Question 1

A bank's reserves are

Accepted Answer

A)  the minimum value of assets it must have. 
B)  the amount of gold it is required to have as reserves against loans. 
C)  the value of federal securities it is required to have as reserves against loans. 
D)  deposits that banks have accepted from customers but have not loaned out. 
A)  the minimum value of assets it must have. 
B)  the amount of gold it is required to have as reserves against loans. 
C)  the value of federal securities it is required to have as reserves against loans. 
D)  deposits that banks have accepted from customers but have not loaned out.

Question 2

For a given level of reserves, an increase in the reserve requirement ratio will

Accepted Answer

A)  decrease legal reserves and decrease the money supply. 
B)  increase legal reserves and decrease excess reserves. 
C)  increase legal reserves and increase excess reserves. 
D)  increase excess reserves and increase the money supply. 
A)  decrease legal reserves and decrease the money supply. 
B)  increase legal reserves and decrease excess reserves. 
C)  increase legal reserves and increase excess reserves. 
D)  increase excess reserves and increase the money supply.

Question 3

The M1 money supply includes all currency in circulation, checkable deposits, and traveler's checks.

Accepted Answer

A) True 
 B)False

Question 4

Table 9-6: Deposit Expansion Stages
   In Table 9-6, assume that banks loan out 100% of their excess banking reserves, there are no cash withdrawals, and all loan proceeds are spent. Figures have been rounded up to the nearest whole number.
-Refer to Table 9-6. What is the value of $B in stage 1?

Accepted Answer

A)  $100 
B)  $200 
C)  $600 
D)  $800 
A)  $100 
B)  $200 
C)  $600 
D)  $800

Question 5

Currency is paper money and coin issued by the government.

Accepted Answer

A) True 
 B)False

Question 6

If the Fed raises its target for the federal fund rate, this indicates

Accepted Answer

A)  the Fed is pursuing an expansionary monetary policy. 
B)  the Fed is pursuing a contractionary monetary policy. 
C)  the Fed is attempting to lower unemployment. 
D)  the Fed is concerned that the growth in aggregate demand will exceed potential GDP. 
A)  the Fed is pursuing an expansionary monetary policy. 
B)  the Fed is pursuing a contractionary monetary policy. 
C)  the Fed is attempting to lower unemployment. 
D)  the Fed is concerned that the growth in aggregate demand will exceed potential GDP.

Question 7

If Naruz is in the car dealer's showroom looking at the sticker price on a 2013 car, that sticker price serves as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 8

Table 9-4
Acme Bank: Partial Balance Sheet
(All figures in $ million)
  
-Refer to Table 9-4. If Acme Bank has no excess reserves, the required reserve ratio is

Accepted Answer

A)  26.67% 
B)  16% 
C)  10% 
D)  There is insufficient information to answer question. 
A)  26.67% 
B)  16% 
C)  10% 
D)  There is insufficient information to answer question.

Question 9

Which of the following is true regarding the interest rate earned on the reserves that bank's keep at the Fed?

Accepted Answer

A)  These reserves earn no interest. 
B)  It is relatively low. 
C)  It varies depending on the federal funds rate. 
D)  It is equal to the discount rate. 
A)  These reserves earn no interest. 
B)  It is relatively low. 
C)  It varies depending on the federal funds rate. 
D)  It is equal to the discount rate.

Question 10

Fiat money is money that has a value apart from its use as money.

Accepted Answer

A) True 
 B)False

Question 11

If you withdraw currency from your savings account, you are

Accepted Answer

A)  increasing M1, decreasing M2. 
B)  increasing both M1 and M2. 
C)  increasing M1 but not affecting M2. 
D)  decreasing both M1 and M2. 
A)  increasing M1, decreasing M2. 
B)  increasing both M1 and M2. 
C)  increasing M1 but not affecting M2. 
D)  decreasing both M1 and M2.

Question 12

Which of the following is an example of a bank's reserves?

Accepted Answer

A)  currency held in the vaults of the bank 
B)  demand deposits with other member banks 
C)  U.S. Treasury bills 
D)  U.S. Treasury bonds 
A)  currency held in the vaults of the bank 
B)  demand deposits with other member banks 
C)  U.S. Treasury bills 
D)  U.S. Treasury bonds

Question 13

Table 9-3
Balance Sheet of the Alpha-Beta Bank
(All figures in $ million)
  
-Refer to Table 9-3. If the required reserve ratio is 10%, what is the maximum amount of new loans that Alpha-Beta can create?

