Question 1

The money supply decreases if the Fed

Accepted Answer

A)   sells Treasury bonds. The larger the reserve requirement, the larger the decrease will be.
B)   sells Treasury bonds. The smaller the reserve requirement, the larger the decrease will be.
C)   buys Treasury bonds. The larger the reserve requirement, the larger the decrease will be.
D)   buys Treasury bonds. The smaller the reserve requirement, the larger the decrease will be.E) A) and B)
F) B) and C)

Question 2

Suppose a bank purchases $50 of government securities using funds from reserves. How much do bank assets change as a result of this transaction?

Accepted Answer

In this case, the value of bank assets d...

Question 3

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) A) and C)
F) A) and B)

Question 4

The Fed can directly protect a bank during a bank run by

Accepted Answer

A)   increasing reserve requirements.
B)   selling government bonds to the bank.
C)   lending reserves to the bank.
D)   doing any of the above.E) B) and D)
F) A) and B)

Question 5

When you purchase school supplies at the book store using cash, you are using money as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 6

Economists call an institution designed to oversee the banking system and regulate the quantity of money in the economy

Accepted Answer

A)   a central bank.
B)   a charter bank.
C)   a national bank.
D)   a state bank.E) A) and D)
F) C) and D)

Question 7

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.E) A) and C)
F) B) and C)

Question 8

Money

Accepted Answer

A)   is more efficient than barter.
B)   makes trades easier.
C)   allows greater specialization.
D)   All of the above are correct.E) A) and D)
F) B) and C)

Question 9

Currency includes

Accepted Answer

A)   paper bills and coins.
B)   demand deposits.
C)   credit cards.
D)   Both a)  and b)  are correct.E) B) and C)
F) All of the above

Question 10

M1 includes

Accepted Answer

A)   small time deposits.
B)   savings deposits.
C)   other checkable deposits.
D)   money market mutual funds.E) B) and C)
F) A) and B)

Question 11

Which of the following can banks use to borrow from the Federal Reserve?

Accepted Answer

A)   the discount window or the term auction facility
B)   the discount window but not the term auction facility
C)   the term auction facility but not the discount window
D)   Banks cannot borrow from the Federal Reserve, only the government can.E) None of the above
F) All of the above

Question 12

Treasury Bonds are

Accepted Answer

A)   liquid, but not a store of value.
B)   a store of value, but not liquid.
C)   both liquid and a store of value.
D)   neither liquid nor a store of value.E) A) and D)
F) C) and D)

Question 13

The Fed sets the interest that borrowers pay on loans from

Accepted Answer

A)   the discount window and the term auction facility
B)   the discount window but not the term auction facility
C)   the term auction facility but not the discount window
D)   neither the discount window nor the term auction facilityE) A) and B)
F) All of the above

Question 14

Scenario 29-1.
The monetary policy of Namdian is determined by the Namdian Central Bank. The local currency is the dia. Namdian banks collectively hold 100 million dias of required reserves, 25 million dias of excess reserves, 250 million dias of Namdian Treasury Bonds, and their customers hold 1,000 million dias of deposits. Namdians 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 Namdia loaned the banks of Namdia 5 million dias. 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 Namdia change?

Accepted Answer

A)   60 million dias
B)   50 million dias
C)   40 million dias
D)   None of the above is correct.E) C) and D)
F) A) and B)

Question 15

Because of the multiple tools at its disposal, the Fed can control the money supply very precisely.

Accepted Answer

A) True 
 B)False

Question 16

When colonists in Virginia used tobacco as money, their money

Accepted Answer

A)   was commodity money.
B)   had no intrinsic value.
C)   was fiat money.
D)   had no store of value.E) All of the above
F) B) and D)

Question 17

Which of the following is included in M2 but not in M1?

Accepted Answer

A)   demand deposits
B)   corporate bonds
C)   large time deposits
D)   money market mutual fundsE) A) and B)
F) None of the above

Question 18

What is the change in the money supply when the Fed purchases $100 worth of bonds in a 100-percent-reserve banking system?

Accepted Answer

The answer of What is the change in the money...

Question 19

Money market mutual funds are included in

Accepted Answer

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

Question 20

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.E) C) and D)
F) None of the above

Exam 16: The Monetary System

When colonists in Virginia used tobacco as money, their money

Correct Answer
verified

The Fed can directly protect a bank during a bank run by

Correct Answer
verified

The New York Federal Reserve Bank

Correct Answer
verified

Fiat money

Correct Answer
verified

The money supply decreases if the Fed

Correct Answer
verified

Which of the following can banks use to borrow from the Federal Reserve?

Correct Answer
verified

Currency includes

Correct Answer
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M1 includes

Correct Answer
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Treasury Bonds are

Correct Answer
verified

The Fed sets the interest that borrowers pay on loans from

Correct Answer
verified

Correct Answer
verified

Because of the multiple tools at its disposal, the Fed can control the money supply very precisely.

Correct Answer
verified

Economists call an institution designed to oversee the banking system and regulate the quantity of money in the economy

Correct Answer
verified

Money

Correct Answer
verified

When you purchase school supplies at the book store using cash, you are using money as a medium of exchange.

Correct Answer
verified

Suppose a bank purchases $50 of government securities using funds from reserves. How much do bank assets change as a result of this transaction?

Correct Answer
verified
In this case, the value of bank assets d...
View Answer

Money market mutual funds are included in

Correct Answer
verified

Which of the following is included in M2 but not in M1?

Correct Answer
verified

Correct Answer
verified

What is the change in the money supply when the Fed purchases $100 worth of bonds in a 100-percent-reserve banking system?

Correct Answer
verified

Exam 16: The Monetary System

When colonists in Virginia used tobacco as money, their money

Correct AnswerverifiedShow Answer

The Fed can directly protect a bank during a bank run by

Correct AnswerverifiedShow Answer

The New York Federal Reserve Bank

Correct AnswerverifiedShow Answer

Fiat money

Correct AnswerverifiedShow Answer

The money supply decreases if the Fed

Correct AnswerverifiedShow Answer

Which of the following can banks use to borrow from the Federal Reserve?

Correct AnswerverifiedShow Answer

Currency includes

Correct AnswerverifiedShow Answer

M1 includes

Correct AnswerverifiedShow Answer

Treasury Bonds are

Correct AnswerverifiedShow Answer

The Fed sets the interest that borrowers pay on loans from

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Because of the multiple tools at its disposal, the Fed can control the money supply very precisely.

Correct AnswerverifiedShow Answer

Economists call an institution designed to oversee the banking system and regulate the quantity of money in the economy

Correct AnswerverifiedShow Answer

Money

Correct AnswerverifiedShow Answer

When you purchase school supplies at the book store using cash, you are using money as a medium of exchange.

Correct AnswerverifiedShow Answer

Suppose a bank purchases $50 of government securities using funds from reserves. How much do bank assets change as a result of this transaction?

Correct AnswerverifiedIn this case, the value of bank assets d...View AnswerShow Answer

Money market mutual funds are included in

Correct AnswerverifiedShow Answer

Which of the following is included in M2 but not in M1?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What is the change in the money supply when the Fed purchases $100 worth of bonds in a 100-percent-reserve banking system?

Correct AnswerverifiedShow Answer

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In this case, the value of bank assets d...
View Answer

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Correct Answer
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