Question 1

The existence of money

Accepted Answer

A)   reduces specialization.
B)   makes trade easier.
C)   allows for barter.
D)   hinders production.E) A) and B)
F) None of the above

Question 2

In the months of November and December, people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays. As a result, other things the same, the money supply increases.

Accepted Answer

A) True 
 B)False

Question 3

Suppose the required reserve ratio is 20%. What is the maximum amount of total money supply that can be created from an initial deposit of $200? In general, why might the actual amount of total money creation be less than the maximum?

Accepted Answer

The money multiplier is the reciprocal o...

Question 4

The federal funds rate is the interest rate

Accepted Answer

A)   the Federal Reserve charges for loans it makes to the federal government.
B)   the Federal Reserve charges banks for short-term loans.
C)   banks charge each other for short-term loans of reserves.
D)   on newly issued one-year Treasury bonds.E) All of the above
F) B) and C)

Question 5

Table 29-3. An economy starts with $50,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $45,750. The T-account of the bank is shown below.
 
-Refer to Table 29-3. If all banks in the economy have the same reserve ratio as this bank, then an increase in reserves of $150 for this bank has the potential to increase deposits for all banks by

Accepted Answer

A)   $287.25.
B)   $1,614.71.
C)   $1,764.71.
D)   $2,000 or more.E) B) and C)
F) None of the above

Question 6

To increase the money supply, the Fed could

Accepted Answer

A)   sell government bonds.
B)   auction more loans to banks.
C)   increase the reserve requirement.
D)   None of the above is correct.E) A) and B)
F) B) and D)

Question 7

Suppose that in a country the total holdings of banks were as follows: required reserves = $45 million excess reserves = $15 million deposits = $750 million loans = $600 million
Treasury bonds = $90 million. Show that the balance sheet balances if these are the only assets and liabilities. Assuming that people hold no currency, what happens to each of these values if the central bank changes the reserve requirement ratio to 2%, banks still want to hold the same percentage of excess reserves, and banks don't change their holdings of Treasury bonds? How much does the money supply change by?

Accepted Answer

The only liability is deposits which equ...

Question 8

When the Federal Reserve conducts open-market operations to increase the money supply, it

Accepted Answer

A)   redeems Federal Reserve notes.
B)   buys government bonds from the public.
C)   raises the discount rate.
D)   decreases its lending to member banks.E) A) and D)
F) A) and B)

Question 9

A bank has $1000 in deposits and maintains a 12 percent reserve ratio. Its reserves are $ .

Accepted Answer

The answer of A bank has $1000 in deposits and...

Question 10

A problem that the Fed faces when it attempts to control the money supply is that

Accepted Answer

A)   the 100-percent-reserve banking system in the U.S. makes it difficult for the Fed to carry out its monetary policy.
B)   the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools.
C)   the Fed does not have a tool that it can use to change the money supply by either a small amount or a large amount.
D)   the Fed does not control the amount of money that households choose to hold as deposits in banks.E) All of the above
F) A) and B)

Question 11

The agency responsible for regulating the money supply in the United States is

Accepted Answer

A)   the Comptroller of the Currency.
B)   the U.S. Treasury.
C)   the Federal Reserve.
D)   the U.S. Bank.E) All of the above
F) B) and C)

Question 12

An open-market purchase

Accepted Answer

A)   increases the number of dollars and the number of bonds in the hands of the public.
B)   increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public.
C)   decreases the number of dollars and the number of bonds in the hands of the public.
D)   decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public.E) A) and B)
F) A) and C)

Question 13

You pay for cheese and bread from the deli with currency. Which function of money does this best illustrate?

Accepted Answer

A)   medium of exchange
B)   unit of account
C)   store of value
D)   liquidityE) All of the above
F) C) and D)

Question 14

All of the presidents of the regional Federal Reserve banks

Accepted Answer

A)   attend each FOMC meeting.
B)   have voting rights at each FOMC meeting.
C)   are appointed by the president of the U.S. and confirmed by the U.S. Senate.
D)   All of the above are correct.E) A) and B)
F) None of the above

Question 15

Consider five individuals with different occupations.  Which of the following pairs of individuals has a double coincidence of wants?

Accepted Answer

A)   Mary and Clark
B)   Clark and Nathan
C)   Nathan and Polly
D)   Polly and PaulE) All of the above
F) B) and C)

Question 16

If the federal funds rate were below the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Accepted Answer

A)   buying bonds. This buying would reduce reserves.
B)   buying bonds. This buying would increase reserves.
C)   selling bonds. This selling would reduce reserves.
D)   selling bonds. This selling would increase reserves.E) A) and D)
F) All of the above

Question 17

During the Great Depression in the early 1930s,

Accepted Answer

A)   bank runs closed many banks.
B)   the money supply rose sharply.
C)   the Fed decreased reserve requirements.
D)   both a and b are correct.E) A) and B)
F) A) and D)

Question 18

Suppose the Federal Reserve increases bank reserves and banks lend out some of these reserves, but at some point banks still have $5 million more they wish to lend out. If the reserve requirement is 10 percent, how much more money can banks create if they lend out the remaining amount?