Accepted Answer

A)  $25 million 
B)  $40 million 
C)  $60 million 
D)  $75 million 
A)  $25 million 
B)  $40 million 
C)  $60 million 
D)  $75 million

Question 14

Money is any item that

Accepted Answer

A)  serves as a medium of exchange for goods and services. 
B)  can be converted into silver with relatively little loss in value. 
C)  can be converted into gold with relatively little loss in value. 
D)  facilitates a connecting link between credit instruments and debt instruments. 
A)  serves as a medium of exchange for goods and services. 
B)  can be converted into silver with relatively little loss in value. 
C)  can be converted into gold with relatively little loss in value. 
D)  facilitates a connecting link between credit instruments and debt instruments.

Question 15

Table 9-5
Bolton Bank: Partial Balance Sheet
(All figures in $ million)
  
-Refer to Table 9-5. The required reserve ratio is 10%. What is the value of the deposit multiplier?

Accepted Answer

A)  1 
B)  2.5 
C)  7 
D)  10 
A)  1 
B)  2.5 
C)  7 
D)  10

Question 16

Which of the following describes the store of value function of money?

Accepted Answer

A)  noting that Audible.com sells downloadable audio books for $10 per book 
B)  making a monthly payment toward your car loan 
C)  paying $30 for a haircut 
D)  putting away $50 each month into your savings account 
A)  noting that Audible.com sells downloadable audio books for $10 per book 
B)  making a monthly payment toward your car loan 
C)  paying $30 for a haircut 
D)  putting away $50 each month into your savings account

Question 17

Table 9-6: Deposit Expansion Stages
   In Table 9-6, assume that banks loan out 100% of their excess banking reserves, there are no cash withdrawals, and all loan proceeds are spent. Figures have been rounded up to the nearest whole number.
-Refer to Table 9-6. New loans made in Stage 1($C) amount to

Accepted Answer

A)  $100. 
B)  $200. 
C)  $600. 
D)  $800. 
A)  $100. 
B)  $200. 
C)  $600. 
D)  $800.

Question 18

Table 9-3
Balance Sheet of the Alpha-Beta Bank
(All figures in $ million)
  
-Refer to Table 9-3. If the required reserve ratio is 10% and the market interest rate is 6%, then the opportunity cost of holding excess reserves is

Accepted Answer

A)  zero since Alpha-Beta does not hold any excess reserves. 
B)  $0.9 million. 
C)  $2.4 million. 
D)  $4 million. 
A)  zero since Alpha-Beta does not hold any excess reserves. 
B)  $0.9 million. 
C)  $2.4 million. 
D)  $4 million.

Question 19

Table 9-4
Acme Bank: Partial Balance Sheet
(All figures in $ million)
  
-Refer to Table 9-4. Assume Acme Bank initially has no excess reserves. If Guevara withdraws $6,000 from her checking account at Acme Bank, which of the following will occur?

Accepted Answer

A)  Acme's excess reserves are reduced by $6,000. 
B)  Acme will have excess reserves of $2,000. 
C)  Acme will have a required reserve deficiency of $3,000. 
D)  Acme will have a required reserve deficiency of $5, 400. 
A)  Acme's excess reserves are reduced by $6,000. 
B)  Acme will have excess reserves of $2,000. 
C)  Acme will have a required reserve deficiency of $3,000. 
D)  Acme will have a required reserve deficiency of $5, 400.

Question 20

Suppose a bank has $50,000 in deposits and $6,000 in reserves. The required reserve ratio is 10%. Which of the following occurs if the required reserve ratio is increased to 12%?

Accepted Answer

A)  The bank's total reserves will fall. 
B)  The bank will now be fully loaned up. 
C)  The bank will have insufficient required reserves. 
D)  The bank's profit will fall. 
A)  The bank's total reserves will fall. 
B)  The bank will now be fully loaned up. 
C)  The bank will have insufficient required reserves. 
D)  The bank's profit will fall.

A bank's reserves are

For a given level of reserves, an increase in the reserve requirement ratio will

The M1 money supply includes all currency in circulation, checkable deposits, and traveler's checks.

Table 9-6: Deposit Expansion Stages In Table 9-6, assume that banks loan out 100% of their excess banking reserves, there are no cash withdrawals, and all loan proceeds are spent. Figures have been rounded up to the nearest whole number. -Refer to Table 9-6. What is the value of $B in stage 1?

Currency is paper money and coin issued by the government.

If the Fed raises its target for the federal fund rate, this indicates

If Naruz is in the car dealer's showroom looking at the sticker price on a 2013 car, that sticker price serves as a medium of exchange.

