Question 1

The use of money allows trade to be roundabout.

Accepted Answer

A) True 
 B)False

Question 2

The existence of money makes trade easier. How is it that money can also increase the standard of living?

Accepted Answer

The existence of money means the economy

Question 3

Just after the terrorist attack on September 11, 2001, the Fed stood ready to lend financial institutions funds. When the Fed did this, it was acting in its role of lender of last resort.

Accepted Answer

A) True 
 B)False

Question 4

Currently, bank runs are a major problem for the U.S. banking system and the Fed.

Accepted Answer

A) True 
 B)False

Question 5

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150. If customers deposit $50 into the bank, what is the value of the money supply?

Accepted Answer

A) $50 
B) $100 
C) $150 
D) $200 
A) $50 
B) $100 
C) $150 
D) $200

Question 6

If banks hold any amount of their deposits in reserve, then they do not have the ability to influence the money supply.

Accepted Answer

A) True 
 B)False

Question 7

Money, such as gold, with some intrinsic value is called _____. Money with no intrinsic value is called _____.

Accepted Answer

commodity

Question 8

According to economists, "money" means the same thing as "wealth".

Accepted Answer

A) True 
 B)False

Question 9

If you withdraw $500 from your savings account and deposit it in your checking account, then M1 will change by _____ and M2 will change by _____.

Accepted Answer

The answer of If you withdraw $500 from your savings...

Question 10

If traveler's checks were $1000 higher and saving deposits were $500 higher, M1 would be

Accepted Answer

A) $500 higher and M2 would be $1,500 higher. 
B) $1,000 higher and M2 would be $1,500 higher. 
C) M2 and M1 would be $1,500 higher. 
D) $1,000 high and M2 would be $500 higher. 
A) $500 higher and M2 would be $1,500 higher. 
B) $1,000 higher and M2 would be $1,500 higher. 
C) M2 and M1 would be $1,500 higher. 
D) $1,000 high and M2 would be $500 higher.

Question 11

Assume that when $100 of new reserves enter the banking system, the money supply ultimately increases by $625. Assume also that no banks hold excess reserves and that the entire money supply consists of bank deposits. If, at a point in time, reserves for all banks amount to $500, then at that same point in time, loans for all banks amount to $2,625.

Accepted Answer

A) True 
 B)False

Question 12

You believe the dollars you have today will be accepted in the future in exchange for goods and services. Which function of money does this illustrate?

Accepted Answer

The answer of You believe the dollars you have today...

Question 13

The _____ is the interest rate at which banks make overnight loans to other banks.

Accepted Answer

The answer of The _____ is the interest rate at...

Question 14

How does the Fed Open Market Committee increase the money supply?

Accepted Answer

The answer of How does the Fed Open Market Committee...

Question 15

Table 29-2
The information in the following table pertains to the hypothetical economy of Florencial.
​
 $$\begin{array} { | c | c | } 
\hline \text { Type of Money } & \begin{array} { c } 
\text { Amount } \
\text { (Billions of dollars) }
\end{array} \
\hline \text { Large time deposits } & 120 \
\hline \text { Small time deposits } & 80 \
\hline \text { Demand deposits } & 300 \
\hline \text { Other checkable deposits } & 50 \
\hline \text { Savings deposits } & 65 \
\hline \text { Traveler's checks } & 5 \
\hline \text { Money market mutual funds } & 200 \
\hline \text { Currency } & 150 \
\hline \text { Credit card balances } & 300 \
\hline \text { Miscellaneous categories of M2 } & 30 \
\hline
\end{array}$$
-Refer to Table 29-2. What is the M2 money supply in Florencial?

Accepted Answer

A) $1,300 billion 
B) $580 billion 
C) $880 billion 
D) $1,000 billion 
A) $1,300 billion 
B) $580 billion 
C) $880 billion 
D) $1,000 billion

Question 16

Banks can hold deposits at the Federal Reserve. Balances in these accounts can be used by banks to meet their reserve requirements, but the Fed pays no interest on these deposits.

Accepted Answer

A) True 
 B)False

Question 17

If the reserve ratio is 5 percent, then $500 of additional reserves would ultimately generate

Accepted Answer

A) $10,500 of money. 
B) $10,000 of money. 
C) $9,500 of money. 
D) $2,500 of money. 
A) $10,500 of money. 
B) $10,000 of money. 
C) $9,500 of money. 
D) $2,500 of money.

Question 18

Why do Federal Reserve Board of Governors have long (14 year) terms?

Accepted Answer

Long terms allow Fed Board of

Question 19

Table 29-4
   ​
-Refer to Table 29-4. The Bank of Cheerton's reserve ratio is

Accepted Answer

A) 8.7 percent. 
B) 11.3 percent. 
C) 8.0 percent. 
D) 14.3 percent. 
A) 8.7 percent. 
B) 11.3 percent. 
C) 8.0 percent. 
D) 14.3 percent.

Question 20

Which of the following is not a function of money?

Accepted Answer

A) Unit of account 
B) Store of value 
C) Medium of exchange 
D) Protection against inflation 
A) Unit of account 
B) Store of value 
C) Medium of exchange 
D) Protection against inflation

Exam 29: The Monetary System

The use of money allows trade to be roundabout.

The existence of money makes trade easier. How is it that money can also increase the standard of living?

Just after the terrorist attack on September 11, 2001, the Fed stood ready to lend financial institutions funds. When the Fed did this, it was acting in its role of lender of last resort.

Currently, bank runs are a major problem for the U.S. banking system and the Fed.

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150. If customers deposit $50 into the bank, what is the value of the money supply?

If banks hold any amount of their deposits in reserve, then they do not have the ability to influence the money supply.

Money, such as gold, with some intrinsic value is called _____. Money with no intrinsic value is called _____.

According to economists, "money" means the same thing as "wealth".

If you withdraw $500 from your savings account and deposit it in your checking account, then M1 will change by _____ and M2 will change by _____.

If traveler's checks were $1000 higher and saving deposits were $500 higher, M1 would be

You believe the dollars you have today will be accepted in the future in exchange for goods and services. Which function of money does this illustrate?

The _____ is the interest rate at which banks make overnight loans to other banks.

How does the Fed Open Market Committee increase the money supply?

Banks can hold deposits at the Federal Reserve. Balances in these accounts can be used by banks to meet their reserve requirements, but the Fed pays no interest on these deposits.

If the reserve ratio is 5 percent, then $500 of additional reserves would ultimately generate

Why do Federal Reserve Board of Governors have long (14 year) terms?

Table 29-4 ​ -Refer to Table 29-4. The Bank of Cheerton's reserve ratio is

Which of the following is not a function of money?

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

Money, such as gold, with some intrinsic value is called _. Money with no intrinsic value is called _.

If you withdraw $500 from your savings account and deposit it in your checking account, then M1 will change by _ and M2 will change by _.

Table 29-4 -Refer to Table 29-4. The Bank of Cheerton's reserve ratio is