified

In a system of 100-percent-reserve banking,the purpose of a bank is to

Correct Answer
verified

What is meant by the term "lender of last resort?" In what circumstances might the Fed be a lender of last resort?

Correct Answer
verified
A "lender of last resort" is a lender to...
View Answer

Which of the following both increase the money supply?

Correct Answer
verified

If the reserve ratio is 12.5 percent,then $1,000 of additional reserves can create up to

Correct Answer
verified

How are Federal Reserve Board Governors selected?

Correct Answer
verified
The Fed Governors are appointed by the p...
View Answer

Suppose banks desire to hold no excess reserves and that the Fed has set a reserve requirement of 10 percent.If you deposit $9,000 into First Jayhawk Bank,

Correct Answer
verified

You use U.S.currency to pay the owner of a restaurant for a delicious meal.The currency

Correct Answer
verified

Which of the following is not included in M1?

Correct Answer
verified

Suppose a bank is operating with a leverage ratio of 20.What is the maximum decrease in the market value of assets before the bank becomes insolvent?

Correct Answer
verified
A leverage ratio of 20 implies each perc...
View Answer

When we say that trade is roundabout we mean that

Correct Answer
verified

Fiat money

Correct Answer
verified

Most financial assets other than money function as

Correct Answer
verified

The president of each regional Federal Reserve Bank is appointed by

Correct Answer
verified

In order for currency to be widely used as a medium of exchange,it is sufficient for the government to designate it as legal tender.

Correct Answer
verified

Exam 29: The Monetary System

If the reserve requirement is 10 percent,which of the following pairs of changes would both allow a bank to lend out an additional $10,000?

Correct AnswerverifiedShow Answer

Commodity money cannot be used as a unit of account.

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Table 16-1.The information in the table pertains to an imaginary economy. -Refer to Table 16-1.What is the M1 money supply?

Correct AnswerverifiedShow Answer

In a system of 100-percent-reserve banking,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In a system of 100-percent-reserve banking,the purpose of a bank is to

Correct AnswerverifiedShow Answer

What is meant by the term "lender of last resort?" In what circumstances might the Fed be a lender of last resort?

Correct AnswerverifiedA "lender of last resort" is a lender to...View AnswerShow Answer

Which of the following both increase the money supply?

Correct AnswerverifiedShow Answer

If the reserve ratio is 12.5 percent,then $1,000 of additional reserves can create up to

Correct AnswerverifiedShow Answer

How are Federal Reserve Board Governors selected?

Correct AnswerverifiedThe Fed Governors are appointed by the p...View AnswerShow Answer

Suppose banks desire to hold no excess reserves and that the Fed has set a reserve requirement of 10 percent.If you deposit $9,000 into First Jayhawk Bank,

Correct AnswerverifiedShow Answer

You use U.S.currency to pay the owner of a restaurant for a delicious meal.The currency

Correct AnswerverifiedShow Answer

Which of the following is not included in M1?

Correct AnswerverifiedShow Answer

Suppose a bank is operating with a leverage ratio of 20.What is the maximum decrease in the market value of assets before the bank becomes insolvent?

Correct AnswerverifiedA leverage ratio of 20 implies each perc...View AnswerShow Answer

When we say that trade is roundabout we mean that

Correct AnswerverifiedShow Answer

Fiat money

Correct AnswerverifiedShow Answer

Most financial assets other than money function as

Correct AnswerverifiedShow Answer

The president of each regional Federal Reserve Bank is appointed by

Correct AnswerverifiedShow Answer

In order for currency to be widely used as a medium of exchange,it is sufficient for the government to designate it as legal tender.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A "lender of last resort" is a lender to...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The Fed Governors are appointed by the p...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A leverage ratio of 20 implies each perc...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified