Question 1

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

Accepted Answer

A)  writing a check to buy a new Volkswagen 
B)  noting that the price of a $20,000 Volkswagen is 16,000 euros 
C)  keeping $20,000 in cash in your mattress instead of buying a new Volkswagen 
D)  driving your $20,000 Volkswagen to a friend's house 
A)  writing a check to buy a new Volkswagen 
B)  noting that the price of a $20,000 Volkswagen is 16,000 euros 
C)  keeping $20,000 in cash in your mattress instead of buying a new Volkswagen 
D)  driving your $20,000 Volkswagen to a friend's house

Question 2

The Fed's narrowest measure of money supply is

Accepted Answer

A)  M1. 
B)  M2. 
C)  credit card balances. 
D)  balances held in money market funds. 
A)  M1. 
B)  M2. 
C)  credit card balances. 
D)  balances held in money market funds.

Question 3

Credit cards are money since they facilitate the purchase of goods and services.

Accepted Answer

A) True 
 B)False

Question 4

When the Fed sells government bonds it ____ reserves and ______ the money supply.

Accepted Answer

A)  increases; increases 
B)  decreases; increases 
C)  decreases; decreases 
D)  increases; decreases 
A)  increases; increases 
B)  decreases; increases 
C)  decreases; decreases 
D)  increases; decreases

Question 5

When the Fed sells government bonds in the open market, the money supply will increase.

Accepted Answer

A) True 
 B)False

Question 6

Use the following to answer question .
Exhibit: Balance Sheets for Fed and Banking System
    
-(Exhibit:Balance Sheets for Fed and Banking System) The table shows entries on the balance sheets for the Federal Reserve and the banking system above. These balance sheet entries are consistent with

Accepted Answer

A)  an open market sale of $1,500 in bonds. 
B)  an open market purchase of $1,500 in bonds. 
C)  neither an open market sale nor an open market purchase. 
D)  either an open market sale or an open market purchase. 
A)  an open market sale of $1,500 in bonds. 
B)  an open market purchase of $1,500 in bonds. 
C)  neither an open market sale nor an open market purchase. 
D)  either an open market sale or an open market purchase.

Question 7

Which of the following are primary functions of a central bank?
I. act as a regulator of banks
II. issue government bonds
III. set monetary policy
IV. regulate dividend payments by corporations

Accepted Answer

A)  I, II, III, and IV 
B)  I, II, and III 
C)  I and III 
D)  I and II 
A)  I, II, III, and IV 
B)  I, II, and III 
C)  I and III 
D)  I and II

Question 8

Use the following to answer questions .
Exhibit: Balance Sheet of the Alpha-Beta Bank
  
-(Exhibit: Balance Sheet of the Alpha-Beta Bank) If the required reserve ratio is 10%, what is the amount of excess reserves held by Alpha-Beta Bank?

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 9

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

Accepted Answer

A)  reserves borrowed from the Fed 
B)  checkable deposits 
C)  vault cash 
D)  savings deposits 
A)  reserves borrowed from the Fed 
B)  checkable deposits 
C)  vault cash 
D)  savings deposits

Question 10

When a person makes price comparisons among products, money is being used as a(n)

Accepted Answer

A)  unit of account. 
B)  standard of quality. 
C)  medium of exchange. 
D)  checkable deposit. 
A)  unit of account. 
B)  standard of quality. 
C)  medium of exchange. 
D)  checkable deposit.

Question 11

Which of the following is the most liquid asset?

Accepted Answer

A)  season tickets to the Yankees' games 
B)  the cash that your Aunt Ursula stuffs in her mattress 
C)  a $5,000 6-month certificate of deposit (time deposit) 
D)  one hundred shares of IBM stock 
A)  season tickets to the Yankees' games 
B)  the cash that your Aunt Ursula stuffs in her mattress 
C)  a $5,000 6-month certificate of deposit (time deposit) 
D)  one hundred shares of IBM stock

Question 12

In 2008, commercial banks' share of the U.S. credit market changed as a result of

Accepted Answer

A)  commercial banks that experienced significant difficulties resulting from real estate investments applied for status as investment banks. 
B)  investment banks that experienced significant difficulties resulting from real estate investments applied for status as commercial banks. 
C)  increasing returns on real estate investments led commercial banks to expand. 
D)  increasing returns on real estate investments led investment banks to expand. 
A)  commercial banks that experienced significant difficulties resulting from real estate investments applied for status as investment banks. 
B)  investment banks that experienced significant difficulties resulting from real estate investments applied for status as commercial banks. 
C)  increasing returns on real estate investments led commercial banks to expand. 
D)  increasing returns on real estate investments led investment banks to expand.

Question 13

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 14

When the Fed buys U.S. Treasury bonds from a bank, it increases the supply of reserves by crediting the seller's account at the Fed.

Accepted Answer

A) True 
 B)False

Question 15

Credit cards are

Accepted Answer

A)  not money. 
B)  not money, because they can't be used to purchase goods and services. 
C)  considered to be money. 
D)  counted as a part of M2 but not M1. 
A)  not money. 
B)  not money, because they can't be used to purchase goods and services. 
C)  considered to be money. 
D)  counted as a part of M2 but not M1.

Question 16

Use the following to answer questions .
Exhibit: Reserves, Loans, and Money
  
-(Exhibit: Reserves, Loans, and Money) 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 17

Use the following to answer questions .
Exhibit: Reserves, Loans, and Money
  
-(Exhibit: Reserves, Loans, and Money) . The required reserve ratio is 10%. What is the maximum amount of new loans that Bolton bank can create and by how much can Bolton initially increase the money supply, assuming that newly created deposits are transferred to another bank?

