Question 1

The Second National Bank of Townville has $400,000 in checking deposits, $125,000 in savings deposits, $500,000 in loans, $20,000 in its reserve account at the Fed, and $5,000 of currency in its vault. What is the amount of its reserves?

Accepted Answer

Reserves include the bank's de...

Question 2

Which statement about money is most correct?

Accepted Answer

A)  Money is a new invention and only includes dollar bills and coins.
B)  Money is a new invention and can include anything that is accepted as a means of payment.
C)  Money has been around for a long time and can include anything that is accepted as a means of payment.
D)  Money has been around for a long time and only includes dollar bills and coins.
E)  Money has been around for a long time and only includes checking and savings accounts.

Question 3

Actual reserves are equal to

Accepted Answer

A)  minimum balances plus desired reserves.
B)  required reserves plus fractional deposits.
C)  excess reserves plus liabilities.
D)  desired reserves plus excess reserves.
E)  government securities plus cash in the bank's vault.

Question 4

A commercial bank's main goal is to

Accepted Answer

A)  provide loans to its customers.
B)  maximize the wealth of its stockholders.
C)  help the government when it needs money.
D)  lend money to the Federal Reserve banks.
E)  open checking accounts.

Question 5

"By definition, all parts of M2 are money." Is the previous statement correct or not?
 Explain your answer.

Accepted Answer

The statement is incorrect. Many of the ...

Question 6

Which of the following is NOT a component of M1?

Accepted Answer

A)  demand deposits
B)  traveler's checks
C)  savings deposits
D)  currency
E)  Both answers C and D are correct.

Question 7

Which of the following accept deposits from or sell shares to the general public?
I. money market funds
Ii. thrift institutions
Iii. commercial banks

Accepted Answer

A)  i only
B)  ii only
C)  iii only
D)  Both ii and iii
E)  i, ii, and iii

Question 8

The Federal Reserve System is organized into ________ Federal Reserve districts.

Accepted Answer

A)  6
B)  10
C)  12
D)  15
E)  50

Question 9

The monetary base does NOT include which of the following items?
I. Federal Reserve notes
Ii. banks' reserves at the Federal Reserve
Iii. U.S. government securities owned by the Federal Reserve

Accepted Answer

A)  i only
B)  ii only
C)  iii only
D)  Both i and ii
E)  Both ii and iii

Question 10

A public authority that provides banking services to commercial banks and regulates financial institutions and markets is called a

Accepted Answer

A)  commercial bank.
B)  thrift institution.
C)  central bank.
D)  money market fund.
E)  mint.

Question 11

The desired reserve ratio is 10 percent. Fly By Night Bank has deposits of $250,000 and reserves of $25,000. What is the amount of its excess reserves?

Accepted Answer

The bank has no excess reserve...

Question 12

A bank has reserves of $50, deposits of $100, loans of $20, and government securities of $30. Assume the desired reserve ratio is 20 percent.
a. What are the bank's assets and what are its liabilities?
b. How much does the bank have in excess reserves?
c. What can the bank do with its excess reserves that will affect the quantity of money?

Accepted Answer

a. Assets are reserves, loans, and secur...

Question 13

Explain what is included in M1 and M2. Is all of M1 money?
 Is all of M2 money?

Accepted Answer

M1 is equal to the sum of currency held ...

Question 14

The main policy making body of the Federal Reserve System is the

Accepted Answer

A)  Board of Governors of the Federal Reserve System.
B)  Board of Presidents of the Federal Reserve banks.
C)  Federal Open Market Committee.
D)  Board of Advisors.
E)  Federal Monetary Conditions Board.

Question 15

The Fed purchases $1 million of U.S. government securities from First Bank. The desired reserve ratio is 10 percent, the currency drain ratio is zero, and banks loan all excess reserves. The money multiplier is equal to

Accepted Answer

A)  0.10.
B)  1.0.
C)  10.0.
D)  100.0.
E)  $1 million.

Question 16

Suppose the Fed buys $1 million of government securities from Bank One, a large commercial bank. Bank One's reserves ________ and its deposits ________.

Accepted Answer

A)  increase by $1 million; do not change
B)  increase by $1 million; increase by $1 million
C)  do not change; increase by $1 million
D)  do not change; do not change
E)  decrease by $1 million; do not change

Question 17

A credit card is

Accepted Answer

A)  money.
B)  barter money.
C)  not money.
D)  fiat money.
E)  not money but the card's credit line is money.

Question 18

The Fed buys $50,000 of government securities. The desired reserve ratio is 10 percent and the currency drain ratio is zero. What will be the change in the quantity of money?

Accepted Answer

A)  $5,000
B)  $50,000
C)  $500,000
D)  $5,000,000
E)  $0

Question 19

Which of the following are policy tools used by the Federal Reserve?
I. the federal personal income tax
Ii. open market operations
Iii. changing the required reserve ratio

Accepted Answer

A)  i only
B)  ii only
C)  iii only
D)  ii and iii
E)  i, ii, and iii

Question 20

The function of money that helps assess the opportunity cost of an activity is money's use as a

Accepted Answer

A)  medium of exchange.
B)  store of value.
C)  unit of account.
D)  store of debt.
E)  barter tool.

Exam 18: Money and the Monetary System

The function of money that helps assess the opportunity cost of an activity is money's use as a

Correct Answer
verified

Suppose the Fed buys $1 million of government securities from Bank One, a large commercial bank. Bank One's reserves and its deposits .

Correct Answer
verified

The Fed buys $50,000 of government securities. The desired reserve ratio is 10 percent and the currency drain ratio is zero. What will be the change in the quantity of money?

