Question 1

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 2

Assume that banks do not hold excess reserves, all deposits remain in the banking system and that the required reserve ratio is 20%. If one bank obtains excess reserves of $10,000, then the maximum increase in money supply is

Accepted Answer

A)  $10,000. 
B)  $20,000. 
C)  $40,000. 
D)  $50,000. 
A)  $10,000. 
B)  $20,000. 
C)  $40,000. 
D)  $50,000.

Question 3

Which of the following is a market in which banks lend reserves to one another?

Accepted Answer

A)  required reserve market 
B)  open market 
C)  discount market 
D)  federal funds market 
A)  required reserve market 
B)  open market 
C)  discount market 
D)  federal funds market

Question 4

The function of money illustrated by the prevailing prices of goods and services is the

Accepted Answer

A)  medium of exchange function. 
B)  unit of account function. 
C)  standard of deferred payments function. 
D)  store of value function. 
A)  medium of exchange function. 
B)  unit of account function. 
C)  standard of deferred payments function. 
D)  store of value function.

Question 5

Increasing the reserve requirement ratio is

Accepted Answer

A)  a contractionary policy because it lowers the amount of total reserves in the banking system. 
B)  a contractionary policy because it lowers the amount of excess reserves in the banking system. 
C)  an expansionary policy because it raises the amount of excess reserves in the banking system. 
D)  an expansionary policy because it raises the amount of required reserves in the banking system. 
A)  a contractionary policy because it lowers the amount of total reserves in the banking system. 
B)  a contractionary policy because it lowers the amount of excess reserves in the banking system. 
C)  an expansionary policy because it raises the amount of excess reserves in the banking system. 
D)  an expansionary policy because it raises the amount of required reserves in the banking system.

Question 6

When you buy a ticket to the rodeo, you are using money as a

Accepted Answer

A)  source of economic activity. 
B)  store of value. 
C)  factor of production. 
D)  medium of exchange. 
A)  source of economic activity. 
B)  store of value. 
C)  factor of production. 
D)  medium of exchange.

Question 7

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 8

Membership in the Federal Reserve System

Accepted Answer

A)  is held by state-owned banks only. 
B)  is held collectively by all banks in the banking system. 
C)  is held by only a minority of banks in the banking system. 
D)  is held by banks that also have branches outside the United States. 
A)  is held by state-owned banks only. 
B)  is held collectively by all banks in the banking system. 
C)  is held by only a minority of banks in the banking system. 
D)  is held by banks that also have branches outside the United States.

Question 9

The non-bank public chooses among various financial assets in deciding in what form it wants to hold liquidity. It thereby increases or decreases
I. the M1 measure of money supply.
II. the reserves of commercial banks.
III. the reserves that commercial banks are required to hold.

Accepted Answer

A)  none of the above since only the Fed can alter the money supply 
B)  I, II, and III 
C)  I and II only 
D)  I only 
A)  none of the above since only the Fed can alter the money supply 
B)  I, II, and III 
C)  I and II only 
D)  I only

Question 10

The seven members of the Board of Governors serve 14-year terms to

Accepted Answer

A)  provide steady employment. 
B)  reduce political influence. 
C)  prevent illegal appointments. 
D)  inhibit independent decisions. 
A)  provide steady employment. 
B)  reduce political influence. 
C)  prevent illegal appointments. 
D)  inhibit independent decisions.

Question 11

Use the following to answer questions .
Exhibit: Balance Sheet of the Alpha-Beta Bank
  
-(Exhibit: Balance Sheet of the Alpha-Beta Bank) What is the value of the bank's total reserves?

Accepted Answer

A)  $25 million 
B)  $75 million 
C)  $100 million 
D)  $200 million 
A)  $25 million 
B)  $75 million 
C)  $100 million 
D)  $200 million

Question 12

A bank has $100,000 in checkable deposits and $30,000 in reserves. If the required reserve ratio is 10%, what is the amount of required reserves?

Accepted Answer

A)  $0 
B)  $10,000 
C)  $20,000 
D)  $30,000 
A)  $0 
B)  $10,000 
C)  $20,000 
D)  $30,000

Question 13

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 required reserves?

Accepted Answer

A)  $25,000 
B)  $55,000 
C)  $80,000 
D)  $135,000 
A)  $25,000 
B)  $55,000 
C)  $80,000 
D)  $135,000

Question 14

Nita deposits a check for $750 drawn against Home Federal Bank into her account at Village Bank. Which pair of the T-accounts below shows this transaction on the respective bank's balance sheets?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 15

The unit-of-account function of money means that money is used

Accepted Answer

A)  as a consistent means of measuring the value of things. 
B)  as the common denominator of future payments. 
C)  to pay for goods and services. 
D)  to accumulate purchasing power. 
A)  as a consistent means of measuring the value of things. 
B)  as the common denominator of future payments. 
C)  to pay for goods and services. 
D)  to accumulate purchasing power.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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 18

Use the following to answer questions.
Exhibit: Money in the Economy
  
-(Exhibit: Money in the Economy) In Year 1, the supply of money measured by M1 was

Accepted Answer

A)  $150 billion. 
B)  $300 billion. 
C)  $450 billion. 
D)  $950 billion. 
A)  $150 billion. 
B)  $300 billion. 
C)  $450 billion. 
D)  $950 billion.