Accepted Answer

A)   $55 million
B)   $50 million
C)   $45 million
D)   $40 millionE) All of the above
F) B) and D)

Question 19

Which of the following can the Fed do to change the money supply?

Accepted Answer

A)   change reserves or change the reserve ratio
B)   change reserves but not change the reserve ratio
C)   change the reserve ratio but not change the reserve ratio
D)   neither change reserves nor change the reserve ratioE) B) and C)
F) All of the above

Question 20

A double coincidence of wants

Accepted Answer

A)   is required when there is no item in an economy that is widely accepted in exchange for goods and services.
B)   is required in an economy that relies on barter.
C)   is a hindrance to the allocation of resources when it is required for trade.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Exam 21: The Monetary System

Which of the following can the Fed do to change the money supply?

Correct Answer
verified

To increase the money supply, the Fed could

Correct Answer
verified

The existence of money

Correct Answer
verified

Correct Answer
verified

When the Federal Reserve conducts open-market operations to increase the money supply, it

Correct Answer
verified

Suppose the Federal Reserve increases bank reserves and banks lend out some of these reserves, but at some point banks still have $5 million more they wish to lend out. If the reserve requirement is 10 percent, how much more money can banks create if they lend out the remaining amount?

Correct Answer
verified

Suppose the required reserve ratio is 20%. What is the maximum amount of total money supply that can be created from an initial deposit of $200? In general, why might the actual amount of total money creation be less than the maximum?

Correct Answer
verified
The money multiplier is the reciprocal o...
View Answer

If the federal funds rate were below the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Correct Answer
verified

Consider five individuals with different occupations. Which of the following pairs of individuals has a double coincidence of wants?

Correct Answer
verified

All of the presidents of the regional Federal Reserve banks

Correct Answer
verified

A bank has $1000 in deposits and maintains a 12 percent reserve ratio. Its reserves are $ .

Correct Answer
verified

An open-market purchase

Correct Answer
verified

You pay for cheese and bread from the deli with currency. Which function of money does this best illustrate?

Correct Answer
verified

Correct Answer
verified
The only liability is deposits which equ...
View Answer

In the months of November and December, people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays. As a result, other things the same, the money supply increases.

Correct Answer
verified

During the Great Depression in the early 1930s,

Correct Answer
verified

The agency responsible for regulating the money supply in the United States is

Correct Answer
verified

The federal funds rate is the interest rate

Correct Answer
verified

A problem that the Fed faces when it attempts to control the money supply is that

Correct Answer
verified

A double coincidence of wants

Correct Answer
verified

Exam 21: The Monetary System

Which of the following can the Fed do to change the money supply?

Correct AnswerverifiedShow Answer

To increase the money supply, the Fed could

Correct AnswerverifiedShow Answer

The existence of money

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the Federal Reserve conducts open-market operations to increase the money supply, it

Correct AnswerverifiedShow Answer

Suppose the Federal Reserve increases bank reserves and banks lend out some of these reserves, but at some point banks still have $5 million more they wish to lend out. If the reserve requirement is 10 percent, how much more money can banks create if they lend out the remaining amount?

Correct AnswerverifiedShow Answer

Suppose the required reserve ratio is 20%. What is the maximum amount of total money supply that can be created from an initial deposit of $200? In general, why might the actual amount of total money creation be less than the maximum?

Correct AnswerverifiedThe money multiplier is the reciprocal o...View AnswerShow Answer

If the federal funds rate were below the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Correct AnswerverifiedShow Answer

Consider five individuals with different occupations. Which of the following pairs of individuals has a double coincidence of wants?

Correct AnswerverifiedShow Answer

All of the presidents of the regional Federal Reserve banks

Correct AnswerverifiedShow Answer

A bank has $1000 in deposits and maintains a 12 percent reserve ratio. Its reserves are $ .

Correct AnswerverifiedShow Answer

An open-market purchase

Correct AnswerverifiedShow Answer

You pay for cheese and bread from the deli with currency. Which function of money does this best illustrate?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe only liability is deposits which equ...View AnswerShow Answer

In the months of November and December, people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays. As a result, other things the same, the money supply increases.

Correct AnswerverifiedShow Answer

During the Great Depression in the early 1930s,

Correct AnswerverifiedShow Answer

The agency responsible for regulating the money supply in the United States is

Correct AnswerverifiedShow Answer

The federal funds rate is the interest rate

Correct AnswerverifiedShow Answer

A problem that the Fed faces when it attempts to control the money supply is that

Correct AnswerverifiedShow Answer

A double coincidence of wants

Correct AnswerverifiedShow Answer

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

Correct Answer
verified
The money multiplier is the reciprocal o...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The only liability is deposits which equ...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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