Question 1

If a bank has a required reserve ratio of 25 percent and there is $10,000 in deposits, what is the maximum possible change to the money supply?

Accepted Answer

A)  $40,000 
B)  $10,000 
C)  $0 
D)  $2,500 
E)  $7,500 
A)  $40,000 
B)  $10,000 
C)  $0 
D)  $2,500 
E)  $7,500 A

Question 2

A bank's liabilities, by definition, are the

Accepted Answer

A)  financial obligations the bank owes to others. 
B)  items of value the bank owns. 
C)  portion of bank deposits that are set aside and not loaned out. 
D)  currency deposited in the bank's accounts. 
E)  property the bank underwrites as the loan source. 
A)  financial obligations the bank owes to others. 
B)  items of value the bank owns. 
C)  portion of bank deposits that are set aside and not loaned out. 
D)  currency deposited in the bank's accounts. 
E)  property the bank underwrites as the loan source. A

Question 3

After the initial deposit, the bank decides to lend out the legally maximum amount of funds to borrowers who do business at other banks. If the required reserve ratio is 25 percent, write out the bank's balance sheet and include the entries for required reserves, excess reserves, loans, and deposits.

Accepted Answer

$$\begin{array} { l l } 
\hline \quad\quad\quad\quad\quad { \text { Bank's balance sheet } } \
\hline \text { Assets } & \text { Liabilities } \
\hline \text { Required reserves: } \$ 5,000 & \text { Deposits: } \$ 20,000 \
\text { Excess reserves: } \$ 0 & \
\text { Loans: } \$ 15,000 & \
\hline
\end{array}$$

Question 4

In the following figure, the green arrows represent flows. Identify each of the flows for points A, B, C, and D.

Accepted Answer

A)  A= federal funds, B =deposits, C = loans, D =discount loans 
B)  A =federal funds, B = loans, C = federal funds, D =discount loans 
C)  A =loans, B =federal funds, C = deposits, D = discount loans 
D)  A = deposits, B = federal funds, C =loans, D = discount loans 
E)  A = discount loans, B =federal funds, C  loans, D deposits 
A)  A= federal funds, B =deposits, C = loans, D =discount loans 
B)  A =federal funds, B = loans, C = federal funds, D =discount loans 
C)  A =loans, B =federal funds, C = deposits, D = discount loans 
D)  A = deposits, B = federal funds, C =loans, D = discount loans 
E)  A = discount loans, B =federal funds, C  loans, D deposits

Question 5

What is the most appropriate measure of the money supply-M1 or M2?

Accepted Answer

M2 offers a broader measure of the money

Question 6

Refer to the following table to answer the next  questions: $$\begin{array} { l l } 
\text { Checkable deposits } & \$ 12,500,000 \
\text { Currency } & \$ 34,000,000 \
\text { Traveler's checks } & \$ 1,000,000 \
\text { Money market matual funds } & \$ 10,000,000 \
\text { Small time deposits } & \$ 7,000,000 \
\text { Savings deposits } & \$ 500,000
\end{array}$$
-What is the value of M2 that is not part of M1?

Accepted Answer

A)  $13,500,000 
B)  $17,500,000 
C)  $47,500,000 
D)  $57,500,000 
E)  $64,500,000 
A)  $13,500,000 
B)  $17,500,000 
C)  $47,500,000 
D)  $57,500,000 
E)  $64,500,000

Question 7

What are the techniques available to the Federal Reserve to alter the money supply? Briefly explain how each method works.

Accepted Answer

The Federal Reserve has three means of a

Question 8

If Ralph were to receive cash from his sister and he deposited it into his checking account, which of the following changes would occur?

Accepted Answer

A)  M1 and M2 would remain unchanged. 
B)  M1 would decrease; M2 would increase. 
C)  Both M1 and M2 would increase. 
D)  Both M1 and M2 would decrease. 
E)  M1 would increase; M2 would decrease. 
A)  M1 and M2 would remain unchanged. 
B)  M1 would decrease; M2 would increase. 
C)  Both M1 and M2 would increase. 
D)  Both M1 and M2 would decrease. 
E)  M1 would increase; M2 would decrease.

Question 9

________ is the phenomenon when one party that is protected from risk behaves differently than if it were fully exposed to the risk.

