Question 1

Members of the Board of Governors are appointed by the president of the U.S. and confirmed by the U.S. Senate.

Accepted Answer

A) True 
 B)False

Question 2

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Accepted Answer

Commodity money has "intrinsic value," o...

Question 3

If the money multiplier is 3 and the Fed buys $50,000 worth of bonds, what happens to the money supply?

Accepted Answer

A)   it increases by $100,000
B)   it increases by $150,000
C)   it decreases by $100,000
D)   it decreases by $200,000E) B) and D)
F) All of the above

Question 4

If the Federal Open Market Committee decides to decrease the money supply, it will

Accepted Answer

A)   sell government bonds.
B)   purchase corporate bonds.
C)   purchase government bonds.
D)   reduce interest rates.E) B) and C)
F) A) and D)

Question 5

Describe how the use of leverage affects the impact of bank investments.

Accepted Answer

Leverage amplifies the impact from chang...

Question 6

The Federal Reserve primarily uses open-market operations to change the money supply.

Accepted Answer

A) True 
 B)False

Question 7

To decrease the money supply, the Fed could

Accepted Answer

A)   sell government bonds.
B)   increase the discount rate.
C)   increase the reserve requirement.
D)   All of the above are correct.E) All of the above
F) C) and D)

Question 8

A decrease in the money supply might indicate that the Fed had

Accepted Answer

A)   purchased bonds to increase banks reserves.
B)   purchased bonds to decrease banks reserves.
C)   sold bonds to increase banks reserves.
D)   sold bonds to decrease banks reserves.E) A) and D)
F) All of the above

Question 9

Suppose a bank is operating with a leverage rate of 10. A 6 percent increase in the value of assets

Accepted Answer

A)   will reduce liabilities by 6 percent.
B)   will result in a 60 percent increase in owner's equity.
C)   will result in a 60percent decrease in owner's equity.
D)   will reduce liabilities by 10 percent.E) A) and C)
F) None of the above

Question 10

You believe the dollars you have today will be accepted in the future in exchange for goods and services. Which function of money does this illustrate?

Accepted Answer

The answer of You believe the dollars you have today...

Question 11

The banking system currently has $10 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the Fed raises the reserve requirement to 12.5 percent and at the same time buys $1 billion worth of bonds, then by how much does the money supply change?

Accepted Answer

A)   It falls by $12 billion.
B)   It falls by $19 billion.
C)   It falls by $21 billion.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 12

One of the features of money is its store of value. However, most people do not hold their wealth as currency. Given that currency is the most liquid type of asset, why don't people hold all their wealth as currency?

Accepted Answer

Currency is not a perfect store of value...

Question 13

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

Accepted Answer

A)   currency
B)   demand deposits
C)   savings deposits
D)   All of the above are included in both M1 and M2.E) B) and C)
F) All of the above

Question 14

Other things the same, if banks decide to hold a smaller part of their deposits as excess reserves, the money supply will fall.

Accepted Answer

A) True 
 B)False

Question 15

Explain how each of the following changes the money supply.
a. the Fed buys bonds
b. the Fed auctions credit
c. the Fed raises the discount rate
d. the Fed raises the reserve requirement

Accepted Answer

The answer of Explain how each of the following changes...

Question 16

If the reserve ratio is 100-percent, then a new deposit of $1000 into a bank account

Accepted Answer

A)   eventually increases the money supply by $1000.
B)   leaves the size of the money supply unchanged.
C)   eventually decreases the size of the money supply by $1000.
D)   eventually increases the money supply by $2000.E) None of the above
F) B) and D)

Question 17

Which list ranks assets from most to least liquid?

Accepted Answer

A)   money, bonds, cars, houses
B)   money, cars, houses, bonds
C)   bonds, money, cars, houses
D)   bonds, cars, money, housesE) B) and C)
F) A) and B)

Question 18

What are the functions of money?

Accepted Answer

Medium of exchange, ...

Question 19

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) B) and D)
F) B) and C)

Question 20

Table 29-6.
 
-Refer to Table 29-6. Assume there is a reserve requirement and the Bank of Pleasantville is exactly in compliance with that requirement. Assume the same is true for all other banks. Lastly, assume people hold only deposits and no currency. What is the money multiplier?

Accepted Answer

A)   6
B)   16.7
C)   15.6
D)   6.4E) C) and D)
F) B) and C)

Exam 16: The Monetary System

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

The Federal Reserve primarily uses open-market operations to change the money supply.

Correct Answer
verified

If the money multiplier is 3 and the Fed buys $50,000 worth of bonds, what happens to the money supply?

