Question 1

When the Federal Reserve conducts open-market operations to increase the money supply, it

Accepted Answer

A)   redeems Federal Reserve notes.
B)   buys government bonds from the public.
C)   raises the discount rate.
D)   decreases its lending to member banks.

Question 2

A bank has a 5 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement.

Accepted Answer

A)   It has $25 in reserves and $4,975 in loans.
B)   It has $250 in reserves and $4,750 in loans.
C)   It has $1,000 in reserves and $4,000 in loans.
D)   None of the above is correct.

Question 3

What is bank insolvancy?

Accepted Answer

Bank insolvancy is when bank c...

Question 4

Which of the following is a store of value?

Accepted Answer

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

Question 5

During the Great Depression in the early 1930s,

Accepted Answer

A)   bank runs closed many banks.
B)   the money supply rose sharply.
C)   the Fed decreased reserve requirements.
D)   both a and b are correct.

Question 6

Which of the following is not included in M1?

Accepted Answer

A)   a $5 bill in your wallet
B)   $100 in your checking account
C)   $500 in your savings account
D)   All of the above are included in M1.

Question 7

Scenario 29-2.
The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the taz. Aggregate banking statistics show that collectively the banks of Tazi hold 300 million tazes of required reserves, 75 million tazes of excess reserves, have issued 7,500 million tazes of deposits, and hold 225 million tazes of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank.
-Refer to Scenario 29-2. Suppose the Bank of Tazi purchased 50 million tazes of Tazian Treasury Bonds from the banks. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much does the money supply change?

Accepted Answer

A)   625 million tazes
B)   1,000 million tazes
C)   1,250 million tazes
D)   None of the above is correct.

Question 8

The president of each regional Federal Reserve Bank is appointed by

Accepted Answer

A)   the U.S. president with the approval of the Senate.
B)   the Board of Governors.
C)   the voting members of the Federal Open Market Committee.
D)   the board of directors of that regional Federal Reserve Bank.

Question 9

Given the following information, what are the values of M1 and M2?
Small time deposits $600 billion
Demand deposits and other checkable deposits $400 billion
Savings deposits $800 billion
Money market mutual funds $700 billion
Traveler's checks $30 billion
Large time deposits $400 billion
Currency $250 billion
Miscellaneous categories in M2 $20 billion

Accepted Answer

A)   M1 = $650 billion, M2 = $2,830 billion.
B)   M1 = $400 billion, M2 = $3,080 billion.
C)   M1 = $680 billion, M2 = $2,800 billion.
D)   M1 = $680 billion, M2 = $3,200 billion.

Question 10

The discount rate is the rate the Federal Reserve charges banks for loans. By lowering this rate, the Fed provides banks with a greater incentive to borrow from it.

Accepted Answer

A) True 
 B)False

Question 11

If the reserve requirement is 10 percent, which of the following pairs of changes would both allow a bank to lend out an additional $10,000?

Accepted Answer

A)   the Fed buys a $10,000 bond from the bank or someone deposits $10,000 in the bank
B)   the Fed buys a $10,000 bond from the bank or the Fed lends the bank $10,000
C)   the Fed sells a $10,000 bond to the bank or someone deposits $10,000 in the bank
D)   the Fed sells a $10,000 bond to the bank or the Fed lends the bank $10,000

Question 12

As the reserve ratio decreases, the money multiplier

Accepted Answer

A)   increases.
B)   does not change.
C)   decreases.
D)   could do any of the above.

Question 13

Sandra routinely uses currency to purchase her groceries. She is using money as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 14

To increase the money supply, the Fed could

Accepted Answer

A)   sell government bonds.
B)   increase the discount rate.
C)   decrease the reserve requirement.
D)   None of the above is correct.

Question 15

Table 29-6.
 
-Refer to Table 29-6. The Bank of Pleasantville's reserve ratio is

Accepted Answer

A)   6.4 percent.
B)   16.7 percent.
C)   6.0 percent.
D)   15.7 percent.

Question 16

In a fractional-reserve banking system with no excess reserves and no currency holdings, if the central bank buys $100 million worth of bonds,

Accepted Answer

A)   reserves and the money supply increase by less than $100 million.
B)   reserves increase by $100 million and the money supply increases by $100 million.
C)   reserves increase by $100 million and the money supply increases by more than $100 million.
D)   both reserves and the money supply increase by more than $100 million.

Question 17

A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve. Its deposits amount to

Accepted Answer

A)   $114.
B)   $2,166.
C)   $2,400.
D)   $45,600.