Correct Answer
verified

The Second National Bank of Townville has $400,000 in checking deposits, $125,000 in savings deposits, $500,000 in loans, $20,000 in its reserve account at the Fed, and $5,000 of currency in its vault. What is the amount of its reserves?

Correct Answer
verified
Reserves include the bank's de...
View Answer

Explain what is included in M1 and M2. Is all of M1 money? Is all of M2 money?

Correct Answer
verified
M1 is equal to the sum of currency held ...
View Answer

Which of the following are policy tools used by the Federal Reserve? I. the federal personal income tax Ii. open market operations Iii. changing the required reserve ratio

Correct Answer
verified

Which of the following is NOT a component of M1?

Correct Answer
verified

The main policy making body of the Federal Reserve System is the

Correct Answer
verified

A credit card is

Correct Answer
verified

Which statement about money is most correct?

Correct Answer
verified

Which of the following accept deposits from or sell shares to the general public? I. money market funds Ii. thrift institutions Iii. commercial banks

Correct Answer
verified

The desired reserve ratio is 10 percent. Fly By Night Bank has deposits of $250,000 and reserves of $25,000. What is the amount of its excess reserves?

Correct Answer
verified
The bank has no excess reserve...
View Answer

The Fed purchases $1 million of U.S. government securities from First Bank. The desired reserve ratio is 10 percent, the currency drain ratio is zero, and banks loan all excess reserves. The money multiplier is equal to

Correct Answer
verified

The Federal Reserve System is organized into ________ Federal Reserve districts.

Correct Answer
verified

The monetary base does NOT include which of the following items? I. Federal Reserve notes Ii. banks' reserves at the Federal Reserve Iii. U.S. government securities owned by the Federal Reserve

Correct Answer
verified

"By definition, all parts of M2 are money." Is the previous statement correct or not? Explain your answer.

Correct Answer
verified
The statement is incorrect. Many of the ...
View Answer

Correct Answer
verified
a. Assets are reserves, loans, and secur...
View Answer

A public authority that provides banking services to commercial banks and regulates financial institutions and markets is called a

Correct Answer
verified

A commercial bank's main goal is to

Correct Answer
verified

Actual reserves are equal to

Correct Answer
verified

Exam 18: Money and the Monetary System

The function of money that helps assess the opportunity cost of an activity is money's use as a

Correct AnswerverifiedShow Answer

Suppose the Fed buys $1 million of government securities from Bank One, a large commercial bank. Bank One's reserves ________ and its deposits ________.

Correct AnswerverifiedShow Answer

The Fed buys $50,000 of government securities. The desired reserve ratio is 10 percent and the currency drain ratio is zero. What will be the change in the quantity of money?

Correct AnswerverifiedShow Answer

The Second National Bank of Townville has $400,000 in checking deposits, $125,000 in savings deposits, $500,000 in loans, $20,000 in its reserve account at the Fed, and $5,000 of currency in its vault. What is the amount of its reserves?

Correct AnswerverifiedReserves include the bank's de...View AnswerShow Answer

Explain what is included in M1 and M2. Is all of M1 money? Is all of M2 money?

Correct AnswerverifiedM1 is equal to the sum of currency held ...View AnswerShow Answer

Which of the following are policy tools used by the Federal Reserve? I. the federal personal income tax Ii. open market operations Iii. changing the required reserve ratio

Correct AnswerverifiedShow Answer

Which of the following is NOT a component of M1?

Correct AnswerverifiedShow Answer

The main policy making body of the Federal Reserve System is the

Correct AnswerverifiedShow Answer

A credit card is

Correct AnswerverifiedShow Answer

Which statement about money is most correct?

Correct AnswerverifiedShow Answer

Which of the following accept deposits from or sell shares to the general public? I. money market funds Ii. thrift institutions Iii. commercial banks

Correct AnswerverifiedShow Answer

The desired reserve ratio is 10 percent. Fly By Night Bank has deposits of $250,000 and reserves of $25,000. What is the amount of its excess reserves?

Correct AnswerverifiedThe bank has no excess reserve...View AnswerShow Answer

The Fed purchases $1 million of U.S. government securities from First Bank. The desired reserve ratio is 10 percent, the currency drain ratio is zero, and banks loan all excess reserves. The money multiplier is equal to

Correct AnswerverifiedShow Answer

The Federal Reserve System is organized into ________ Federal Reserve districts.

Correct AnswerverifiedShow Answer

The monetary base does NOT include which of the following items? I. Federal Reserve notes Ii. banks' reserves at the Federal Reserve Iii. U.S. government securities owned by the Federal Reserve

Correct AnswerverifiedShow Answer

"By definition, all parts of M2 are money." Is the previous statement correct or not? Explain your answer.

Correct AnswerverifiedThe statement is incorrect. Many of the ...View AnswerShow Answer

Correct Answerverifieda. Assets are reserves, loans, and secur...View AnswerShow Answer

A public authority that provides banking services to commercial banks and regulates financial institutions and markets is called a

Correct AnswerverifiedShow Answer

A commercial bank's main goal is to

Correct AnswerverifiedShow Answer

Actual reserves are equal to

Correct AnswerverifiedShow Answer

Correct Answer
verified

Suppose the Fed buys $1 million of government securities from Bank One, a large commercial bank. Bank One's reserves and its deposits .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Reserves include the bank's de...
View Answer

Correct Answer
verified
M1 is equal to the sum of currency held ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The bank has no excess reserve...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The statement is incorrect. Many of the ...
View Answer

Correct Answer
verified
a. Assets are reserves, loans, and secur...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified