Question 1

Gresham's Law

Accepted Answer

A)  deals with the theory of regulatory forces in the economy. 
B)  is the tendency for good money to drive bad money out of circulation. 
C)  is the tendency for bad money to drive good money out of circulation. 
D)  was passed in 1913, as part of the Federal Reserve Act. 
A)  deals with the theory of regulatory forces in the economy. 
B)  is the tendency for good money to drive bad money out of circulation. 
C)  is the tendency for bad money to drive good money out of circulation. 
D)  was passed in 1913, as part of the Federal Reserve Act.

Question 2

The higher the discount rate, the greater the incentive for banks to hold excess reserves.

Accepted Answer

A) True 
 B)False

Question 3

Any item that serves as a medium of exchange is called

Accepted Answer

A)  gold. 
B)  capital. 
C)  silver. 
D)  money. 
A)  gold. 
B)  capital. 
C)  silver. 
D)  money.

Question 4

If the banking system has $2,000 in excess reserves, then it can expand deposits at most by $10,000 if the required reserve ratio is 10%.

Accepted Answer

A) True 
 B)False

Question 5

Table 9-2
  
-Refer to Table 9-2. In Year 1, if the supply of money measured by M2 was $650 billion, then the components of M2 not shown in the table must have totaled

Accepted Answer

A)  less than $100 billion. 
B)  $100 billion. 
C)  $200 billion. 
D)  $250 billion. 
A)  less than $100 billion. 
B)  $100 billion. 
C)  $200 billion. 
D)  $250 billion.

Question 6

Which of the following would lead to a change in the money measure, M1?

Accepted Answer

A)  a customer purchases music downloads with a debit card 
B)  a customer withdraws funds from her checking account to purchase a 6-month time deposit 
C)  depositing a paycheck drawn against Bank of America into your checking account in Wells Fargo Bank 
D)  interest payments by the Treasury on its debt 
A)  a customer purchases music downloads with a debit card 
B)  a customer withdraws funds from her checking account to purchase a 6-month time deposit 
C)  depositing a paycheck drawn against Bank of America into your checking account in Wells Fargo Bank 
D)  interest payments by the Treasury on its debt

Question 7

Assume that the required reserve ratio is 10%. An increase of $1,000 in the banking system's excess reserves may result in a total expansion of new deposits for the banking system as a whole by as much as

Accepted Answer

A)  $1,000. 
B)  $9,000. 
C)  $10,000. 
D)  $100,000. 
A)  $1,000. 
B)  $9,000. 
C)  $10,000. 
D)  $100,000.

Question 8

The discount rate is the rate of interest charged when banks lend excess reserves to one another.

Accepted Answer

A) True 
 B)False

Question 9

The reserve-requirement ratio is the interest rate the Federal Reserve System charges banks for loans.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following describes the medium-of-exchange 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 11

An institution that collects funds from lenders and distributes these funds to borrowers is called

Accepted Answer

A)  a financial intermediary. 
B)  the Federal Reserve System. 
C)  a mercantile exchange. 
D)  a currency market. 
A)  a financial intermediary. 
B)  the Federal Reserve System. 
C)  a mercantile exchange. 
D)  a currency market.

Question 12

Freema withdraws $1,000 from her checking account to purchase a $1,000 time-deposit. JAs a result of her transaction,

Accepted Answer

A)  M1 and M2 decrease. 
B)  M1 decreases and M2 increases. 
C)  M1 decreases and M2 is unaffected. 
D)  M1 and M2 are unaffected. 
A)  M1 and M2 decrease. 
B)  M1 decreases and M2 increases. 
C)  M1 decreases and M2 is unaffected. 
D)  M1 and M2 are unaffected.

Question 13

The deposit multiplier is given by the formula

Accepted Answer

A)  change in checkable deposits ÷ change in required reserves. 
B)  change in checkable deposits ÷ change in reserves. 
C)  change in excess reserves ÷ change in checkable deposits. 
D)  change in legal reserves ÷ change in excess reserves. 
A)  change in checkable deposits ÷ change in required reserves. 
B)  change in checkable deposits ÷ change in reserves. 
C)  change in excess reserves ÷ change in checkable deposits. 
D)  change in legal reserves ÷ change in excess reserves.

Question 14

Suppose the required reserve ratio is 10%. If a bank has total reserves of $80,000 and checkable deposits of $550,000, what is the amount of the bank's excess reserves?

Accepted Answer

A)  $25,000 
B)  $55,000 
C)  $80,000 
D)  $250,000 
A)  $25,000 
B)  $55,000 
C)  $80,000 
D)  $250,000

Question 15

Assume that the required reserve ratio is 20%. What is the maximum increase in money supply for the banking system as a whole following a $10,000 increase in excess reserves?

Accepted Answer

A)  $5,000 
B)  $10,000 
C)  $40,000 
D)  $50,000 
A)  $5,000 
B)  $10,000 
C)  $40,000 
D)  $50,000

Question 16

The federal funds rate is determined

Accepted Answer

A)  by the Board of Governors. 
B)  by the supply and demand for bank reserves. 
C)  directly by households' and firms' demands for funds. 
D)  by the federal government. 
A)  by the Board of Governors. 
B)  by the supply and demand for bank reserves. 
C)  directly by households' and firms' demands for funds. 
D)  by the federal government.

Question 17

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

Accepted Answer

A)  its reserves 
B)  its loans 
C)  checkable deposits 
D)  its holdings of U.S. government bonds 
A)  its reserves 
B)  its loans 
C)  checkable deposits 
D)  its holdings of U.S. government bonds

Question 18

Currency in the United States today is

Accepted Answer

A)  fiat money. 
B)  intrinsic money. 
C)  backed by gold. 
D)  quasi- intrinsic. 
A)  fiat money. 
B)  intrinsic money. 
C)  backed by gold. 
D)  quasi- intrinsic.

Question 19

Table 9-5
Bolton Bank: Partial Balance Sheet
(All figures in $ million)
  
-Refer to Table 9-5. If the required reserve ratio is 10% and the market interest rate is 8%, what is Bolton Bank's opportunity cost of holding the excess reserves it is currently holding?

Accepted Answer

A)  $5.6 million 
B)  $3.2 million 
C)  $0.8 million 
D)  0; Bolton Bank has no excess reserves. 
A)  $5.6 million 
B)  $3.2 million 
C)  $0.8 million 
D)  0; Bolton Bank has no excess reserves.

Question 20

The Federal Reserve System is made up of twelve regional banks owned by

Accepted Answer

A)  commercial banks in the respective districts that have chosen to be members of the Fed. 
B)  Wall Street investors. 
C)  the Board of Governors appointed by the President. 
D)  the U.S. Treasury. 
A)  commercial banks in the respective districts that have chosen to be members of the Fed. 
B)  Wall Street investors. 
C)  the Board of Governors appointed by the President. 
D)  the U.S. Treasury.

Gresham's Law

The higher the discount rate, the greater the incentive for banks to hold excess reserves.

Any item that serves as a medium of exchange is called

If the banking system has $2,000 in excess reserves, then it can expand deposits at most by $10,000 if the required reserve ratio is 10%.

Table 9-2 -Refer to Table 9-2. In Year 1, if the supply of money measured by M2 was $650 billion, then the components of M2 not shown in the table must have totaled

Which of the following would lead to a change in the money measure, M1?

Assume that the required reserve ratio is 10%. An increase of $1,000 in the banking system's excess reserves may result in a total expansion of new deposits for the banking system as a whole by as much as

The discount rate is the rate of interest charged when banks lend excess reserves to one another.

The reserve-requirement ratio is the interest rate the Federal Reserve System charges banks for loans.

Which of the following describes the medium-of-exchange function of money?

An institution that collects funds from lenders and distributes these funds to borrowers is called

Freema withdraws $1,000 from her checking account to purchase a $1,000 time-deposit. JAs a result of her transaction,

The deposit multiplier is given by the formula

Suppose the required reserve ratio is 10%. If a bank has total reserves of $80,000 and checkable deposits of $550,000, what is the amount of the bank's excess reserves?

Assume that the required reserve ratio is 20%. What is the maximum increase in money supply for the banking system as a whole following a $10,000 increase in excess reserves?

The federal funds rate is determined

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

Currency in the United States today is

Table 9-5 Bolton Bank: Partial Balance Sheet (All figures in $ million) -Refer to Table 9-5. If the required reserve ratio is 10% and the market interest rate is 8%, what is Bolton Bank's opportunity cost of holding the excess reserves it is currently holding?

The Federal Reserve System is made up of twelve regional banks owned by

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

Exam 9: The Nature and Creation of Money

Gresham's Law

The higher the discount rate, the greater the incentive for banks to hold excess reserves.

Any item that serves as a medium of exchange is called

If the banking system has $2,000 in excess reserves, then it can expand deposits at most by $10,000 if the required reserve ratio is 10%.

Table 9-2 -Refer to Table 9-2. In Year 1, if the supply of money measured by M2 was $650 billion, then the components of M2 not shown in the table must have totaled

Which of the following would lead to a change in the money measure, M1?

Assume that the required reserve ratio is 10%. An increase of $1,000 in the banking system's excess reserves may result in a total expansion of new deposits for the banking system as a whole by as much as

The discount rate is the rate of interest charged when banks lend excess reserves to one another.

The reserve-requirement ratio is the interest rate the Federal Reserve System charges banks for loans.

Which of the following describes the medium-of-exchange function of money?

An institution that collects funds from lenders and distributes these funds to borrowers is called

Freema withdraws $1,000 from her checking account to purchase a $1,000 time-deposit. JAs a result of her transaction,

The deposit multiplier is given by the formula

Suppose the required reserve ratio is 10%. If a bank has total reserves of $80,000 and checkable deposits of $550,000, what is the amount of the bank's excess reserves?

Assume that the required reserve ratio is 20%. What is the maximum increase in money supply for the banking system as a whole following a $10,000 increase in excess reserves?

The federal funds rate is determined

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

Currency in the United States today is

Table 9-5 Bolton Bank: Partial Balance Sheet (All figures in $ million) -Refer to Table 9-5. If the required reserve ratio is 10% and the market interest rate is 8%, what is Bolton Bank's opportunity cost of holding the excess reserves it is currently holding?

The Federal Reserve System is made up of twelve regional banks owned by

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