Accepted Answer

A)  Moral hazard 
B)  Fractional reserve banking 
C)  Owner's equity 
D)  Simple deposit multiplier 
E)  Double coincidence of wants 
A)  Moral hazard 
B)  Fractional reserve banking 
C)  Owner's equity 
D)  Simple deposit multiplier 
E)  Double coincidence of wants

Question 10

Use the following information to answer the next questions: Currency $\quad \$ 1,500,000$
Savings deposits $\quad \$ 7,000,000$
Money market funds $\quad \$ 650,000$
Small time deposits $\quad \$ 720,000$
Checking accounts $\quad \$ 1,230,000$
Traveler's checks $\quad \$ 100,000$
-Calculate the portion of M2 that was not included in M1.

Accepted Answer

The sum of savings,

Question 11

If Bank of Mateer has a required reserve ratio of 40 percent and there is $100,000 in deposits, what is the maximum amount of money it can loan?

Accepted Answer

A)  $100,000 
B)  $15,000 
C)  $40,000 
D)  $60,000 
E)  $0 
A)  $100,000 
B)  $15,000 
C)  $40,000 
D)  $60,000 
E)  $0

Question 12

The Federal Reserve System was created in

Accepted Answer

A)  1776. 
B)  1863. 
C)  1913. 
D)  1945. 
E)  1975. 
A)  1776. 
B)  1863. 
C)  1913. 
D)  1945. 
E)  1975.

Question 13

A bank has excess reserves of $400,000 and makes a new loan for $50,000. If the bank faces a 25 percent required reserve ratio, by how much will the money supply increase when the loan is made?

Accepted Answer

A)  $0 
B)  $200,000 
C)  $50,000 
D)  $350,000 
E)  $750,000 
A)  $0 
B)  $200,000 
C)  $50,000 
D)  $350,000 
E)  $750,000

Question 14

If the required reserve ratio is 100 percent, could the Federal Reserve still change the money supply with open market operations? Explain whether it could or could not.

Accepted Answer

The Federal Reserve could still change t

Question 15

What function of money is highlighted when Sally pays her cell phone bill with cash?

Accepted Answer

A)  fiat money 
B)  medium of exchange 
C)  unit of account 
D)  store of value 
E)  commodity money 
A)  fiat money 
B)  medium of exchange 
C)  unit of account 
D)  store of value 
E)  commodity money

Question 16

Which of the following CANNOT be found on a bank's balance sheet?

Accepted Answer

A)  deposits 
B)  cash held by individuals 
C)  owner's equity 
D)  reserves 
E)  loans 
A)  deposits 
B)  cash held by individuals 
C)  owner's equity 
D)  reserves 
E)  loans

Question 17

Money does NOT function as an)

Accepted Answer

A)  unit of account. 
B)  medium of exchange. 
C)  means to buy goods and services. 
D)  item to barter. 
E)  store of value. 
A)  unit of account. 
B)  medium of exchange. 
C)  means to buy goods and services. 
D)  item to barter. 
E)  store of value.

Question 18

Refer to the following table to answer the next questions: $$\begin{array} { l l } 
\text { Checkable deposits } & \$ 400,000,000 \
\text { Currency } & \$ 340,000,000 \
\text { Traveler's checks } & \$ 4,000,000 \
\text { Money market mutual funds } & \$ 50,000,000 \
\text { Small time deposits } & \$ 6,000,000 \
\text { Savings deposits } & \$ 850,000,000
\end{array}$$
-What is the value of M2?

Accepted Answer

A)  $404,000,000 
B)  $1,650,000,000 
C)  $740,000,000 
D)  $906,000,000 
E)  $744,000,000 
A)  $404,000,000 
B)  $1,650,000,000 
C)  $740,000,000 
D)  $906,000,000 
E)  $744,000,000

Question 19

Explain what excess reserves are. Why do banks face a disincentive to hold a significant amount of excess reserves?

Accepted Answer

Excess reserves represent customer depos

Question 20

Federal funds, by definition, are the

Accepted Answer

A)  deposits that private banks hold on reserve at the Federal Reserve. 
B)  loans between private banks. 
C)  loans from the Federal Reserve to private banks. 
D)  income generated by the Federal Reserve through discount loans. 
E)  portion of bank deposits that are set aside and not loaned out. 
A)  deposits that private banks hold on reserve at the Federal Reserve. 
B)  loans between private banks. 
C)  loans from the Federal Reserve to private banks. 
D)  income generated by the Federal Reserve through discount loans. 
E)  portion of bank deposits that are set aside and not loaned out.