Correct Answer
verified

You believe the dollars you have today will be accepted in the future in exchange for goods and services. Which function of money does this illustrate?

Correct Answer
verified

A decrease in the money supply might indicate that the Fed had

Correct Answer
verified

Members of the Board of Governors are appointed by the president of the U.S. and confirmed by the U.S. Senate.

Correct Answer
verified

Suppose a bank is operating with a leverage rate of 10. A 6 percent increase in the value of assets

Correct Answer
verified

To decrease the money supply, the Fed could

Correct Answer
verified

Describe how the use of leverage affects the impact of bank investments.

Correct Answer
verified
Leverage amplifies the impact from chang...
View Answer

One of the features of money is its store of value. However, most people do not hold their wealth as currency. Given that currency is the most liquid type of asset, why don't people hold all their wealth as currency?

Correct Answer
verified
Currency is not a perfect store of value...
View Answer

If the reserve ratio is 100-percent, then a new deposit of $1000 into a bank account

Correct Answer
verified

Other things the same, if banks decide to hold a smaller part of their deposits as excess reserves, the money supply will fall.

Correct Answer
verified

If the Federal Open Market Committee decides to decrease the money supply, it will

Correct Answer
verified

Table 29-6. -Refer to Table 29-6. Assume there is a reserve requirement and the Bank of Pleasantville is exactly in compliance with that requirement. Assume the same is true for all other banks. Lastly, assume people hold only deposits and no currency. What is the money multiplier?

Correct Answer
verified

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Correct Answer
verified
Commodity money has "intrinsic value," o...
View Answer

Which list ranks assets from most to least liquid?

Correct Answer
verified

What are the functions of money?

Correct Answer
verified
Medium of exchange, ...
View Answer

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

Correct Answer
verified

Explain how each of the following changes the money supply. a. the Fed buys bonds b. the Fed auctions credit c. the Fed raises the discount rate d. the Fed raises the reserve requirement

Correct Answer
verified

Exam 16: The Monetary System

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

The Federal Reserve primarily uses open-market operations to change the money supply.

Correct AnswerverifiedShow Answer

If the money multiplier is 3 and the Fed buys $50,000 worth of bonds, what happens to the money supply?

Correct AnswerverifiedShow Answer

You believe the dollars you have today will be accepted in the future in exchange for goods and services. Which function of money does this illustrate?

Correct AnswerverifiedShow Answer

A decrease in the money supply might indicate that the Fed had

Correct AnswerverifiedShow Answer

Members of the Board of Governors are appointed by the president of the U.S. and confirmed by the U.S. Senate.

Correct AnswerverifiedShow Answer

Suppose a bank is operating with a leverage rate of 10. A 6 percent increase in the value of assets

Correct AnswerverifiedShow Answer

To decrease the money supply, the Fed could

Correct AnswerverifiedShow Answer

Describe how the use of leverage affects the impact of bank investments.

Correct AnswerverifiedLeverage amplifies the impact from chang...View AnswerShow Answer

One of the features of money is its store of value. However, most people do not hold their wealth as currency. Given that currency is the most liquid type of asset, why don't people hold all their wealth as currency?

Correct AnswerverifiedCurrency is not a perfect store of value...View AnswerShow Answer

If the reserve ratio is 100-percent, then a new deposit of $1000 into a bank account

Correct AnswerverifiedShow Answer

Other things the same, if banks decide to hold a smaller part of their deposits as excess reserves, the money supply will fall.

Correct AnswerverifiedShow Answer

If the Federal Open Market Committee decides to decrease the money supply, it will

Correct AnswerverifiedShow Answer

Table 29-6. -Refer to Table 29-6. Assume there is a reserve requirement and the Bank of Pleasantville is exactly in compliance with that requirement. Assume the same is true for all other banks. Lastly, assume people hold only deposits and no currency. What is the money multiplier?

Correct AnswerverifiedShow Answer

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Correct AnswerverifiedCommodity money has "intrinsic value," o...View AnswerShow Answer

Which list ranks assets from most to least liquid?

Correct AnswerverifiedShow Answer

What are the functions of money?

Correct AnswerverifiedMedium of exchange, ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Explain how each of the following changes the money supply. a. the Fed buys bonds b. the Fed auctions credit c. the Fed raises the discount rate d. the Fed raises the reserve requirement

Correct AnswerverifiedShow Answer

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
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Leverage amplifies the impact from chang...
View Answer

Correct Answer
verified
Currency is not a perfect store of value...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Commodity money has "intrinsic value," o...
View Answer

Correct Answer
verified

Correct Answer
verified
Medium of exchange, ...
View Answer

Correct Answer
verified

Correct Answer
verified