Question 1

Roundabout trade decreases production.

Accepted Answer

A) True 
 B)False

Question 2

Credit cards

Accepted Answer

A)  defer payments.
B)  are a store of value.
C)  have led to wider use of currency.
D)  are part of the money supply.

Question 3

In a fractional reserve economy where the required reserve ratio is 10%, must it be the case that an initial deposit of $100 increases the total money supply by $1,000? Explain.

Accepted Answer

No, this is not necessarily the case.It ...

Question 4

Consider four survivors on an island.  Which of the following pairs of survivors has a double-coincidence of wants?

Accepted Answer

A)  Ron with Alice, and Ron with Lee
B)  Alice with Lee
C)  Ron with Raymond
D)  None of the above are correct.

Question 5

According to economists, "money" means the same thing as "wealth".

Accepted Answer

A) True 
 B)False

Question 6

The most common method employed by the Fed to increase the money supply is the

Accepted Answer

A)  sale of U.S. government bonds.
B)  purchase of U.S. government bonds.
C)  sale of gold.
D)  increase of the federal debt ceiling.

Question 7

The measure of the money stock called M1 includes

Accepted Answer

A)  wealth held by people in their checking accounts.
B)  wealth held by people in their savings accounts.
C)  wealth held by people in money market mutual funds.
D)  everything that is included in M2 plus some additional items.

Question 8

The Fed purchases $200 worth of government bonds from the public. The reserve requirement is 12.5 percent, people hold no currency, and the banking system keeps no excess reserves. The U.S. money supply eventually increases by

Accepted Answer

A)  $25.
B)  between $200 and $300.
C)  $1,600.
D)  $2,500.

Question 9

When the Fed conducts open-market purchases,

Accepted Answer

A)  banks buy Treasury securities from Fed, which increases the money supply.
B)  banks buy Treasury securities from the Fed, which decreases the money supply.
C)  it buys Treasury securities, which increases the money supply.
D)  it buys Treasury securities, which decreases the money supply.

Question 10

The primary difference between commodity money and fiat money is that

Accepted Answer

A)  commodity money is a medium of exchange but fiat money is not.
B)  fiat money is a medium of exchange but commodity money is not.
C)  commodity money has intrinsic value but fiat money does not.
D)  fiat money has intrinsic value but commodity money does not.

Question 11

If the Fed decreases reserve requirements, the money supply will increase.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is correct?

Accepted Answer

A)  The Fed can control the money supply precisely.
B)  The amount of money in the economy does not depend on the behavior of depositors.
C)  The amount of money in the economy depends in part on the behavior of banks.
D)  None of the above is correct.

Question 13

If the reserve ratio is 15 percent, the money multiplier is

Accepted Answer

A)  7.7.
B)  6.7.
C)  5.7.
D)  15.

Question 14

Over one time horizon or another, Fed policy decisions influence

Accepted Answer

A)  inflation and employment.
B)  inflation but not employment.
C)  employment but not inflation.
D)  neither inflation nor employment.

Question 15

Gary's wealth is $1 million. Economists would say that Gary has $1 million worth of money.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is correct?

Accepted Answer

A)  A bank's deposits at the Federal Reserve counts as part of the bank's reserves. The Federal Reserve pays interest on these deposits.
B)  A bank's deposits at the Federal Reserve counts as part of the bank's reserves. The Federal Reserve does not pay interest on these deposits.
C)  A bank's deposits at the Federal Reserve does not count as part of the bank's reserves. The Federal Reserve pays interest on these deposits.
D)  A bank's deposits at the Federal Reserve does not count as part of the bank's reserves. The Federal Reserve does not pay interest on these deposits.

Question 17

Table 29-5. 
-Refer to Table 29-5. Suppose the bank faces a reserve requirement of 10 percent. Starting from the situation as depicted by the T-account, a customer deposits an additional $60,000 into his account at the bank. If the bank takes no other action it will

Accepted Answer

A)  have $64,000 in excess reserves.
B)  have $4,000 in excess reserves.
C)  be in a position to make new loans equal to $6,000
D)  None of the above is correct.

Question 18

The federal funds rate is the interest rate that

Accepted Answer

A)  banks charge one another for loans.
B)  banks charge the Fed for loans.
C)  the Fed charges banks for loans.
D)  the Fed charges Congress for loans.

Question 19

When we measure and record economic value, we use money as the

Accepted Answer

A)  liquid asset.
B)  medium of exchange.
C)  unit of account.
D)  store of value.

Question 20

Which of the following is a store of value?

Accepted Answer

A)  currency
B)  U.S. government bonds
C)  fine art
D)  All of the above are correct.

Exam 29: The Monetary System

When we measure and record economic value, we use money as the

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The primary difference between commodity money and fiat money is that

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Roundabout trade decreases production.

Correct AnswerverifiedShow Answer

Table 29-5. -Refer to Table 29-5. Suppose the bank faces a reserve requirement of 10 percent. Starting from the situation as depicted by the T-account, a customer deposits an additional $60,000 into his account at the bank. If the bank takes no other action it will

Correct AnswerverifiedShow Answer

According to economists, "money" means the same thing as "wealth".

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The measure of the money stock called M1 includes

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The federal funds rate is the interest rate that

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If the reserve ratio is 15 percent, the money multiplier is

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The Fed purchases $200 worth of government bonds from the public. The reserve requirement is 12.5 percent, people hold no currency, and the banking system keeps no excess reserves. The U.S. money supply eventually increases by

Correct AnswerverifiedShow Answer

Consider four survivors on an island. Which of the following pairs of survivors has a double-coincidence of wants?

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The most common method employed by the Fed to increase the money supply is the

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Which of the following is a store of value?

Correct AnswerverifiedShow Answer

When the Fed conducts open-market purchases,

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Credit cards

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Gary's wealth is $1 million. Economists would say that Gary has $1 million worth of money.

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Over one time horizon or another, Fed policy decisions influence

Correct AnswerverifiedShow Answer

In a fractional reserve economy where the required reserve ratio is 10%, must it be the case that an initial deposit of $100 increases the total money supply by $1,000? Explain.

Correct AnswerverifiedNo, this is not necessarily the case.It ...View AnswerShow Answer

Which of the following is correct?

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If the Fed decreases reserve requirements, the money supply will increase.

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No, this is not necessarily the case.It ...
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