Question 1

The Fed's primary tool to change the money supply is

Accepted Answer

A) changing the interest rate on reserves. 
B) changing the reserve requirement. 
C) conducting open market operations. 
D) redeeming Federal Reserve notes. 
A) changing the interest rate on reserves. 
B) changing the reserve requirement. 
C) conducting open market operations. 
D) redeeming Federal Reserve notes. C

Question 2

Economists use the term "money" to refer to

Accepted Answer

A) all wealth. 
B) all assets, including real assets and financial assets. 
C) all financial assets, but not real assets. 
D) those types of wealth that are regularly accepted by sellers in exchange for goods and services. 
A) all wealth. 
B) all assets, including real assets and financial assets. 
C) all financial assets, but not real assets. 
D) those types of wealth that are regularly accepted by sellers in exchange for goods and services. D

Question 3

Consider five firms that produce different goods and services using different inputs.
​  
​
Which of the following pairs of firms has a double coincidence of wants?

Accepted Answer

A) ​Moo Farms and Burger Shack 
B) Corny Farms and Biomass Corp. 
C) ​Moo Farms and Corny Farms 
D) ​Carne Castle and Moo Farms 
A) ​Moo Farms and Burger Shack 
B) Corny Farms and Biomass Corp. 
C) ​Moo Farms and Corny Farms 
D) ​Carne Castle and Moo Farms C

Question 4

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

Accepted Answer

A) True 
 B)False

Question 5

Table 29-8  
-Refer to Table 29-8. This bank's leverage ratio is

Accepted Answer

A) 2. 
B) 50. 
C) 13.3. 
D) 7.5. 
A) 2. 
B) 50. 
C) 13.3. 
D) 7.5.

Question 6

Which of the following is a liability of a bank and an asset of its customers?

Accepted Answer

A) deposits of its customers and loans to its customers 
B) deposits of its customers but not loans to its customers 
C) loans of its customers but not the deposits of its customers 
D) neither the deposits of its customers nor the loans to its customers 
A) deposits of its customers and loans to its customers 
B) deposits of its customers but not loans to its customers 
C) loans of its customers but not the deposits of its customers 
D) neither the deposits of its customers nor the loans to its customers

Question 7

Which of the following is included in both M1 and M2?

Accepted Answer

A) savings deposits 
B) demand deposits 
C) small time deposits 
D) money market mutual funds 
A) savings deposits 
B) demand deposits 
C) small time deposits 
D) money market mutual funds

Question 8

Currency includes

Accepted Answer

A) paper bills and coins. 
B) demand deposits. 
C) credit cards. 
D) Both (a) and (b) are correct. 
A) paper bills and coins. 
B) demand deposits. 
C) credit cards. 
D) Both (a) and (b) are correct.

Question 9

​Which of the following is NOT an example of monetary policy?

Accepted Answer

A) ​The Federal Open Market Committee decides to sell bonds. 
B) ​​The Federal Open Market Committee decides to buy bonds. 
C) ​The Federal Reserve reduces the reserve requirements. 
D) ​The Federal Reserve facilitates bank transactions by clearing checks. 
A) ​The Federal Open Market Committee decides to sell bonds. 
B) ​​The Federal Open Market Committee decides to buy bonds. 
C) ​The Federal Reserve reduces the reserve requirements. 
D) ​The Federal Reserve facilitates bank transactions by clearing checks.

Question 10

Describe the role of bank leverage in bank insolvency during times of falling asset prices.

Accepted Answer

As bank asset values fall, the effect on

Question 11

The reserve requirement is 12 percent. Lucy deposits $600 into a bank. By how much do excess reserves change?

Accepted Answer

A) $600 
B) $528 
C) $72 
D) $12 
A) $600 
B) $528 
C) $72 
D) $12

Question 12

When the federal funds rate is below the target rate, the Fed will _____ bonds. This action will _____ the money supply.

Accepted Answer

The answer of When the federal funds rate is below...