Question 18

Economists argue that the move from barter to money increased trade and production. How is this possible?

Accepted Answer

The use of money allows people...

Question 19

The agency responsible for regulating the U.S. monetary system is the

Accepted Answer

A)   U.S. Treasury
B)   Federal Reserve
C)   Department of Justice
D)   Federal Trade Commission

Question 20

If the money multiplier is 3 and the Fed wants to increase the money supply by $900,000, it could

Accepted Answer

A)   buy $300,000 worth of bonds.
B)   buy $225,000 worth of bonds.
C)   sell $300,000 worth of bonds.
D)   sell $225,000 worth of bonds.

Exam 11: The Monetary System

If the reserve requirement is 10 percent, which of the following pairs of changes would both allow a bank to lend out an additional $10,000?

Correct Answer
verified

Which of the following is not included in M1?

Correct Answer
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Table 29-6. -Refer to Table 29-6. The Bank of Pleasantville's reserve ratio is

Correct Answer
verified

The agency responsible for regulating the U.S. monetary system is the

Correct Answer
verified

Which of the following is a store of value?

Correct Answer
verified

Economists argue that the move from barter to money increased trade and production. How is this possible?

Correct Answer
verified
The use of money allows people...
View Answer

If the money multiplier is 3 and the Fed wants to increase the money supply by $900,000, it could

Correct Answer
verified

Correct Answer
verified

When the Federal Reserve conducts open-market operations to increase the money supply, it

Correct Answer
verified

Sandra routinely uses currency to purchase her groceries. She is using money as a medium of exchange.

Correct Answer
verified

In a fractional-reserve banking system with no excess reserves and no currency holdings, if the central bank buys $100 million worth of bonds,

Correct Answer
verified

Correct Answer
verified

As the reserve ratio decreases, the money multiplier

Correct Answer
verified

A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve. Its deposits amount to

Correct Answer
verified

The president of each regional Federal Reserve Bank is appointed by

Correct Answer
verified

During the Great Depression in the early 1930s,

Correct Answer
verified

To increase the money supply, the Fed could

Correct Answer
verified

What is bank insolvancy?

Correct Answer
verified
Bank insolvancy is when bank c...
View Answer

A bank has a 5 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement.

Correct Answer
verified

The discount rate is the rate the Federal Reserve charges banks for loans. By lowering this rate, the Fed provides banks with a greater incentive to borrow from it.

Correct Answer
verified

Exam 11: The Monetary System

If the reserve requirement is 10 percent, which of the following pairs of changes would both allow a bank to lend out an additional $10,000?

Correct AnswerverifiedShow Answer

Which of the following is not included in M1?

Correct AnswerverifiedShow Answer

Table 29-6. -Refer to Table 29-6. The Bank of Pleasantville's reserve ratio is

Correct AnswerverifiedShow Answer

The agency responsible for regulating the U.S. monetary system is the

Correct AnswerverifiedShow Answer

Which of the following is a store of value?

Correct AnswerverifiedShow Answer

Economists argue that the move from barter to money increased trade and production. How is this possible?

Correct AnswerverifiedThe use of money allows people...View AnswerShow Answer

If the money multiplier is 3 and the Fed wants to increase the money supply by $900,000, it could

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the Federal Reserve conducts open-market operations to increase the money supply, it

Correct AnswerverifiedShow Answer

Sandra routinely uses currency to purchase her groceries. She is using money as a medium of exchange.

Correct AnswerverifiedShow Answer

In a fractional-reserve banking system with no excess reserves and no currency holdings, if the central bank buys $100 million worth of bonds,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

As the reserve ratio decreases, the money multiplier

Correct AnswerverifiedShow Answer

A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve. Its deposits amount to

Correct AnswerverifiedShow Answer

The president of each regional Federal Reserve Bank is appointed by

Correct AnswerverifiedShow Answer

During the Great Depression in the early 1930s,

Correct AnswerverifiedShow Answer

To increase the money supply, the Fed could

Correct AnswerverifiedShow Answer

What is bank insolvancy?

Correct AnswerverifiedBank insolvancy is when bank c...View AnswerShow Answer

A bank has a 5 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement.

Correct AnswerverifiedShow Answer

The discount rate is the rate the Federal Reserve charges banks for loans. By lowering this rate, the Fed provides banks with a greater incentive to borrow from it.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
The use of money allows people...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Bank insolvancy is when bank c...
View Answer

Correct Answer
verified

Correct Answer
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