Question 1

The Bank of Red Oak has $2 million in deposits and $400,000 in reserves.If excess reserves are equal to $100,000,the required reserve ratio is

Accepted Answer

A)  5%.
B)  10%.
C)  15%.
D)  20%.

Question 2

The Federal Reserve System consists of ________ Federal Reserve Banks.

Accepted Answer

A)  8
B)  10
C)  12
D)  14

Question 3

Dollar Bank is currently loaned up.If the required reserve ratio is lowered,

Accepted Answer

A)  Dollar Bank's net worth will increase.
B)  Dollar Bank will have excess reserves that it can lend out.
C)  Dollar Bank will still be loaned up because it did not receive any additional deposits.
D)  Dollar Bank's actual reserves will increase,but it will still be loaned up.

Question 4

Which of the following activities is one of the responsibilities of the Federal Reserve?

Accepted Answer

A)  issuing new bonds to finance the federal budget deficit
B)  loaning money to other countries that are friendly to the United States
C)  assisting banks that are in a difficult financial position
D)  auditing the various agencies and departments of the federal government

Question 5

If the Fed sells government securities,then there is

Accepted Answer

A)  an increase in the supply of money.
B)  a decrease in the supply of money.
C)  a decrease in the discount rate.
D)  an increase in the required reserve ratio.

Question 6

Money that a government has required to be accepted in settlement of debts is

Accepted Answer

A)  fiat money.
B)  commodity money.
C)  barter money.
D)  legal tender.

Question 7

When money is used as a medium of exchange

Accepted Answer

A)  the need for a barter system diminishes.
B)  the cost of transactions increases.
C)  the need for a banking system in the economy decreases.
D)  it reduces the number of transactions in the economy.

Question 8

A checking deposit in a bank is considered ________ of that bank.

Accepted Answer

A)  an asset
B)  a liability
C)  net worth
D)  capital

Question 9

Thompson National Trust has assets of $500,000 and liabilities of $400,000.Thompson National Trust's net worth is

Accepted Answer

A)  $100,000.
B)  $400,000.
C)  $500,000.
D)  $900,000.

Question 10

When you keep your savings in a saving account,you are using money as a(n)

Accepted Answer

A)  investment good.
B)  store of value.
C)  medium of exchange.
D)  unit of account.

Question 11

The liquidity property of money is the property that makes money

Accepted Answer

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

Question 12

The amount of money banks can loan out is determined by the discount rate.

Accepted Answer

A) True 
 B)False

Question 13

The money supply has increased from $1.4 trillion to $1.45 trillion.Which of the following could have caused this increase?

Accepted Answer

A)  The Fed sold government securities to the public.
B)  Consumers who were holding money outside the banking system deposit this money.
C)  The Fed increased the discount rate.
D)  Commercial banks began to hold excess reserves.

Question 14

When Mexico experiences a period of high inflation and Mexicans lose confidence in their peso as a store of value,which of the following would be most likely to occur?

Accepted Answer

A)  The demand for pesos would increase.
B)  The buying power of the peso would increase.
C)  The value of foreign currencies would depreciate relative to the peso.
D)  Mexicans would use a different currency as a medium of exchange.

Question 15

Refer to the information provided in Table 10.1 below to answer the questions that follow.
Table 10.1
 
-Refer to Table 10.1.The required reserve ratio is 25%.If the First Charter Bank is meeting its reserve requirement and has no excess reserves,its reserves equal

Accepted Answer

A)  $100.
B)  $200.
C)  $300.
D)  $600.

Question 16

Which of the following would NOT be counted as part of M1?

Accepted Answer

A)  demand deposits
B)  traveler's check
C)  money market accounts
D)  currency

Question 17

The M2 definition of money includes demand deposits.

Accepted Answer

A) True 
 B)False

Question 18

The Bank of Arugula has $9 million in deposits and $900,000 in reserves.If the required reserve ratio is 10%,excess reserves are equal to

Accepted Answer

A)  $180,000.
B)  $90,000.
C)  $81,000.
D)  zero.

Question 19

Refer to the information provided in Table 10.4 below to answer the questions that follow.
Table 10.4
 
-Refer to Table 10.4.First Charter Bank could make additional,first round loans of $400,000 if the required reserve ratio were

Accepted Answer

A)  12%.
B)  10%.
C)  8%.
D)  7.5%.

Question 20

Jaime transfers $2,500 from his checking account to his savings account.This transaction will

Accepted Answer

A)  decrease both M1 and M2.
B)  not change M1 and decrease M2.
C)  decrease M1 and not change M2.
D)  increase both M1 and M2.

Exam 10: The Money Supply and the Federal Reserve System

Refer to the information provided in Table 10.1 below to answer the questions that follow. Table 10.1 -Refer to Table 10.1.The required reserve ratio is 25%.If the First Charter Bank is meeting its reserve requirement and has no excess reserves,its reserves equal

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Refer to the information provided in Table 10.4 below to answer the questions that follow. Table 10.4 -Refer to Table 10.4.First Charter Bank could make additional,first round loans of $400,000 if the required reserve ratio were

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The Bank of Red Oak has $2 million in deposits and $400,000 in reserves.If excess reserves are equal to $100,000,the required reserve ratio is

Correct AnswerverifiedShow Answer

If the Fed sells government securities,then there is

Correct AnswerverifiedShow Answer

The liquidity property of money is the property that makes money

Correct AnswerverifiedShow Answer

Dollar Bank is currently loaned up.If the required reserve ratio is lowered,

Correct AnswerverifiedShow Answer

When money is used as a medium of exchange

Correct AnswerverifiedShow Answer

The Bank of Arugula has $9 million in deposits and $900,000 in reserves.If the required reserve ratio is 10%,excess reserves are equal to

Correct AnswerverifiedShow Answer

Jaime transfers $2,500 from his checking account to his savings account.This transaction will

Correct AnswerverifiedShow Answer

The amount of money banks can loan out is determined by the discount rate.

Correct AnswerverifiedShow Answer

When Mexico experiences a period of high inflation and Mexicans lose confidence in their peso as a store of value,which of the following would be most likely to occur?

Correct AnswerverifiedShow Answer

The M2 definition of money includes demand deposits.

Correct AnswerverifiedShow Answer

Thompson National Trust has assets of $500,000 and liabilities of $400,000.Thompson National Trust's net worth is

Correct AnswerverifiedShow Answer

Which of the following activities is one of the responsibilities of the Federal Reserve?

Correct AnswerverifiedShow Answer

A checking deposit in a bank is considered ________ of that bank.

Correct AnswerverifiedShow Answer

When you keep your savings in a saving account,you are using money as a(n)

Correct AnswerverifiedShow Answer

Which of the following would NOT be counted as part of M1?

Correct AnswerverifiedShow Answer

Money that a government has required to be accepted in settlement of debts is

Correct AnswerverifiedShow Answer

The money supply has increased from $1.4 trillion to $1.45 trillion.Which of the following could have caused this increase?

Correct AnswerverifiedShow Answer

The Federal Reserve System consists of ________ Federal Reserve Banks.

Correct AnswerverifiedShow Answer

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