Question 1

Commodity money cannot be used as a unit of account.

Accepted Answer

A) True 
 B)False

Question 2

A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can given the reserve requirement.

Accepted Answer

A)   It has $80 in reserves and $9,920 in loans.
B)   It has $800 in reserves and $9,200 in loans.
C)   It has $1,250 in reserves and $8,750 in loans.
D)   None of the above is correct.

Question 3

A problem that the Fed faces when it attempts to control the money supply is that

Accepted Answer

A)   the 100-percent-reserve banking system in the U.S. makes it difficult for the Fed to carry out its monetary policy.
B)   the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools.
C)   the Fed does not have a tool that it can use to change the money supply by either a small amount or a large amount.
D)   the Fed does not control the amount of money that households choose to hold as deposits in banks.

Question 4

Reserves increase if the Federal Reserve

Accepted Answer

A)   raises the discount rate or auctions more credit.
B)   raises the discount rate but not if it auctions more credit.
C)   lowers the discount rate or auctions more credit.
D)   lowers the discount rate but not if it auctions more credit.

Question 5

Assume that when $100 of new reserves enter the banking system, the money supply ultimately increases by $625. 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 $500, then at that same point in time, loans for all banks amount to $2,625.

Accepted Answer

A) True 
 B)False

Question 6

The interest rate that the Fed charges banks that borrow reserves from it is the

Accepted Answer

A)   federal funds rate.
B)   discount rate.
C)   reserve requirement.
D)   prime rate.

Question 7

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 8

People can write checks against

Accepted Answer

A)   demand deposits and money market mutual funds
B)   demand deposits but not money market mutual funds
C)   money market mutual funds but not demand deposits
D)   neither demand deposits nor money market mutual funds

Question 9

Table 29-5.
 
-Refer to Table 29-5. Suppose the bank faces a reserve requirement of 10 percent. Starting from the situation as depicted by the T-account, a customer deposits an additional $60,000 into his account at the bank. If the bank takes no other action it will

Accepted Answer

A)   have $64,000 in excess reserves.
B)   have $4,000 in excess reserves.
C)   be in a position to make new loans equal to $6,000
D)   None of the above is correct.

Question 10

When we measure and record economic value, we use money as the

Accepted Answer

A)   liquid asset.
B)   medium of exchange.
C)   unit of account.
D)   store of value.

Question 11

Why do Federal Reserve Board of Governors have long 14 year) terms?

Accepted Answer

Long terms allow Fed Board of ...

Question 12

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. Assume that banks desire to continue holding the same ratio of excess reserves to deposits. What is the reserve requirement and the reserve ratio for Tazian Banks?

Accepted Answer

A)   5 percent, 8 percent
B)   4 percent, 8 percent
C)   4 percent, 5 percent
D)   None of the above is correct.

Question 13

Money, such as gold, with some intrinsic value is called . Money with no intrinsic value is called .

Accepted Answer

commodity ...

Question 14

The Federal Reserve

Accepted Answer

A)   was created in 1836.
B)   serves as a lender of last resort.
C)   was created to facilitate the federal government's collection of taxes as well as its expenditures.
D)   All of the above are correct.

Question 15

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold

Accepted Answer

A)   fewer reserves, so the reserve ratio will fall.
B)   fewer reserves, so the reserve ratio will rise.
C)   more reserves, so the reserve ratio will fall.
D)   more reserves, so the reserve ratio will rise.

Question 16

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 17

If the reserve ratio is 8 percent, then the money multiplier is

Accepted Answer

A)   12.5.
B)   11.5.
C)   13.5.
D)   8.

Question 18

The discount rate is the interest rate that

Accepted Answer

A)   banks charge one another for loans.
B)   banks charge the Fed for loans.
C)   the Fed charges banks for loans.
D)   the Fed charges Congress for loans.

