Question 1

A bank is legally required to hold a fraction of its ________ as ________.

Accepted Answer

A)  deposits; required reserves
B)  deposits; excess reserves
C)  loans; excess reserves
D)  loans; required reserves

Question 2

Suppose a bank has $100,000 in checking account deposits with no excess reserves and the required reserve ratio is 10 percent.If the Federal Reserve raises the required reserve ratio to 12 percent,then the bank will now have excess reserves of

Accepted Answer

A)  $12,000.
B)  $0.
C)  -$2,000.
D)  -$12,000.

Question 3

There is a strong link between changes in the money supply and inflation

Accepted Answer

A)  in both the short run and the long run.
B)  in neither the short run nor the long run.
C)  in the short run, but not in the long run.
D)  in the long run, but not in the short run.

Question 4

Banks keep ________ of checking deposits as reserves because on a typical day withdrawals ________ deposits.

Accepted Answer

A)  more than 100%; are much greater than
B)  exactly 100%; are about the same as
C)  less than 100%; are about the same as
D)  exactly 100%; are much greater than
E)  less than 100%; are much greater than

Question 5

To increase the money supply,the Federal Reserve could

Accepted Answer

A)  raise the discount rate.
B)  decrease income taxes.
C)  raise the required reserve ratio.
D)  conduct an open market purchase of Treasury securities.
E)  lower transfer payments.

Question 6

The Federal Open Market Committee consists of

Accepted Answer

A)  the seven member Board of Governors of the Federal Reserve.
B)  the 12 Federal Reserve Bank Presidents.
C)  five of the Federal Reserve Bank Presidents.
D)  the Board of Governors plus five of the Federal Reserve Bank Presidents.

Question 7

Credit card balances are

Accepted Answer

A)  part of M1.
B)  part of M2.
C)  part of M3.
D)  not part of the money supply.

Question 8

According to the quantity theory of money,deflation will occur if the

Accepted Answer

A)  money supply is less than real GDP.
B)  money supply is more than real GDP.
C)  money supply grows at a slower rate than real GDP.
D)  money supply grows at a faster rate than real GDP.

Question 9

Scenario 16-2
Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%.
-Refer to Scenario 16-2.As a result of Kristy's deposit,Bank A's required reserves increase by

Accepted Answer

A)  $2,000.
B)  $8,000.
C)  $10,000.
D)  $50,000.

Question 10

Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio is 20 percent.If the Federal Reserve reduces the required reserve ratio to 15 percent,then the bank will now have excess reserves of

Accepted Answer

A)  $0.
B)  $5 million.
C)  $15 million.
D)  $20 million.

Question 11

A bank will consider a car loan to a customer ________ and a customer's checking account to be ________.

Accepted Answer

A)  a liability; an asset
B)  an asset; a liability
C)  a liability; a liability
D)  an asset; an asset
E)  an asset; net worth

Question 12

Banks can continue to make loans until their

Accepted Answer

A)  actual reserves equal their required reserves.
B)  excess reserves equal their required reserves.
C)  actual reserves equal their excess reserves.
D)  actual reserves equal their checking account balances.

Question 13

Lowering the discount rate will

Accepted Answer

A)  decrease reserves, encourage banks to make fewer loans, and decrease the money supply.
B)  decrease reserves, encourage banks to make fewer loans, and increase the money supply.
C)  increase reserves, encourage banks to make more loans, and increase the money supply.
D)  increase reserves, encourage banks to make more loans, and decrease the money supply.

Question 14

In countries that have experienced hyperinflation,what role have large government budget deficits played in causing the very high inflation rates?

Accepted Answer

The large government budget deficits lea...

Question 15

Which of the following is not counted in M1?

Accepted Answer

A)  checking account balances
B)  credit card balances
C)  coins in circulation
D)  currency in circulation
E)  traveler's check balances

Question 16

If the required reserve ratio (RR) is 20 percent,the simple deposit multiplier is

Accepted Answer

A)  2.
B)  5.
C)  10.
D)  20.

Question 17

In 1980,one Zimbabwean dollar was worth 1.47 U.S.dollars.By the end of 2008,the exchange rate was one U.S.dollar to 2 billion Zimbabwean dollars.When an economy experiences rapid increases in the price level such as what occurred in Zimbabwe,the economy is said to experience

Accepted Answer

A)  stagflation.
B)  deflation.
C)  inflation.
D)  hyperinflation.

Question 18

If whole tomatoes were money,which of the following functions of money would be the hardest for tomatoes to satisfy?

Accepted Answer

A)  unit of account
B)  store of value
C)  certificate of gold
D)  medium of exchange

Question 19

Table 16-3
   Assets  Liabilities  Reserves $7,000 Deposits +$50,000 Loans  Net Worth +$46,000+$3,000\begin{array} { | c | c | } \hline 	ext { Assets } & 	ext { Liabilities } \\hline 	ext { Reserves } \quad \$ 7,000 & \begin{array} { c } 	ext { Deposits } \+ \$ 50,000\end{array} \\hline 	ext { Loans } & 	ext { Net Worth } \+ \$ 46,000 & + \$ 3,000 \\hline\end{array} Assets  Reserves $7,000 Loans +$46,000​ Liabilities  Deposits +$50,000​ Net Worth +$3,000​​ 
-Refer to Table 16-3.Consider the following simplified balance sheet for a bank: If the required reserve ratio is 10 percent,the bank can make a maximum loan of

Accepted Answer

A)  $2,000.
B)  $5,000.
C)  $6,300.
D)  $45,000.

