Question 1

If you deposit $100 of currency into a demand deposit at a bank, this action by itself

Accepted Answer

A)   does not change the money supply.
B)   increases the money supply.
C)   decreases the money supply.
D)   has an indeterminate effect on the money supply.

Question 2

U.S. dollars are an example of commodity money and hides used to make trades are an example of fiat money.

Accepted Answer

A) True 
 B)False

Question 3

What is the Term Auction Facility?

Accepted Answer

The Term Auction Facility is the market ...

Question 4

What is meant by the term "lender of last resort?" In what circumstances might the Fed be a lender of last resort?

Accepted Answer

A "lender of last resort" is a lender to...

Question 5

The legal tender requirement means that

Accepted Answer

A)   people are more likely to accept the dollar as a medium of exchange.
B)   the government must hold enough gold to redeem all currency.
C)   people may not make trades with anything else.
D)   All of the above are correct.

Question 6

What does it mean for the Fed to be the "lender of last resort?"

Accepted Answer

When banks cannot borrow in the market p...

Question 7

If the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Accepted Answer

A)   buying bonds. This buying would reduce reserves.
B)   buying bonds. This buying would increase reserves.
C)   selling bonds. This selling would reduce reserves.
D)   selling bonds. This selling would increase reserves.

Question 8

Bank runs and the accompanying increase in the money multiplier caused the U.S. money supply to rise by 28 percent from 1929 to 1933.

Accepted Answer

A) True 
 B)False

Question 9

The federal funds rate is the interest rate

Accepted Answer

A)   the Federal Reserve charges for loans it makes to the federal government.
B)   the Federal Reserve charges banks for short-term loans.
C)   banks charge each other for short-term loans of reserves.
D)   on newly issued one-year Treasury bonds.

Question 10

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 11

When we say that trade is roundabout we mean that

Accepted Answer

A)   people sometimes trade goods for goods.
B)   trades require a double coincidence of wants.
C)   currency is accepted primarily to make further trades.
D)   people must spend time searching for the products they wish to purchase.

Question 12

Fractional reserve banking is a system where banks must hold an amount of cash based on a percentage of its loans.

Accepted Answer

A) True 
 B)False

Question 13

If the discount rate is lowered, banks borrow

Accepted Answer

A)   less from the Fed so reserves increase.
B)   less from the Fed so reserves decrease.
C)   more from the Fed so reserves increase.
D)   more from the Fed so reserves decrease.

Question 14

If the federal funds rate were below the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Accepted Answer

A)   buying bonds. This buying would reduce reserves.
B)   buying bonds. This buying would increase reserves.
C)   selling bonds. This selling would reduce reserves.
D)   selling bonds. This selling would increase reserves.

Question 15

The Fed can decrease 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

Which of the following statements is correct? In the special case of the 100-percent reserve banking the money multiplier is

Accepted Answer

A)   0 and banks create money.
B)   0 and banks do not create money.
C)   1 and banks create money
D)   1 and banks do not create money.

Question 17

Table 29-5.
 
-Refer to Table 29-5. If the bank faces a reserve requirement of 6 percent, then the bank

Accepted Answer

A)   is in a position to make a new loan of $12,000.
B)   is in a position to make a new loan of $18,000.
C)   has excess reserves of $12,000.
D)   None of the above is correct.

Question 18

Currency includes

Accepted Answer

A)   paper bills and coins.
B)   demand deposits.
C)   credit cards.
D)   Both a)  and b)  are correct.

Question 19

A bank has $500,000 in deposits and $475,000 in loans. It has loaned out all it can. It has a reserve ratio of

Accepted Answer

A)   2.5 percent.
B)   5 percent.
C)   9.5 percent.
D)   25 percent.

Question 20

If the public decides to hold more currency and fewer deposits in banks, bank reserves

Accepted Answer

A)   decrease and the money supply eventually decreases.
B)   decrease but the money supply does not change.
C)   increase and the money supply eventually increases.
D)   increase but the money supply does not change.

Exam 11: The Monetary System

If the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Correct AnswerverifiedShow Answer

Bank runs and the accompanying increase in the money multiplier caused the U.S. money supply to rise by 28 percent from 1929 to 1933.

Correct AnswerverifiedShow Answer

If the discount rate is lowered, banks borrow

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What is meant by the term "lender of last resort?" In what circumstances might the Fed be a lender of last resort?

Correct AnswerverifiedA "lender of last resort" is a lender to...View AnswerShow Answer

What is the Term Auction Facility?

Correct AnswerverifiedThe Term Auction Facility is the market ...View AnswerShow Answer

The legal tender requirement means that

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Table 29-5. -Refer to Table 29-5. If the bank faces a reserve requirement of 6 percent, then the bank

Correct AnswerverifiedShow Answer

When we say that trade is roundabout we mean that

Correct AnswerverifiedShow Answer

What does it mean for the Fed to be the "lender of last resort?"

Correct AnswerverifiedWhen banks cannot borrow in the market p...View AnswerShow Answer

If the public decides to hold more currency and fewer deposits in banks, bank reserves

Correct AnswerverifiedShow Answer

If you deposit $100 of currency into a demand deposit at a bank, this action by itself

Correct AnswerverifiedShow Answer

Currency includes

Correct AnswerverifiedShow Answer

If the federal funds rate were below the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Correct AnswerverifiedShow Answer

Which of the following statements is correct? In the special case of the 100-percent reserve banking the money multiplier is

Correct AnswerverifiedShow Answer

A bank has $500,000 in deposits and $475,000 in loans. It has loaned out all it can. It has a reserve ratio of

Correct AnswerverifiedShow Answer

U.S. dollars are an example of commodity money and hides used to make trades are an example of fiat money.

Correct AnswerverifiedShow Answer

The federal funds rate is the interest rate

Correct AnswerverifiedShow Answer

Fractional reserve banking is a system where banks must hold an amount of cash based on a percentage of its loans.

Correct AnswerverifiedShow Answer

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A "lender of last resort" is a lender to...
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The Term Auction Facility is the market ...
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When banks cannot borrow in the market p...
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