Question 1

In an economy that relies on barter,trade requires a double-coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 2

A bank's reserve ratio is 10 percent and the bank has $2,000 in deposits.Its reserves amount to

Accepted Answer

A)   $20.
B)   $200.
C)   $400.
D)   $1,800.

Question 3

If the reserve ratio is 5 percent,then $1,000 of additional reserves can create up to

Accepted Answer

A)   $200 of new money.
B)   $2,000 of new money.
C)   $20,000 of new money.
D)   None of the above is correct.

Question 4

Savings deposits are included in

Accepted Answer

A)   M1 but not M2.
B)   M2 but not M1.
C)   M1 and M2.
D)   neither M1 nor M2.

Question 5

Table 21-2.An economy starts with $10,000 in currency.All of this currency is deposited into a single bank,and the bank then makes loans totaling $9,250.The T-account of the bank is shown below.
 
-Refer to Table 21-2.If all banks in the economy have the same reserve ratio as this bank,then an increase in reserves of $150 for this bank has the potential to increase deposits for all banks by

Accepted Answer

A)   $866.67.
B)   $1,666.67.
C)   $2,000.00.
D)   an infinite amount.

Question 6

Which of the following lists is included in what economists call "money"?

Accepted Answer

A)   cash
B)   cash and stocks and bonds
C)   cash and stocks and bonds and real estate
D)   cash and stocks and bonds and real estate and all other assets

Question 7

Assume that when $100 of new reserves enter the banking system,the money supply ultimately increases by $800.Assume also that no banks hold excess reserves and that the entire money supply consists of bank deposits.If,at a point in time,reserves for all banks amount to $750,then at that same point in time,loans for all banks amount to $6,000.

Accepted Answer

A) True 
 B)False

Question 8

Demand deposits are balances in bank accounts that depositors can access by writing a check or using a debit card.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following increases when the Fed makes open-market sales?

Accepted Answer

A)   currency and reserves
B)   currency but not reserves
C)   reserves but not currency
D)   neither currency nor reserves

Question 10

Which of the following is correct?

Accepted Answer

A)   The Federal Reserve has 14 regional banks.The Board of Governors has 12 members who serve 7-year terms.
B)   The Federal Reserve has 14 regional banks.The Board of Governors has 7 members who serve 14-year terms.
C)   The Federal Reserve has 12 regional banks.The Board of Governors has 12 members who serve 7-year terms.
D)   The Federal Reserve has 12 regional banks.The Board of Governors has 7 members who serve 14-year terms.

Question 11

Money

Accepted Answer

A)   is a perfect store of value.
B)   is the most liquid asset.
C)   has intrinsic value,regardless of which form it takes.
D)   All of the above are correct.

Question 12

The money supply decreases if the Fed

Accepted Answer

A)   sells Treasury bonds.The larger the reserve requirement,the larger the decrease will be.
B)   sells Treasury bonds.The smaller the reserve requirement,the larger the decrease will be.
C)   buys Treasury bonds.The larger the reserve requirement,the larger the decrease will be.
D)   buys Treasury bonds.The smaller the reserve requirement,the larger the decrease will be.

Question 13

People hold $400 million of bank deposits but no currency.Banks have made $380 million dollars of loans and only hold enough reserves to satisfy reserve requirements.Because of uncertainty,banks choose to hold $10 million more in reserves.The Fed takes no action.What happens to bank loans?

Accepted Answer

A)   they fall $220 million
B)   they fall $200 million
C)   they rise $200 million
D)   they rise $220 million

Question 14

Suppose banks decide to hold more excess reserves relative to deposits.Other things the same,this action will cause the

Accepted Answer

A)   money supply to fall.To reduce the impact of this the Fed could sell Treasury bonds.
B)   money supply to fall.To reduce the impact of this the Fed could buy Treasury bonds.
C)   money supply to rise.To reduce the impact of this the Fed could sell Treasury bonds.
D)   money supply to rise.To reduce the impact of this the Fed could buy Treasury bonds.

Question 15

The Fed can increase the money supply by conducting open-market

Accepted Answer

A)   sales or by raising the discount rate.
B)   sales or by lowering the discount rate.
C)   purchases or by raising the discount rate.
D)   purchases or by lowering the discount rate.

Question 16

If the reserve ratio is 10 percent,$1,000 of additional reserves can create up to

Accepted Answer

A)   $100 of new money.
B)   $1,000 of new money.
C)   $10,000 of new money.
D)   None of the above is correct.

Question 17

A bank's reserve ratio is 5 percent and the bank has $1,000 in deposits.Its reserves amount to

Accepted Answer

A)   $5.
B)   $50.
C)   $95.
D)   $950.