If a bank has a required reserve ratio of 25 percent and there is $10,000 in deposits, what is the maximum possible change to the money supply?

A bank's liabilities, by definition, are the

In the following figure, the green arrows represent flows. Identify each of the flows for points A, B, C, and D.

What is the most appropriate measure of the money supply-M1 or M2?

Refer to the following table to answer the next questions: Checkable deposits \ 12,500,000 Currency \ 34,000,000 Traveler's checks \ 1,000,000 Money market matual funds \ 10,000,000 Small time deposits \ 7,000,000 Savings deposits \ 500,000 -What is the value of M2 that is not part of M1?

What are the techniques available to the Federal Reserve to alter the money supply? Briefly explain how each method works.

If Ralph were to receive cash from his sister and he deposited it into his checking account, which of the following changes would occur?

________ is the phenomenon when one party that is protected from risk behaves differently than if it were fully exposed to the risk.

If Bank of Mateer has a required reserve ratio of 40 percent and there is $100,000 in deposits, what is the maximum amount of money it can loan?

The Federal Reserve System was created in

A bank has excess reserves of $400,000 and makes a new loan for $50,000. If the bank faces a 25 percent required reserve ratio, by how much will the money supply increase when the loan is made?

If the required reserve ratio is 100 percent, could the Federal Reserve still change the money supply with open market operations? Explain whether it could or could not.

What function of money is highlighted when Sally pays her cell phone bill with cash?

Which of the following CANNOT be found on a bank's balance sheet?

Money does NOT function as an)

Refer to the following table to answer the next questions: Checkable deposits \ 400,000,000 Currency \ 340,000,000 Traveler's checks \ 4,000,000 Money market mutual funds \ 50,000,000 Small time deposits \ 6,000,000 Savings deposits \ 850,000,000 -What is the value of M2?

Explain what excess reserves are. Why do banks face a disincentive to hold a significant amount of excess reserves?

Federal funds, by definition, are the

Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Market Outcomes and Tax Incidence

Price Controls

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

The Price Level and Inflation

Savings, Interest Rates, and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

The Aggregate Demandaggregate Supply Model

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Monetary Policy Learning Objectives

International Trade

International Finance

Filters

Exam 17: Money and the Federal Reserve

If a bank has a required reserve ratio of 25 percent and there is $10,000 in deposits, what is the maximum possible change to the money supply?

A bank's liabilities, by definition, are the

In the following figure, the green arrows represent flows. Identify each of the flows for points A, B, C, and D.

What is the most appropriate measure of the money supply-M1 or M2?

Refer to the following table to answer the next questions: Checkable deposits \ 12,500,000 Currency \ 34,000,000 Traveler's checks \ 1,000,000 Money market matual funds \ 10,000,000 Small time deposits \ 7,000,000 Savings deposits \ 500,000 -What is the value of M2 that is not part of M1?

What are the techniques available to the Federal Reserve to alter the money supply? Briefly explain how each method works.

If Ralph were to receive cash from his sister and he deposited it into his checking account, which of the following changes would occur?

________ is the phenomenon when one party that is protected from risk behaves differently than if it were fully exposed to the risk.

If Bank of Mateer has a required reserve ratio of 40 percent and there is $100,000 in deposits, what is the maximum amount of money it can loan?

The Federal Reserve System was created in

A bank has excess reserves of $400,000 and makes a new loan for $50,000. If the bank faces a 25 percent required reserve ratio, by how much will the money supply increase when the loan is made?

If the required reserve ratio is 100 percent, could the Federal Reserve still change the money supply with open market operations? Explain whether it could or could not.

What function of money is highlighted when Sally pays her cell phone bill with cash?

Which of the following CANNOT be found on a bank's balance sheet?

Money does NOT function as an)

Refer to the following table to answer the next questions: Checkable deposits \ 400,000,000 Currency \ 340,000,000 Traveler's checks \ 4,000,000 Money market mutual funds \ 50,000,000 Small time deposits \ 6,000,000 Savings deposits \ 850,000,000 -What is the value of M2?

Explain what excess reserves are. Why do banks face a disincentive to hold a significant amount of excess reserves?

Federal funds, by definition, are the

Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Market Outcomes and Tax Incidence

Price Controls

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

The Price Level and Inflation

Savings, Interest Rates, and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

The Aggregate Demandaggregate Supply Model

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Monetary Policy Learning Objectives

International Trade

International Finance

Filters