Question 19

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 value of the bank's required reserves?

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 20

If the Fed increases the discount rate, it is pursuing

Accepted Answer

A)  a contractionary policy because it will be more costly for banks to borrow funds and this puts upward pressure on interest rates in the economy. 
B)  a contractionary policy because it reduces banks' profit margins by raising the cost of borrowing and lowering the return on lending. 
C)  an expansionary policy because it raises the cost of holding excess reserves in the banking system. 
D)  an expansionary policy because it increases bank profits by putting upward pressure on the interest rates that banks can charge on its loans. 
A)  a contractionary policy because it will be more costly for banks to borrow funds and this puts upward pressure on interest rates in the economy. 
B)  a contractionary policy because it reduces banks' profit margins by raising the cost of borrowing and lowering the return on lending. 
C)  an expansionary policy because it raises the cost of holding excess reserves in the banking system. 
D)  an expansionary policy because it increases bank profits by putting upward pressure on the interest rates that banks can charge on its loans.

Any item that serves as a medium of exchange is called

Assume that banks do not hold excess reserves, all deposits remain in the banking system and that the required reserve ratio is 20%. If one bank obtains excess reserves of $10,000, then the maximum increase in money supply is

Which of the following is a market in which banks lend reserves to one another?

The function of money illustrated by the prevailing prices of goods and services is the

Increasing the reserve requirement ratio is

When you buy a ticket to the rodeo, you are using money as a

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

Membership in the Federal Reserve System

The non-bank public chooses among various financial assets in deciding in what form it wants to hold liquidity. It thereby increases or decreases I. the M1 measure of money supply. II. the reserves of commercial banks. III. the reserves that commercial banks are required to hold.

The seven members of the Board of Governors serve 14-year terms to

Use the following to answer questions . Exhibit: Balance Sheet of the Alpha-Beta Bank -(Exhibit: Balance Sheet of the Alpha-Beta Bank) What is the value of the bank's total reserves?

A bank has $100,000 in checkable deposits and $30,000 in reserves. If the required reserve ratio is 10%, what is the amount of required reserves?

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 required reserves?

Nita deposits a check for $750 drawn against Home Federal Bank into her account at Village Bank. Which pair of the T-accounts below shows this transaction on the respective bank's balance sheets?

The unit-of-account function of money means that money is used

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

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

Use the following to answer questions. Exhibit: Money in the Economy -(Exhibit: Money in the Economy) In Year 1, the supply of money measured by M1 was

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 value of the bank's required reserves?

If the Fed increases the discount rate, it is pursuing

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

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Exam 9: The Nature and Creation of Money

Any item that serves as a medium of exchange is called

Assume that banks do not hold excess reserves, all deposits remain in the banking system and that the required reserve ratio is 20%. If one bank obtains excess reserves of $10,000, then the maximum increase in money supply is

Which of the following is a market in which banks lend reserves to one another?

The function of money illustrated by the prevailing prices of goods and services is the

Increasing the reserve requirement ratio is

When you buy a ticket to the rodeo, you are using money as a

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

Membership in the Federal Reserve System

The non-bank public chooses among various financial assets in deciding in what form it wants to hold liquidity. It thereby increases or decreases I. the M1 measure of money supply. II. the reserves of commercial banks. III. the reserves that commercial banks are required to hold.

The seven members of the Board of Governors serve 14-year terms to

Use the following to answer questions . Exhibit: Balance Sheet of the Alpha-Beta Bank -(Exhibit: Balance Sheet of the Alpha-Beta Bank) What is the value of the bank's total reserves?

A bank has $100,000 in checkable deposits and $30,000 in reserves. If the required reserve ratio is 10%, what is the amount of required reserves?

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 required reserves?

Nita deposits a check for $750 drawn against Home Federal Bank into her account at Village Bank. Which pair of the T-accounts below shows this transaction on the respective bank's balance sheets?

The unit-of-account function of money means that money is used

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

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

Use the following to answer questions. Exhibit: Money in the Economy -(Exhibit: Money in the Economy) In Year 1, the supply of money measured by M1 was

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 value of the bank's required reserves?

If the Fed increases the discount rate, it is pursuing

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