Question 13

In the United States, currency holdings per person average about

Accepted Answer

A) $110; one explanation for this relatively small average is that many people use credit and debit cards to make transactions. 
B) $110; one explanation for this relatively small average is that U.S. citizens hold a lot of foreign currency. 
C) $4,490; one explanation for this relatively large amount is that criminals probably prefer currency as a medium of exchange. 
D) $4,490; one explanation for this relatively large average is that U.S. citizens hold a lot of foreign currency. 
A) $110; one explanation for this relatively small average is that many people use credit and debit cards to make transactions. 
B) $110; one explanation for this relatively small average is that U.S. citizens hold a lot of foreign currency. 
C) $4,490; one explanation for this relatively large amount is that criminals probably prefer currency as a medium of exchange. 
D) $4,490; one explanation for this relatively large average is that U.S. citizens hold a lot of foreign currency.

Question 14

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

Accepted Answer

When the reserve requirement is less tha

Question 15

The Fed can directly protect a bank during a bank run by

Accepted Answer

A) increasing reserve requirements. 
B) selling government bonds to the bank. 
C) lending reserves to the bank. 
D) doing any of the above. 
A) increasing reserve requirements. 
B) selling government bonds to the bank. 
C) lending reserves to the bank. 
D) doing any of the above.

Question 16

During a bank run, depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits.

Accepted Answer

A) Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply increase. 
B) Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply decrease. 
C) The decision to hold relatively more currency would make the money supply increase. The decision to hold relatively more excess reserves would make the money supply decrease. 
D) the decision to hold relatively more currency would make the money supply increase. The decision to hold relatively more excess reserves would make the money supply decrease. 
A) Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply increase. 
B) Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply decrease. 
C) The decision to hold relatively more currency would make the money supply increase. The decision to hold relatively more excess reserves would make the money supply decrease. 
D) the decision to hold relatively more currency would make the money supply increase. The decision to hold relatively more excess reserves would make the money supply decrease.

Question 17

All Fed purchases and sales of

Accepted Answer

A) corporate stocks and bonds are conducted at the New York Fed's trading desk. 
B) government bonds are conducted at the New York Fed's trading desk. 
C) real estate and other real assets are conducted by the Federal Open Market Committee. 
D) All of the above are correct. 
A) corporate stocks and bonds are conducted at the New York Fed's trading desk. 
B) government bonds are conducted at the New York Fed's trading desk. 
C) real estate and other real assets are conducted by the Federal Open Market Committee. 
D) All of the above are correct.

Question 18

If the Fed sells government bonds to the public, then reserves

Accepted Answer

A) increase and the money supply increases. 
B) increase and the money supply decreases. 
C) decrease and the money supply increases. 
D) decrease and the money supply decreases. 
A) increase and the money supply increases. 
B) increase and the money supply decreases. 
C) decrease and the money supply increases. 
D) decrease and the money supply decreases.

Question 19

Why is the Chairman of the Federal Reserve often referred to as the "second most powerful person in the United States?"

Accepted Answer

The Fed's policy decisions influence the

Question 20

Bottles of very fine wine are less liquid than demand deposits.

Accepted Answer

A) True 
 B)False

Exam 29: The Monetary System

The Fed's primary tool to change the money supply is

Economists use the term "money" to refer to

Consider five firms that produce different goods and services using different inputs. ​ ​ Which of the following pairs of firms has a double coincidence of wants?

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

Table 29-8 -Refer to Table 29-8. This bank's leverage ratio is

Which of the following is a liability of a bank and an asset of its customers?

Which of the following is included in both M1 and M2?

Currency includes

​Which of the following is NOT an example of monetary policy?

Describe the role of bank leverage in bank insolvency during times of falling asset prices.

The reserve requirement is 12 percent. Lucy deposits $600 into a bank. By how much do excess reserves change?

When the federal funds rate is below the target rate, the Fed will _____ bonds. This action will _____ the money supply.

In the United States, currency holdings per person average about

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

The Fed can directly protect a bank during a bank run by

During a bank run, depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits.

All Fed purchases and sales of

If the Fed sells government bonds to the public, then reserves

Why is the Chairman of the Federal Reserve often referred to as the "second most powerful person in the United States?"

Bottles of very fine wine are less liquid than demand deposits.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Consider five firms that produce different goods and services using different inputs. Which of the following pairs of firms has a double coincidence of wants?

Which of the following is NOT an example of monetary policy?

When the federal funds rate is below the target rate, the Fed will _ bonds. This action will _ the money supply.