Question 1

What makes the New York Federal Reserve regional bank so important?

Accepted Answer

The president of the New York Federal Re

Question 2

Which of the following is included in M2?

Accepted Answer

A) Credit cards 
B) Money market mutual funds 
C) Corporate bonds 
D) Large time deposits 
A) Credit cards 
B) Money market mutual funds 
C) Corporate bonds 
D) Large time deposits

Question 3

The discount rate is the rate the Federal Reserve charges banks for loans. By lowering this rate, the Fed provides banks with a greater incentive to borrow from it.

Accepted Answer

A) True 
 B)False

Question 4

The money multiplier equals 1/(1 - R), where R represents the reserve ratio.

Accepted Answer

A) True 
 B)False

Question 5

M1 includes savings deposits.

Accepted Answer

A) True 
 B)False

Question 6

What is the change in the money supply when the Fed purchases $700 worth of bonds and the required reserve ratio is 14 percent assuming banks hold no excess reserves?

Accepted Answer

The answer of What is the change in the money...

Question 7

Why is the president of the New York Fed always a voting member of the FOMC?

Accepted Answer

New York is the financial capitol of the

Question 8

Which of the following both decrease the money supply?

Accepted Answer

A) A decrease in the discount rate and a decrease in the interest rate on reserves 
B) An increase in the discount rate and a decrease in the interest rate on reserves 
C) A decrease in the discount rate and an increase in the interest rate on reserves 
D) An increase in the discount rate and an increase in the interest rate on reserves 
A) A decrease in the discount rate and a decrease in the interest rate on reserves 
B) An increase in the discount rate and a decrease in the interest rate on reserves 
C) A decrease in the discount rate and an increase in the interest rate on reserves 
D) An increase in the discount rate and an increase in the interest rate on reserves

Question 9

​Bank runs are only a concern under a fractional-reserve banking system.

Accepted Answer

A) True 
 B)False

Question 10

The banking system currently has $10 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the Fed raises the reserve requirement to 12.5 percent and at the same time buys $1 billion worth of bonds, then by how much does the money supply change?

Accepted Answer

A) It falls by $12 billion. 
B) It falls by $19 billion. 
C) It falls by $21 billion. 
D) It rises by $19 billion. 
A) It falls by $12 billion. 
B) It falls by $19 billion. 
C) It falls by $21 billion. 
D) It rises by $19 billion.

Question 11

When the Fed decreases the discount rate, banks will

Accepted Answer

A) borrow more from the Fed and lend more to the public.The money supply increases. 
B) borrow more from the Fed and lend less to the public.The money supply decreases. 
C) borrow less from the Fed and lend more to the public.The money supply increases. 
D) borrow less from the Fed and lend less to the public.The money supply decreases. 
A) borrow more from the Fed and lend more to the public.The money supply increases. 
B) borrow more from the Fed and lend less to the public.The money supply decreases. 
C) borrow less from the Fed and lend more to the public.The money supply increases. 
D) borrow less from the Fed and lend less to the public.The money supply decreases.

Question 12

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Accepted Answer

A) True 
 B)False

Question 13

As banks create money, they create wealth.

Accepted Answer

A) True 
 B)False

Question 14

In the special case of the 100-percent-reserve banking, the money multiplier is

Accepted Answer

A) 1 and banks create money. 
B) 1 and banks do not create money. 
C) 2 and banks create money 
D) 2 and banks do not create money. 
A) 1 and banks create money. 
B) 1 and banks do not create money. 
C) 2 and banks create money 
D) 2 and banks do not create money.

Question 15

​In a system of 100-percent-reserve banking, changes in the money supply depend on the decisions of the Fed as well as the behavior of depositors and bankers.

Accepted Answer

A) True 
 B)False

Question 16

The chair of the Board of Governors regularly testifies to Congress about Fed policy.

Accepted Answer

A) True 
 B)False

Question 17

Joshua and Ryzard buy the same pair of flip flops, but each in the wrong size. Joshua proposes a size swap with Ryzard. This is an example of

Accepted Answer

A) barter, since the flip flops in the correct size represent a medium of exchange. 
B) barter, since the flip flops in the correct size have intrinsic value to both Joshua and Ryzard. 
C) money, since the flip flops in the correct size do not have any intrinsic value. 
D) money, since the flip flops in the correct size represent a medium of exchange. 
A) barter, since the flip flops in the correct size represent a medium of exchange. 
B) barter, since the flip flops in the correct size have intrinsic value to both Joshua and Ryzard. 
C) money, since the flip flops in the correct size do not have any intrinsic value. 
D) money, since the flip flops in the correct size represent a medium of exchange.

Question 18

Suppose the required reserve ratio is 20%. What is the maximum amount of total money supply that can be created from an initial deposit of $200? In general, why might the actual amount of total money creation be less than the maximum?

Accepted Answer

The money multiplier is the reciprocal o

Question 19

The existence of money leads to

Accepted Answer

A) greater specialization in production, but not to a higher standard of living. 
B) a higher standard of living, but not to greater specialization. 
C) greater specialization and to a higher standard of living. 
D) neither greater specialization nor to a higher standard of living. 
A) greater specialization in production, but not to a higher standard of living. 
B) a higher standard of living, but not to greater specialization. 
C) greater specialization and to a higher standard of living. 
D) neither greater specialization nor to a higher standard of living.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 29: The Monetary System

What makes the New York Federal Reserve regional bank so important?

Which of the following is included in M2?

The discount rate is the rate the Federal Reserve charges banks for loans. By lowering this rate, the Fed provides banks with a greater incentive to borrow from it.

The money multiplier equals 1/(1 - R), where R represents the reserve ratio.

M1 includes savings deposits.

What is the change in the money supply when the Fed purchases $700 worth of bonds and the required reserve ratio is 14 percent assuming banks hold no excess reserves?

Why is the president of the New York Fed always a voting member of the FOMC?

Which of the following both decrease the money supply?

​Bank runs are only a concern under a fractional-reserve banking system.

When the Fed decreases the discount rate, banks will

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

As banks create money, they create wealth.

In the special case of the 100-percent-reserve banking, the money multiplier is

​In a system of 100-percent-reserve banking, changes in the money supply depend on the decisions of the Fed as well as the behavior of depositors and bankers.

The chair of the Board of Governors regularly testifies to Congress about Fed policy.

Joshua and Ryzard buy the same pair of flip flops, but each in the wrong size. Joshua proposes a size swap with Ryzard. This is an example of

Suppose the required reserve ratio is 20%. What is the maximum amount of total money supply that can be created from an initial deposit of $200? In general, why might the actual amount of total money creation be less than the maximum?

The existence of money leads to

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

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

Bank runs are only a concern under a fractional-reserve banking system.

In a system of 100-percent-reserve banking, changes in the money supply depend on the decisions of the Fed as well as the behavior of depositors and bankers.