Question 18

Most financial assets other than money function as

Accepted Answer

A)   a medium of exchange,a unit of account,and a store of value.
B)   a medium of exchange and a store of value,but not a unit of account.
C)   a store of value and a unit of account,but not a mediuim of exchange.
D)   a store of value,but not a unit of account nor a medium of exchange

Question 19

Which of the following is both a store of value and regularly used as a medium of exchange?

Accepted Answer

A)   cash and stocks
B)   cash but not stocks
C)   stocks but not cash
D)   neither cash nor stocks

Question 20

If the reserve ratio is 15 percent,and banks do not hold excess reserves,and people hold only deposits and no currency,then when the Fed sells $65 million worth of bonds to the public,bank reserves

Accepted Answer

A)   increase by $65 million and the money supply eventually increases by $266.67 million.
B)   increase by $65 million and the money supply eventually increases by $433.33 million.
C)   decrease by $65 million and the money supply eventually decreases by $266.67 million.
D)   decrease by $65 million and the money supply eventually decreases by $433.33 million.

Exam 21: The Monetary System

Most financial assets other than money function as

Correct Answer
verified

Money

Correct Answer
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Demand deposits are balances in bank accounts that depositors can access by writing a check or using a debit card.

Correct Answer
verified

The Fed can increase the money supply by conducting open-market

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

Correct Answer
verified

If the reserve ratio is 10 percent,$1,000 of additional reserves can create up to

Correct Answer
verified

Which of the following is both a store of value and regularly used as a medium of exchange?

Correct Answer
verified

In an economy that relies on barter,trade requires a double-coincidence of wants.

Correct Answer
verified

A bank's reserve ratio is 10 percent and the bank has $2,000 in deposits.Its reserves amount to

Correct Answer
verified

Which of the following increases when the Fed makes open-market sales?

Correct Answer
verified

If the reserve ratio is 5 percent,then $1,000 of additional reserves can create up to

Correct Answer
verified

A bank's reserve ratio is 5 percent and the bank has $1,000 in deposits.Its reserves amount to

Correct Answer
verified

If the reserve ratio is 15 percent,and banks do not hold excess reserves,and people hold only deposits and no currency,then when the Fed sells $65 million worth of bonds to the public,bank reserves

Correct Answer
verified

Savings deposits are included in

Correct Answer
verified

Which of the following lists is included in what economists call "money"?

Correct Answer
verified

Correct Answer
verified

People hold $400 million of bank deposits but no currency.Banks have made $380 million dollars of loans and only hold enough reserves to satisfy reserve requirements.Because of uncertainty,banks choose to hold $10 million more in reserves.The Fed takes no action.What happens to bank loans?

Correct Answer
verified

The money supply decreases if the Fed

Correct Answer
verified

Suppose banks decide to hold more excess reserves relative to deposits.Other things the same,this action will cause the

Correct Answer
verified

Exam 21: The Monetary System

Most financial assets other than money function as

Correct AnswerverifiedShow Answer

Money

Correct AnswerverifiedShow Answer

Demand deposits are balances in bank accounts that depositors can access by writing a check or using a debit card.

Correct AnswerverifiedShow Answer

The Fed can increase the money supply by conducting open-market

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the reserve ratio is 10 percent,$1,000 of additional reserves can create up to

Correct AnswerverifiedShow Answer

Which of the following is both a store of value and regularly used as a medium of exchange?

Correct AnswerverifiedShow Answer

In an economy that relies on barter,trade requires a double-coincidence of wants.

Correct AnswerverifiedShow Answer

A bank's reserve ratio is 10 percent and the bank has $2,000 in deposits.Its reserves amount to

Correct AnswerverifiedShow Answer

Which of the following increases when the Fed makes open-market sales?

Correct AnswerverifiedShow Answer

If the reserve ratio is 5 percent,then $1,000 of additional reserves can create up to

Correct AnswerverifiedShow Answer

A bank's reserve ratio is 5 percent and the bank has $1,000 in deposits.Its reserves amount to

Correct AnswerverifiedShow Answer

If the reserve ratio is 15 percent,and banks do not hold excess reserves,and people hold only deposits and no currency,then when the Fed sells $65 million worth of bonds to the public,bank reserves

Correct AnswerverifiedShow Answer

Savings deposits are included in

Correct AnswerverifiedShow Answer

Which of the following lists is included in what economists call "money"?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

People hold $400 million of bank deposits but no currency.Banks have made $380 million dollars of loans and only hold enough reserves to satisfy reserve requirements.Because of uncertainty,banks choose to hold $10 million more in reserves.The Fed takes no action.What happens to bank loans?

Correct AnswerverifiedShow Answer

The money supply decreases if the Fed

Correct AnswerverifiedShow Answer

Suppose banks decide to hold more excess reserves relative to deposits.Other things the same,this action will cause the

Correct AnswerverifiedShow Answer

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