Question 1

Which of the following might explain why the United States has so much currency per person?

Accepted Answer

A)   U.S. citizens are holding a lot of foreign currency.
B)   Currency may be a preferable store of wealth for criminals.
C)   People use credit and debit cards more frequently.
D)   All of the above help explain the abundance of currency.E) None of the above
F) A) and B)

Question 2

First National Bank (FNB)  has a reserve ratio of 20 percent, a required reserve ratio of 10 percent, and deposits of $1,000. If FNB receives an additional deposit of $100,

Accepted Answer

A)   then it has required reserves of $210 and holds excess reserves of $10.
B)   then it has required reserves of $10 and holds excess reserves of $20.
C)   then it has required reserves of $110 and holds excess reserves of $190.
D)   then it has required reserves of $110 and holds excess reserves of $0.E) A) and C)
F) A) and D)

Question 3

Monetary policy is made by the .

Accepted Answer

Federal Op...

Question 4

The money multiplier equals

Accepted Answer

A)   1/R, where R represents the quantity of reserves in the economy.
B)   1/R, where R represents the reserve ratio for all banks in the economy.
C)   1/(1+R) , where R represents the quantity of reserves in the economy.
D)   1/(1+R) , where R represents the reserve ratio for all banks in the economy.E) A) and B)
F) A) and D)

Question 5

If the reserve requirement is 5 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $10, then this bank

Accepted Answer

A)   must increase its required reserves by $10.
B)   will initially see its total reserves increase by $10.50.
C)   will be able to make new loans up to a maximum of $9.50.
D)   All of the above are correct.E) B) and D)
F) A) and B)

Question 6

Which of the following is a store of value?

Accepted Answer

A)   cash and stocks
B)   cash but not stocks
C)   stocks but not cash
D)   neither cash nor stocksE) A) and B)
F) A) and C)

Question 7

Which of the following is an example of barter?

Accepted Answer

A)   A parent gives a teenager a $10 bill in exchange for her babysitting services.
B)   A homeowner gives an exterminator a check for $50 in exchange for extermination services.
C)   A barber gives a plumber a haircut in exchange for the plumber fixing the barber's leaky faucet.
D)   All of the above are examples of barter.E) None of the above
F) B) and D)

Question 8

The "yardstick" people use to post prices and record debts is called

Accepted Answer

A)   a medium of exchange.
B)   a unit of account.
C)   a store of value.
D)   liquidity.E) C) and D)
F) A) and B)

Question 9

Sandra routinely uses currency to purchase her groceries. She is using money as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 10

Paper dollars

Accepted Answer

A)   are commodity money and gold coins are fiat money.
B)   are fiat money and gold coins are commodity money.
C)   and gold coins are both commodity monies.
D)   and gold coins are both fiat monies.E) A) and B)
F) All of the above

Question 11

As opposed to a payments system based on barter, a payments system based on money

Accepted Answer

A)   requires a double coincidence of wants.
B)   leads to less specialization.
C)   makes trades less costly.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 12

In an economy that relies upon barter,

Accepted Answer

A)   trade does not require a double coincidence of wants.
B)   scarce resources are allocated just as easily as they are in economies that do not rely upon barter.
C)   there is no item in the economy that is widely accepted in exchange for goods and services.
D)   All of the above are correct.E) None of the above
F) C) and D)

Question 13

If the reserve ratio is 4 percent, then the money multiplier is
A)  24.

Accepted Answer

A)   25.
B)   26.
C)   4.D) A) and C)
E) A) and A)

Question 14

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 D)

Question 15

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

Accepted Answer

A)   demand deposits.
B)   short-term bonds.
C)   credit cards.
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 16

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

Question 17

In a system of 100-percent-reserve banking,

Accepted Answer

A)   banks do not make loans.
B)   currency is the only form of money.
C)   deposits are banks' only assets.
D)   All of the above are correct.E) B) and D)
F) A) and D)

Question 18

The existence of money makes trade easier. How is it that money can also increase the standard of living?

Accepted Answer

The existence of money means the economy...

Question 19

What makes the New York Federal Reserve regional bank so important?

Accepted Answer

The president of the New York Federal Re...

Question 20

The members of the Federal Reserve's Board of Governors

Accepted Answer

A)   are elected to office by the public every fourteen years.
B)   are nominated by the U.S. Senate banking committee and confirmed by the U.S. house of representatives.
C)   are elected by bankers in each Federal Reserve Region.
D)   are appointed by the president of the U.S. and confirmed by the U.S. Senate.E) C) and D)
F) A) and B)

Exam 29: The Monetary System

Which of the following both increase the money supply?

Correct AnswerverifiedShow Answer

Sandra routinely uses currency to purchase her groceries. She is using money as a medium of exchange.

Correct AnswerverifiedShow Answer

First National Bank (FNB) has a reserve ratio of 20 percent, a required reserve ratio of 10 percent, and deposits of $1,000. If FNB receives an additional deposit of $100,

Correct AnswerverifiedShow Answer

As opposed to a payments system based on barter, a payments system based on money

Correct AnswerverifiedShow Answer

In an economy that relies upon barter,

Correct AnswerverifiedShow Answer

Which of the following might explain why the United States has so much currency per person?

Correct AnswerverifiedShow Answer

In a system of 100-percent-reserve banking,

Correct AnswerverifiedShow Answer

Which of the following is an example of barter?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the reserve requirement is 5 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $10, then this bank

Correct AnswerverifiedShow Answer

The "yardstick" people use to post prices and record debts is called

Correct AnswerverifiedShow Answer

The existence of money makes trade easier. How is it that money can also increase the standard of living?

Correct AnswerverifiedThe existence of money means the economy...View AnswerShow Answer

Paper dollars

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Which of the following is a store of value?

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Monetary policy is made by the .

Correct AnswerverifiedFederal Op...View AnswerShow Answer

The members of the Federal Reserve's Board of Governors

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If the reserve ratio is 4 percent, then the money multiplier is A) 24.

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The money multiplier equals

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What makes the New York Federal Reserve regional bank so important?

Correct AnswerverifiedThe president of the New York Federal Re...View AnswerShow Answer

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The existence of money means the economy...
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Federal Op...
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The president of the New York Federal Re...
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