Question 20

The seven members of the Board of Governors of the Federal Reserve are appointed by

Accepted Answer

A)  Congress.
B)  the President.
C)  the Governors of the States.
D)  leaders in the banking industry.
E)  the Treasury Department.

Exam 16: Money, banks, and the Federal Reserve System

Suppose a bank has $100,000 in checking account deposits with no excess reserves and the required reserve ratio is 10 percent.If the Federal Reserve raises the required reserve ratio to 12 percent,then the bank will now have excess reserves of

Correct Answer
verified

Correct Answer
verified

If the required reserve ratio (RR) is 20 percent,the simple deposit multiplier is

Correct Answer
verified

A bank is legally required to hold a fraction of its as .

Correct Answer
verified

Banks can continue to make loans until their

Correct Answer
verified

The Federal Open Market Committee consists of

Correct Answer
verified

There is a strong link between changes in the money supply and inflation

Correct Answer
verified

A bank will consider a car loan to a customer and a customer's checking account to be .

Correct Answer
verified

According to the quantity theory of money,deflation will occur if the

Correct Answer
verified

If whole tomatoes were money,which of the following functions of money would be the hardest for tomatoes to satisfy?

Correct Answer
verified

Which of the following is not counted in M1?

Correct Answer
verified

Credit card balances are

Correct Answer
verified

Banks keep of checking deposits as reserves because on a typical day withdrawals deposits.

Correct Answer
verified

The seven members of the Board of Governors of the Federal Reserve are appointed by

Correct Answer
verified

Lowering the discount rate will

Correct Answer
verified

In countries that have experienced hyperinflation,what role have large government budget deficits played in causing the very high inflation rates?

Correct Answer
verified
The large government budget deficits lea...
View Answer

Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio is 20 percent.If the Federal Reserve reduces the required reserve ratio to 15 percent,then the bank will now have excess reserves of

Correct Answer
verified

In 1980,one Zimbabwean dollar was worth 1.47 U.S.dollars.By the end of 2008,the exchange rate was one U.S.dollar to 2 billion Zimbabwean dollars.When an economy experiences rapid increases in the price level such as what occurred in Zimbabwe,the economy is said to experience

Correct Answer
verified

To increase the money supply,the Federal Reserve could

Correct Answer
verified

Scenario 16-2 Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. -Refer to Scenario 16-2.As a result of Kristy's deposit,Bank A's required reserves increase by

Correct Answer
verified

Exam 16: Money, banks, and the Federal Reserve System

Suppose a bank has $100,000 in checking account deposits with no excess reserves and the required reserve ratio is 10 percent.If the Federal Reserve raises the required reserve ratio to 12 percent,then the bank will now have excess reserves of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the required reserve ratio (RR) is 20 percent,the simple deposit multiplier is

Correct AnswerverifiedShow Answer

A bank is legally required to hold a fraction of its ________ as ________.

Correct AnswerverifiedShow Answer

Banks can continue to make loans until their

Correct AnswerverifiedShow Answer

The Federal Open Market Committee consists of

Correct AnswerverifiedShow Answer

There is a strong link between changes in the money supply and inflation

Correct AnswerverifiedShow Answer

A bank will consider a car loan to a customer ________ and a customer's checking account to be ________.

Correct AnswerverifiedShow Answer

According to the quantity theory of money,deflation will occur if the

Correct AnswerverifiedShow Answer

If whole tomatoes were money,which of the following functions of money would be the hardest for tomatoes to satisfy?

Correct AnswerverifiedShow Answer

Which of the following is not counted in M1?

Correct AnswerverifiedShow Answer

Credit card balances are

Correct AnswerverifiedShow Answer

Banks keep ________ of checking deposits as reserves because on a typical day withdrawals ________ deposits.

Correct AnswerverifiedShow Answer

The seven members of the Board of Governors of the Federal Reserve are appointed by

Correct AnswerverifiedShow Answer

Lowering the discount rate will

Correct AnswerverifiedShow Answer

In countries that have experienced hyperinflation,what role have large government budget deficits played in causing the very high inflation rates?

Correct AnswerverifiedThe large government budget deficits lea...View AnswerShow Answer

Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio is 20 percent.If the Federal Reserve reduces the required reserve ratio to 15 percent,then the bank will now have excess reserves of

Correct AnswerverifiedShow Answer

In 1980,one Zimbabwean dollar was worth 1.47 U.S.dollars.By the end of 2008,the exchange rate was one U.S.dollar to 2 billion Zimbabwean dollars.When an economy experiences rapid increases in the price level such as what occurred in Zimbabwe,the economy is said to experience

Correct AnswerverifiedShow Answer

To increase the money supply,the Federal Reserve could

Correct AnswerverifiedShow Answer

Scenario 16-2 Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. -Refer to Scenario 16-2.As a result of Kristy's deposit,Bank A's required reserves increase by

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

A bank is legally required to hold a fraction of its as .

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

A bank will consider a car loan to a customer and a customer's checking account to be .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Banks keep of checking deposits as reserves because on a typical day withdrawals deposits.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The large government budget deficits lea...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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