Question 1

Which is not one of the criteria necessary for a commodity to make a suitable medium of exchange?

Accepted Answer

A)  It should be durable.
B)  It should be of standardized quality.
C)  It should be valuable relative to its weight.
D)  It should have intrinsic value.

Question 2

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 3

Scenario 14-2
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 14-2.As a result of Kristy's deposit,Bank A's reserves immediately increase by

Accepted Answer

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

Question 4

The required reserves of a bank equal its ________ the required reserve ratio.

Accepted Answer

A)  deposits divided by
B)  deposits multiplied by
C)  loans divided by
D)  loans multiplied by

Question 5

The statement,"My iPhone is worth $700" represents money's function as

Accepted Answer

A)  a medium of exchange.
B)  a unit of account.
C)  a store of value.
D)  a standard of deferred payment.

Question 6

Suppose that you deposit $2,000 in your bank and the required reserve ratio is 10 percent.The maximum loan your bank can made as a direct result of your deposit is

Accepted Answer

A)  $200.
B)  $1,800.
C)  $2,000.
D)  $20,000.

Question 7

The purchase of Treasury securities by the Federal Reserve will,in general

Accepted Answer

A)  not change the money supply.
B)  not change the quantity of reserves held by banks.
C)  increase the quantity of reserves held by banks.
D)  decrease the quantity of reserves held by banks.

Question 8

Why is the real-world deposit multiplier smaller than 1/RR,where RR is the required reserve ratio?

Accepted Answer

There are two reasons why the real world...

Question 9

Scenario 14-1
  Consider the information above for a simple economy.Assume there are no traveler's checks.
-Refer to Scenario 14-1.M1 in this simple economy equals

Accepted Answer

A)  $1,000.
B)  $2,000.
C)  $3,000.
D)  $8,000.

Question 10

Silver is an example of a

Accepted Answer

A)  commodity money.
B)  barter money.
C)  fiat money.
D)  representative money.

Question 11

Suppose that you decide that you no longer want to hold currency,and deposit all of your currency holdings to your checking account.What is the immediate or initial impact of this transaction on M1 and M2?

Accepted Answer

Neither M1 nor M2 will change (at least ...

Question 12

The quantity equation becomes the basis for a theory when we assume that velocity of money is constant.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following assets is most liquid?

Accepted Answer

A)  money
B)  bond
C)  savings account
D)  stock

Question 14

Soldiers in a World War II prisoner-of-war camp

Accepted Answer

A)  used gold as a fiat money.
B)  used cowrie shells as money.
C)  used cigarettes as money.
D)  used U.S.dollars as a commodity money.

Question 15

The three main monetary policy tools used by the Federal Reserve to manage the money supply are

Accepted Answer

A)  interest rates,tax rates,and government spending.
B)  tax rates,government purchases,and government transfer payments.
C)  open market operations,discount policy,and reserve requirements.
D)  open market operations,the exchange rate of the dollar against foreign currencies,and government purchases.

Question 16

What are the four functions of money? Can something be considered money if it does not fulfill all four functions?

Accepted Answer

The four functions are medium ...

Question 17

Commodity money

Accepted Answer

A)  has value independent of its use as money.
B)  has little to no value independent of its use as money.
C)  is backed by a valuable commodity such as gold.
D)  can be used to purchase commodities,but not services.

Question 18

Dollar bills in the modern economy serve as money because

Accepted Answer

A)  they are backed by the gold stored in Fort Knox.
B)  they can be redeemed for gold by the central bank.
C)  they have value as a commodity independent of their use as money.
D)  people have confidence that others will accept them as money.

Question 19

In an economy with money,as opposed to barter,people are more likely to specialize in the production of goods and services.

Accepted Answer

A) True 
 B)False

Question 20

Suppose a transaction changes the balance sheet of Wells Fargo bank as indicated in the following T-account.  At this point,what percentage of the new deposits does Wells Fargo hold in reserves?

Accepted Answer

A)  100 percent
B)  10 percent
C)  5 percent
D)  1 percent

Exam 14: Money,Banks,and the Federal Reserve System

Which of the following assets is most liquid?

Correct AnswerverifiedShow Answer

Soldiers in a World War II prisoner-of-war camp

Correct AnswerverifiedShow Answer

Suppose a transaction changes the balance sheet of Wells Fargo bank as indicated in the following T-account. At this point,what percentage of the new deposits does Wells Fargo hold in reserves?

Correct AnswerverifiedShow Answer

Silver is an example of a

Correct AnswerverifiedShow Answer

The quantity equation becomes the basis for a theory when we assume that velocity of money is constant.

Correct AnswerverifiedShow Answer

The purchase of Treasury securities by the Federal Reserve will,in general

Correct AnswerverifiedShow Answer

The required reserves of a bank equal its ________ the required reserve ratio.

Correct AnswerverifiedShow Answer

Scenario 14-2 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 14-2.As a result of Kristy's deposit,Bank A's reserves immediately increase by

Correct AnswerverifiedShow Answer

The statement,"My iPhone is worth $700" represents money's function as

Correct AnswerverifiedShow Answer

Commodity money

Correct AnswerverifiedShow Answer

What are the four functions of money? Can something be considered money if it does not fulfill all four functions?

Correct AnswerverifiedThe four functions are medium ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Suppose that you deposit $2,000 in your bank and the required reserve ratio is 10 percent.The maximum loan your bank can made as a direct result of your deposit is

Correct AnswerverifiedShow Answer

Why is the real-world deposit multiplier smaller than 1/RR,where RR is the required reserve ratio?

Correct AnswerverifiedThere are two reasons why the real world...View AnswerShow Answer

Suppose that you decide that you no longer want to hold currency,and deposit all of your currency holdings to your checking account.What is the immediate or initial impact of this transaction on M1 and M2?

Correct AnswerverifiedNeither M1 nor M2 will change (at least ...View AnswerShow Answer

Which is not one of the criteria necessary for a commodity to make a suitable medium of exchange?

Correct AnswerverifiedShow Answer

The three main monetary policy tools used by the Federal Reserve to manage the money supply are

Correct AnswerverifiedShow Answer

In an economy with money,as opposed to barter,people are more likely to specialize in the production of goods and services.

Correct AnswerverifiedShow Answer

Scenario 14-1 Consider the information above for a simple economy.Assume there are no traveler's checks. -Refer to Scenario 14-1.M1 in this simple economy equals

Correct AnswerverifiedShow Answer

Dollar bills in the modern economy serve as money because

Correct AnswerverifiedShow Answer

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The four functions are medium ...
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There are two reasons why the real world...
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Neither M1 nor M2 will change (at least ...
View Answer

Correct Answer
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