Question 1

Sam wants to trade eggs for sausage. Sally wants to trade sausage for eggs. Sam and Sally have a double-coincidence of wants.

Accepted Answer

A) True 
 B)False  True

Question 2

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 requirement. 
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 requirement. 
D) The Federal Reserve facilitates bank transactions by clearing checks. D

Question 3

One plausible explanation for the large amount of U.S. currency outstanding is that many dollars are held abroad.

Accepted Answer

A) True 
 B)False  True

Question 4

Monetary policy has an important influence on _____ and _____ in the short run.

Accepted Answer

inflation,

Question 5

An increase in the reserve requirement increases reserves and decreases the money supply.

Accepted Answer

A) True 
 B)False

Question 6

Explain how each of the following changes the money supply.
a.the Fed buys bonds
b.the Fed auctions credit
c.the Fed raises the discount rate
d.the Fed raises the reserve requirement

Accepted Answer

a. If the Fed buys bonds, it pays for th

Question 7

The Federal Reserve is a privately operated commercial bank.

Accepted Answer

A) True 
 B)False

Question 8

Economists argue that the move from barter to money increased trade and production. How is this possible?

Accepted Answer

The use of money allows people

Question 9

The money supply decreases when the Fed

Accepted Answer

A) sells Treasury bonds.The smaller the reserve requirement, the larger the decrease will be. 
B) sells Treasury bonds.The larger the reserve requirement, the larger the decrease will be. 
C) buys Treasury bonds.The smaller the reserve requirement, the larger the decrease will be. 
D) buys Treasury bonds.The larger the reserve requirement, the larger the decrease will be. 
A) sells Treasury bonds.The smaller the reserve requirement, the larger the decrease will be. 
B) sells Treasury bonds.The larger the reserve requirement, the larger the decrease will be. 
C) buys Treasury bonds.The smaller the reserve requirement, the larger the decrease will be. 
D) buys Treasury bonds.The larger the reserve requirement, the larger the decrease will be.

Question 10

Table 29-4
   ​
-Refer to Table 29-4. Assume the Fed's reserve requirement is 6 percent and all banks besides the Bank of Cheerton are exactly in compliance with the 6 percent requirement. Further assume that people hold only deposits and no currency. Starting from the situation as depicted by the T-account, if the Bank of Cheerton decides to make new loans so as to end up with no excess reserves, then by how much does the money supply eventually increase?

Accepted Answer

A) $22,500.00 
B) $30,572.69 
C) $32,526.93 
D) $30,000.00 
A) $22,500.00 
B) $30,572.69 
C) $32,526.93 
D) $30,000.00

Question 11

If the money multiplier is 3 and the Fed buys $50,000 worth of bonds, what happens to the money supply?

Accepted Answer

A) It increases by $100,000. 
B) It increases by $150,000. 
C) It decreases by $100,000. 
D) It decreases by $200,000. 
A) It increases by $100,000. 
B) It increases by $150,000. 
C) It decreases by $100,000. 
D) It decreases by $200,000.

Question 12

Scenario 29-1
The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the Tazian dollar. Aggregate banking statistics show that collectively the banks of Tazi hold $375 million of required reserves, $225 million of excess reserves, have issued $7,500 million of deposits, and hold $750 million of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank.
-Refer to Scenario 29-1. Assume that banks desire to continue holding the same ratio of excess reserves to deposits. What is the reserve requirement and the reserve ratio for Tazian Banks?

Accepted Answer

A) 8 percent, 10 percent 
B) 5 percent, 10 percent 
C) 5 percent, 8 percent 
D) 8 percent, 5 percent 
A) 8 percent, 10 percent 
B) 5 percent, 10 percent 
C) 5 percent, 8 percent 
D) 8 percent, 5 percent

Question 13

Which of the following statements regarding the Federal Open Market Committee is correct?

Accepted Answer

A) Only the five voting regional Fed presidents attend the meetings. 
B) All regional Fed presidents attend and vote at the meetings. 
C) All regional Fed presidents attend the meetings, but only five get to vote. 
D) Regional Fed presidents may neither attend nor vote the meetings. 
A) Only the five voting regional Fed presidents attend the meetings. 
B) All regional Fed presidents attend and vote at the meetings. 
C) All regional Fed presidents attend the meetings, but only five get to vote. 
D) Regional Fed presidents may neither attend nor vote the meetings.

Question 14

A debit card is more similar to a credit card than to a check.

Accepted Answer

A) True 
 B)False

Question 15

If the Fed decreases reserve requirements, the money supply will increase.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not included in M1?

Accepted Answer

A) Currency 
B) Demand deposits 
C) Savings deposits 
D) Traveler's checks 
A) Currency 
B) Demand deposits 
C) Savings deposits 
D) Traveler's checks

Question 17

The interest rate charged by the Fed to member banks is called the _____.

Accepted Answer

The answer of The interest rate charged by the Fed...

Question 18

Bank capital is

Accepted Answer

A) the machinery, structures, and equipment of the bank. 
B) the resources that owners have put into the bank. 
C) the reserves of the bank. 
D) the bank's total assets. 
A) the machinery, structures, and equipment of the bank. 
B) the resources that owners have put into the bank. 
C) the reserves of the bank. 
D) the bank's total assets.

Question 19

When the Fed conducts open-market sales,

Accepted Answer

A) it sells Treasury securities, which increases the money supply. 
B) it auctions term loans, which increases the money supply. 
C) it auctions term loans, which decreases the money supply. 
D) it sells Treasury securities, which decreases the money supply. 
A) it sells Treasury securities, which increases the money supply. 
B) it auctions term loans, which increases the money supply. 
C) it auctions term loans, which decreases the money supply. 
D) it sells Treasury securities, which decreases the money supply.

Question 20

The fractional reserve characteristic of the banking system allows banks to create money and also create wealth from bank deposits. Describe why this statement is or is not true.

Accepted Answer

This statement is not true.
Banks can cr

Exam 29: The Monetary System

Sam wants to trade eggs for sausage. Sally wants to trade sausage for eggs. Sam and Sally have a double-coincidence of wants.

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

One plausible explanation for the large amount of U.S. currency outstanding is that many dollars are held abroad.

Monetary policy has an important influence on _____ and _____ in the short run.

An increase in the reserve requirement increases reserves and decreases the money supply.

Explain how each of the following changes the money supply. a.the Fed buys bonds b.the Fed auctions credit c.the Fed raises the discount rate d.the Fed raises the reserve requirement

The Federal Reserve is a privately operated commercial bank.

Economists argue that the move from barter to money increased trade and production. How is this possible?

The money supply decreases when the Fed

If the money multiplier is 3 and the Fed buys $50,000 worth of bonds, what happens to the money supply?

Which of the following statements regarding the Federal Open Market Committee is correct?

A debit card is more similar to a credit card than to a check.

If the Fed decreases reserve requirements, the money supply will increase.

Which of the following is not included in M1?

The interest rate charged by the Fed to member banks is called the _____.

Bank capital is

When the Fed conducts open-market sales,

The fractional reserve characteristic of the banking system allows banks to create money and also create wealth from bank deposits. Describe why this statement is or is not true.

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 Nations 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

Monetary policy has an important influence on _ and _ in the short run.