Question 1

The reserve ratio is 20 percent. If the Fed buys $1 million of U.S. government securities from a bond dealer by transmitting the funds to the dealer's deposit account at Bank ABC, then

Accepted Answer

A)   Bank ABC can make no additional loans.
B)   Bank ABC can make additional loans up to $800,000.
C)   Bank ABC can make additional loans up to $1 million.
D)   Bank ABC cannot make any additional loans, but the system as a whole can make additional loans up to $1 million.

Question 2

Why might people in a country refuse to accept the fiduciary money in the country?

Accepted Answer

If people believed the government was ab...

Question 3

The Fed is the bankers' bank. What functions of the Fed are involved in this role? What are the other important functions of the Fed?

Accepted Answer

The Fed holds reserves of banks, lends t...

Question 4

A decrease in the reserve ratio will

Accepted Answer

A)   cause the money supply to decrease.
B)   cause the money supply to increase.
C)   not affect the money supply.
D)   decrease the money multiplier.

Question 5

The money supply in the United States is backed by

Accepted Answer

A)   faith.
B)   gold.
C)   silver.
D)   platinum.

Question 6

Which of the following institutions has responsibility for distributing currency and coins to the U.S. banking system?

Accepted Answer

A)   The Office of the Comptroller of the Currency
B)   The Federal Reserve System
C)   The U.S Bureau of Engraving and Printing
D)   The U.S. Mint

Question 7

The Federal Deposit Insurance Corporation

Accepted Answer

A)   increases the stability of the banking system by reducing the likelihood of bank runs.
B)   discourages banks from engaging in excessive risk taking.
C)   only insures deposits in money-center banks.
D)   was established after the Panic of 1907.

Question 8

A fiduciary monetary system means

Accepted Answer

A)   that the value of each currency is determined by the amount of gold held by each nation.
B)   that the currency is backed by implicit faith in government.
C)   that money is legal tender.
D)   that money has commodity value.

Question 9

Monetary policy actions are determined by the

Accepted Answer

A)   Federal Open Market Committee.
B)   New York Federal Reserve Bank.
C)   President of the United States.
D)   U.S. Congress. A

Question 10

Explain what happens to the money supply when the Fed sells bonds on the open market. What happens to the assets and liabilities of the Fed?

Accepted Answer

The money supply falls when the Fed sell...

Question 11

In the United States, who determines monetary policy? What is the major tool used to determine monetary policy?

Accepted Answer

The Federal Reserve Bank's Federal Open ...

Question 12

Camels have been used as money. Which function of money would this type of money perform least well?

Accepted Answer

A)   Medium of exchange
B)   Unit of accounting
C)   Store of value
D)   Standard of deferred payment

Question 13

A fiduciary monetary standard exists when the value of a currency

Accepted Answer

A)   is determined by law.
B)   is convertible to a fixed quantity of gold.
C)   depends upon the public's confidence that the currency can be exchanged for goods and services.
D)   increases with inflation.

Question 14

The reserve ratio is 20 percent. After the Fed buys $1 million in U.S. government securities from a bond dealer by transmitting the funds to the dealer's deposit account at Bank A, Bank A lends a construction company an amount equal to its excess reserves. The construction company spends the entire amount on lumber from a lumber yard, which deposits the construction company's check in its deposit account with Bank A. The maximum loan Bank A can now make is

Accepted Answer

A)   $0.
B)   $640,000.
C)   $800,000.
D)   $1 million.

Question 15

Due to the existence of the FDIC, banks

Accepted Answer

A)   may make riskier loans knowing that their depositors are insured.
B)   have not changed their behavior even with the existence of insurance.
C)   become more cautious in making loans.
D)   are no longer concerned about net worth.

Question 16

Currency consists of

Accepted Answer

A)   only coins minted by the U.S. Treasury.
B)   only Federal Reserve notes.
C)   coins minted by the U.S. Treasury and Federal Reserve notes.
D)   coins, Federal Reserve Notes and traveler's checks.

Question 17

When money serves as a standard for comparing values of different things, it is functioning as a

Accepted Answer

A)   store of value.
B)   hedge against inflation.
C)   standard of deferred payment.
D)   unit of accounting.

Question 18

Which of the following is NOT one of the functions of money?

Accepted Answer

A)   Medium of exchange
B)   Source of wealth
C)   Unit of accounting
D)   Store of value B

Question 19

To reach the maximum money multiplier, it is assumed that

Accepted Answer

A)   commercial banks keep the amount of reserves. equal to total bank deposits.
B)   all loans get redeposited in a checkable account.
C)   there is insufficient loan demand.
D)   loans are diverted into circulating currency. B

Question 20

The reserve ratio is 10 percent. Depositors regularly keep 10 percent of their deposits as cash. If the Fed buys $1 million of U.S. government securities, excess reserves

Accepted Answer

A)   increase by $800,000.
B)   increase by $810,000.
C)   increase by $900,000.
D)   increase by $1 million.