Accepted Answer

A)  $30 million; $30 million 
B)  $70 million; $30 million 
C)  $70 million; $70 million 
D)  $70 million; $700 million 
A)  $30 million; $30 million 
B)  $70 million; $30 million 
C)  $70 million; $70 million 
D)  $70 million; $700 million

Question 18

Which of the following is part of M1?
I. currency in a bank's vault
II. cash in your wallet
III. checkable deposits
IV. traveler's checks

Accepted Answer

A)  I, II, III, and IV 
B)  I, II, and III 
C)  II and III 
D)  II, III, and IV 
A)  I, II, III, and IV 
B)  I, II, and III 
C)  II and III 
D)  II, III, and IV

Question 19

Use the following to answer questions .
Exhibit: Reserves, Loans, and Money
  
-(Exhibit: Reserves, Loans, and Money) The required reserve ratio is 10%. What is the amount of Bolton Bank's required reserves?

Accepted Answer

A)  $30 million 
B)  $70 million 
C)  $100 million 
D)  $300 million 
A)  $30 million 
B)  $70 million 
C)  $100 million 
D)  $300 million

Question 20

Lowering the discount rate is

Accepted Answer

A)  a contractionary policy stance because the cost of borrowing funds falls, thereby encouraging consumption and investment spending. 
B)  a contractionary policy because it reduces banks' profit margins by lowering the return on lending. 
C)  an expansionary policy stance because consumers and businesses can now borrow funds directly from the Fed at a lower cost, thereby encouraging private spending. 
D)  an expansionary policy stance because it will be less costly for banks to borrow funds and this puts downward pressure on interest rates in the economy. 
A)  a contractionary policy stance because the cost of borrowing funds falls, thereby encouraging consumption and investment spending. 
B)  a contractionary policy because it reduces banks' profit margins by lowering the return on lending. 
C)  an expansionary policy stance because consumers and businesses can now borrow funds directly from the Fed at a lower cost, thereby encouraging private spending. 
D)  an expansionary policy stance because it will be less costly for banks to borrow funds and this puts downward pressure on interest rates in the economy.

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

The Fed's narrowest measure of money supply is

Credit cards are money since they facilitate the purchase of goods and services.

When the Fed sells government bonds it reserves and __ the money supply.

When the Fed sells government bonds in the open market, the money supply will increase.

Use the following to answer question . Exhibit: Balance Sheets for Fed and Banking System -(Exhibit:Balance Sheets for Fed and Banking System) The table shows entries on the balance sheets for the Federal Reserve and the banking system above. These balance sheet entries are consistent with

Which of the following are primary functions of a central bank? I. act as a regulator of banks II. issue government bonds III. set monetary policy IV. regulate dividend payments by corporations

Use the following to answer questions . Exhibit: Balance Sheet of the Alpha-Beta Bank -(Exhibit: Balance Sheet of the Alpha-Beta Bank) If the required reserve ratio is 10%, what is the amount of excess reserves held by Alpha-Beta Bank?

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

When a person makes price comparisons among products, money is being used as a(n)

Which of the following is the most liquid asset?

In 2008, commercial banks' share of the U.S. credit market changed as a result of

Money is any item that

When the Fed buys U.S. Treasury bonds from a bank, it increases the supply of reserves by crediting the seller's account at the Fed.

Credit cards are

Use the following to answer questions . Exhibit: Reserves, Loans, and Money -(Exhibit: Reserves, Loans, and Money) The required reserve ratio is 10%. What is the value of the deposit multiplier?

Which of the following is part of M1? I. currency in a bank's vault II. cash in your wallet III. checkable deposits IV. traveler's checks

Use the following to answer questions . Exhibit: Reserves, Loans, and Money -(Exhibit: Reserves, Loans, and Money) The required reserve ratio is 10%. What is the amount of Bolton Bank's required reserves?

Lowering the discount rate is

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

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

Filters

Exam 9: The Nature and Creation of Money

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

The Fed's narrowest measure of money supply is

Credit cards are money since they facilitate the purchase of goods and services.

When the Fed sells government bonds it ____ reserves and ______ the money supply.

When the Fed sells government bonds in the open market, the money supply will increase.

Use the following to answer question . Exhibit: Balance Sheets for Fed and Banking System -(Exhibit:Balance Sheets for Fed and Banking System) The table shows entries on the balance sheets for the Federal Reserve and the banking system above. These balance sheet entries are consistent with

Which of the following are primary functions of a central bank? I. act as a regulator of banks II. issue government bonds III. set monetary policy IV. regulate dividend payments by corporations

Use the following to answer questions . Exhibit: Balance Sheet of the Alpha-Beta Bank -(Exhibit: Balance Sheet of the Alpha-Beta Bank) If the required reserve ratio is 10%, what is the amount of excess reserves held by Alpha-Beta Bank?

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

When a person makes price comparisons among products, money is being used as a(n)

Which of the following is the most liquid asset?

In 2008, commercial banks' share of the U.S. credit market changed as a result of

Money is any item that

When the Fed buys U.S. Treasury bonds from a bank, it increases the supply of reserves by crediting the seller's account at the Fed.

Credit cards are

Use the following to answer questions . Exhibit: Reserves, Loans, and Money -(Exhibit: Reserves, Loans, and Money) The required reserve ratio is 10%. What is the value of the deposit multiplier?

Which of the following is part of M1? I. currency in a bank's vault II. cash in your wallet III. checkable deposits IV. traveler's checks

Use the following to answer questions . Exhibit: Reserves, Loans, and Money -(Exhibit: Reserves, Loans, and Money) The required reserve ratio is 10%. What is the amount of Bolton Bank's required reserves?

Lowering the discount rate is

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

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

Filters

When the Fed sells government bonds it reserves and __ the money supply.