Question 19

If the reserve ratio is 5 percent, banks do not hold excess reserves, and people do not hold currency, then when the Fed purchases $20 million worth of government bonds, bank reserves

Accepted Answer

A)   increase by $20 million and the money supply eventually increases by $400 million.
B)   decrease by $20 million and the money supply eventually decreases by $400 million.
C)   increase by $20 million and the money supply eventually increases by $100 million.
D)   decrease by $20 million and the money supply eventually decreases by $100 million.

Question 20

If R represents the reserve ratio for all banks in the economy, then the money multiplier is

Accepted Answer

A)   1/1-R) .
B)   1/R.
C)   1/1+R) .
D)   1+R) /R.

Exam 16: The Monetary System

Table 29-5. -Refer to Table 29-5. Suppose the bank faces a reserve requirement of 10 percent. Starting from the situation as depicted by the T-account, a customer deposits an additional $60,000 into his account at the bank. If the bank takes no other action it will

Correct Answer
verified

If the reserve ratio is 8 percent, then the money multiplier is

Correct Answer
verified

Correct Answer
verified

The interest rate that the Fed charges banks that borrow reserves from it is the

Correct Answer
verified

A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can given the reserve requirement.

Correct Answer
verified

Correct Answer
verified

Why do Federal Reserve Board of Governors have long 14 year) terms?

Correct Answer
verified
Long terms allow Fed Board of ...
View Answer

The Federal Reserve

Correct Answer
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Correct Answer
verified

Commodity money cannot be used as a unit of account.

Correct Answer
verified

Money, such as gold, with some intrinsic value is called . Money with no intrinsic value is called .

Correct Answer
verified
commodity ...
View Answer

Reserves increase if the Federal Reserve

Correct Answer
verified

When we measure and record economic value, we use money as the

Correct Answer
verified

People can write checks against

Correct Answer
verified

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold

Correct Answer
verified

The discount rate is the interest rate that

Correct Answer
verified

If the reserve ratio is 5 percent, banks do not hold excess reserves, and people do not hold currency, then when the Fed purchases $20 million worth of government bonds, bank reserves

Correct Answer
verified

A problem that the Fed faces when it attempts to control the money supply is that

Correct Answer
verified

The president of each regional Federal Reserve Bank is appointed by

Correct Answer
verified

If R represents the reserve ratio for all banks in the economy, then the money multiplier is

Correct Answer
verified

Exam 16: The Monetary System

Table 29-5. -Refer to Table 29-5. Suppose the bank faces a reserve requirement of 10 percent. Starting from the situation as depicted by the T-account, a customer deposits an additional $60,000 into his account at the bank. If the bank takes no other action it will

Correct AnswerverifiedShow Answer

If the reserve ratio is 8 percent, then the money multiplier is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The interest rate that the Fed charges banks that borrow reserves from it is the

Correct AnswerverifiedShow Answer

A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can given the reserve requirement.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Why do Federal Reserve Board of Governors have long 14 year) terms?

Correct AnswerverifiedLong terms allow Fed Board of ...View AnswerShow Answer

The Federal Reserve

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Commodity money cannot be used as a unit of account.

Correct AnswerverifiedShow Answer

Money, such as gold, with some intrinsic value is called . Money with no intrinsic value is called .

Correct Answerverifiedcommodity ...View AnswerShow Answer

Reserves increase if the Federal Reserve

Correct AnswerverifiedShow Answer

When we measure and record economic value, we use money as the

Correct AnswerverifiedShow Answer

People can write checks against

Correct AnswerverifiedShow Answer

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold

Correct AnswerverifiedShow Answer

The discount rate is the interest rate that

Correct AnswerverifiedShow Answer

If the reserve ratio is 5 percent, banks do not hold excess reserves, and people do not hold currency, then when the Fed purchases $20 million worth of government bonds, bank reserves

Correct AnswerverifiedShow Answer

A problem that the Fed faces when it attempts to control the money supply is that

Correct AnswerverifiedShow Answer

The president of each regional Federal Reserve Bank is appointed by

Correct AnswerverifiedShow Answer

If R represents the reserve ratio for all banks in the economy, then the money multiplier is

Correct AnswerverifiedShow Answer

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Long terms allow Fed Board of ...
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commodity ...
View Answer

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