Exam 15: Money, Banking, and Central Banking

The reserve ratio is 20 percent. If the Fed buys $1 million of U.S. government securities from a bond dealer by transmitting the funds to the dealer's deposit account at Bank ABC, then

Correct Answer
verified

Why might people in a country refuse to accept the fiduciary money in the country?

Correct Answer
verified
If people believed the government was ab...
View Answer

The Fed is the bankers' bank. What functions of the Fed are involved in this role? What are the other important functions of the Fed?

Correct Answer
verified
The Fed holds reserves of banks, lends t...
View Answer

A decrease in the reserve ratio will

Correct Answer
verified

The money supply in the United States is backed by

Correct Answer
verified

Which of the following institutions has responsibility for distributing currency and coins to the U.S. banking system?

Correct Answer
verified

The Federal Deposit Insurance Corporation

Correct Answer
verified

A fiduciary monetary system means

Correct Answer
verified

Monetary policy actions are determined by the

Correct Answer
verified
A

Explain what happens to the money supply when the Fed sells bonds on the open market. What happens to the assets and liabilities of the Fed?

Correct Answer
verified
The money supply falls when the Fed sell...
View Answer

In the United States, who determines monetary policy? What is the major tool used to determine monetary policy?

Correct Answer
verified
The Federal Reserve Bank's Federal Open ...
View Answer

Camels have been used as money. Which function of money would this type of money perform least well?

Correct Answer
verified

A fiduciary monetary standard exists when the value of a currency

Correct Answer
verified

Correct Answer
verified

Due to the existence of the FDIC, banks

Correct Answer
verified

Currency consists of

Correct Answer
verified

When money serves as a standard for comparing values of different things, it is functioning as a

Correct Answer
verified

Which of the following is NOT one of the functions of money?

Correct Answer
verified
B

To reach the maximum money multiplier, it is assumed that

Correct Answer
verified
B

The reserve ratio is 10 percent. Depositors regularly keep 10 percent of their deposits as cash. If the Fed buys $1 million of U.S. government securities, excess reserves

Correct Answer
verified

Exam 15: Money, Banking, and Central Banking

The reserve ratio is 20 percent. If the Fed buys $1 million of U.S. government securities from a bond dealer by transmitting the funds to the dealer's deposit account at Bank ABC, then

Correct AnswerverifiedShow Answer

Why might people in a country refuse to accept the fiduciary money in the country?

Correct AnswerverifiedIf people believed the government was ab...View AnswerShow Answer

The Fed is the bankers' bank. What functions of the Fed are involved in this role? What are the other important functions of the Fed?

Correct AnswerverifiedThe Fed holds reserves of banks, lends t...View AnswerShow Answer

A decrease in the reserve ratio will

Correct AnswerverifiedShow Answer

The money supply in the United States is backed by

Correct AnswerverifiedShow Answer

Which of the following institutions has responsibility for distributing currency and coins to the U.S. banking system?

Correct AnswerverifiedShow Answer

The Federal Deposit Insurance Corporation

Correct AnswerverifiedShow Answer

A fiduciary monetary system means

Correct AnswerverifiedShow Answer

Monetary policy actions are determined by the

Correct AnswerverifiedA

Explain what happens to the money supply when the Fed sells bonds on the open market. What happens to the assets and liabilities of the Fed?

Correct AnswerverifiedThe money supply falls when the Fed sell...View AnswerShow Answer

In the United States, who determines monetary policy? What is the major tool used to determine monetary policy?

Correct AnswerverifiedThe Federal Reserve Bank's Federal Open ...View AnswerShow Answer

Camels have been used as money. Which function of money would this type of money perform least well?

Correct AnswerverifiedShow Answer

A fiduciary monetary standard exists when the value of a currency

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Due to the existence of the FDIC, banks

Correct AnswerverifiedShow Answer

Currency consists of

Correct AnswerverifiedShow Answer

When money serves as a standard for comparing values of different things, it is functioning as a

Correct AnswerverifiedShow Answer

Which of the following is NOT one of the functions of money?

Correct AnswerverifiedB

To reach the maximum money multiplier, it is assumed that

Correct AnswerverifiedB

The reserve ratio is 10 percent. Depositors regularly keep 10 percent of their deposits as cash. If the Fed buys $1 million of U.S. government securities, excess reserves

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
If people believed the government was ab...
View Answer

Correct Answer
verified
The Fed holds reserves of banks, lends t...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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A

Correct Answer
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The money supply falls when the Fed sell...
View Answer

Correct Answer
verified
The Federal Reserve Bank's Federal Open ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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B

Correct Answer
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B

Correct Answer
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