Table 9-4 Acme Bank: Partial Balance Sheet (All figures in $ million) -Refer to Table 9-4. If Acme Bank has no excess reserves, the required reserve ratio is

Which of the following is true regarding the interest rate earned on the reserves that bank's keep at the Fed?

Fiat money is money that has a value apart from its use as money.

If you withdraw currency from your savings account, you are

Which of the following is an example of a bank's reserves?

Table 9-3 Balance Sheet of the Alpha-Beta Bank (All figures in $ million) -Refer to Table 9-3. If the required reserve ratio is 10%, what is the maximum amount of new loans that Alpha-Beta can create?

Money is any item that

Table 9-5 Bolton Bank: Partial Balance Sheet (All figures in $ million) -Refer to Table 9-5. The required reserve ratio is 10%. What is the value of the deposit multiplier?

Which of the following describes the store of value function of money?

Table 9-6: Deposit Expansion Stages In Table 9-6, assume that banks loan out 100% of their excess banking reserves, there are no cash withdrawals, and all loan proceeds are spent. Figures have been rounded up to the nearest whole number. -Refer to Table 9-6. New loans made in Stage 1($C) amount to

Table 9-3 Balance Sheet of the Alpha-Beta Bank (All figures in $ million) -Refer to Table 9-3. If the required reserve ratio is 10% and the market interest rate is 6%, then the opportunity cost of holding excess reserves is

Table 9-4 Acme Bank: Partial Balance Sheet (All figures in $ million) -Refer to Table 9-4. Assume Acme Bank initially has no excess reserves. If Guevara withdraws $6,000 from her checking account at Acme Bank, which of the following will occur?

Suppose a bank has $50,000 in deposits and $6,000 in reserves. The required reserve ratio is 10%. Which of the following occurs if the required reserve ratio is increased to 12%?

Economics: the Study of Choice

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Economic Development

Socialist Economies in Transition

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Exam 9: The Nature and Creation of Money

A bank's reserves are

For a given level of reserves, an increase in the reserve requirement ratio will

The M1 money supply includes all currency in circulation, checkable deposits, and traveler's checks.

Table 9-6: Deposit Expansion Stages In Table 9-6, assume that banks loan out 100% of their excess banking reserves, there are no cash withdrawals, and all loan proceeds are spent. Figures have been rounded up to the nearest whole number. -Refer to Table 9-6. What is the value of $B in stage 1?

Currency is paper money and coin issued by the government.

If the Fed raises its target for the federal fund rate, this indicates

If Naruz is in the car dealer's showroom looking at the sticker price on a 2013 car, that sticker price serves as a medium of exchange.

Table 9-4 Acme Bank: Partial Balance Sheet (All figures in $ million) -Refer to Table 9-4. If Acme Bank has no excess reserves, the required reserve ratio is

Which of the following is true regarding the interest rate earned on the reserves that bank's keep at the Fed?

Fiat money is money that has a value apart from its use as money.

If you withdraw currency from your savings account, you are

Which of the following is an example of a bank's reserves?

Table 9-3 Balance Sheet of the Alpha-Beta Bank (All figures in $ million) -Refer to Table 9-3. If the required reserve ratio is 10%, what is the maximum amount of new loans that Alpha-Beta can create?

Money is any item that

Table 9-5 Bolton Bank: Partial Balance Sheet (All figures in $ million) -Refer to Table 9-5. The required reserve ratio is 10%. What is the value of the deposit multiplier?

Which of the following describes the store of value function of money?

Table 9-6: Deposit Expansion Stages In Table 9-6, assume that banks loan out 100% of their excess banking reserves, there are no cash withdrawals, and all loan proceeds are spent. Figures have been rounded up to the nearest whole number. -Refer to Table 9-6. New loans made in Stage 1($C) amount to

Table 9-3 Balance Sheet of the Alpha-Beta Bank (All figures in $ million) -Refer to Table 9-3. If the required reserve ratio is 10% and the market interest rate is 6%, then the opportunity cost of holding excess reserves is

Table 9-4 Acme Bank: Partial Balance Sheet (All figures in $ million) -Refer to Table 9-4. Assume Acme Bank initially has no excess reserves. If Guevara withdraws $6,000 from her checking account at Acme Bank, which of the following will occur?

Suppose a bank has $50,000 in deposits and $6,000 in reserves. The required reserve ratio is 10%. Which of the following occurs if the required reserve ratio is increased to 12%?

Economics: the Study of Choice

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Economic Development

Socialist Economies in Transition

Filters