Question 1

TBK Bank Balance Sheet
Assets Liabilities
  
-The above table presents the balance sheet of the TBK commercial bank. What is this bank's actual reserve ratio?

Accepted Answer

A)  50 percent 
B)  12 percent 
C)  20 percent 
D)  5 percent 
A)  50 percent 
B)  12 percent 
C)  20 percent 
D)  5 percent

Question 2

Which of the following is an example of using money as a store of value?

Accepted Answer

A)  paying for a new dress with a credit card 
B)  paying cash for a new automobile 
C)  paying rent with a check on a demand deposit 
D)  keeping $200 on hand for an emergency 
A)  paying for a new dress with a credit card 
B)  paying cash for a new automobile 
C)  paying rent with a check on a demand deposit 
D)  keeping $200 on hand for an emergency

Question 3

The interest rate banks charge other banks for overnight loans is

Accepted Answer

A)  the federal funds rate. 
B)  targeted by the FDIC. 
C)  higher than interest rates for securities and loans. 
D)  lower than interest rates for loans, but higher than interest rates for securities. 
A)  the federal funds rate. 
B)  targeted by the FDIC. 
C)  higher than interest rates for securities and loans. 
D)  lower than interest rates for loans, but higher than interest rates for securities.

Question 4

The quantity theory of money predicts how changes in

Accepted Answer

A)  the price level affect nominal GDP. 
B)  the price level affect real GDP. 
C)  the quantity of money affect the price level. 
D)  real GDP affect the nominal GDP. 
A)  the price level affect nominal GDP. 
B)  the price level affect real GDP. 
C)  the quantity of money affect the price level. 
D)  real GDP affect the nominal GDP.

Question 5

The Federal Reserve System

Accepted Answer

A)  has officers that are elected, like members of Congress. 
B)  controls the amount of currency in circulation. 
C)  is headquartered in San Francisco. 
D)  was recently declared unconstitutional by the Supreme Court. 
A)  has officers that are elected, like members of Congress. 
B)  controls the amount of currency in circulation. 
C)  is headquartered in San Francisco. 
D)  was recently declared unconstitutional by the Supreme Court.

Question 6

Cash assets of a commercial bank consist of

Accepted Answer

A)  notes and coins in the bank's vault, a deposit account at the Fed and loans to other banks. 
B)  notes and coins in the bank's vault , a deposit account at the Fed and any gold held for the bank at Fort Knox. 
C)  vault cash, a deposit account at the Fed and the bank's stock holdings. 
D)  vault cash, a deposit account at the Fed and the value of its depositors' accounts. 
A)  notes and coins in the bank's vault, a deposit account at the Fed and loans to other banks. 
B)  notes and coins in the bank's vault , a deposit account at the Fed and any gold held for the bank at Fort Knox. 
C)  vault cash, a deposit account at the Fed and the bank's stock holdings. 
D)  vault cash, a deposit account at the Fed and the value of its depositors' accounts.

Question 7

The Fed buys $50,000 of government securities from Commerce Bank. The desired reserve ratio is 25 percent. What is the change in Commerce Bank's total reserves and its unplanned reserves?

Accepted Answer

When the Fed buys $50,000 of government

Question 8

The Fed's purchase of government securities could

Accepted Answer

A)  increase loans made by banks. 
B)  be an effective anti-inflationary policy. 
C)  decrease the price level and have no effect on real GDP. 
D)  decrease bank reserves. 
A)  increase loans made by banks. 
B)  be an effective anti-inflationary policy. 
C)  decrease the price level and have no effect on real GDP. 
D)  decrease bank reserves.

Question 9

Which of the following is NOT one of the Fed's monetary policy tools?

Accepted Answer

A)  last resort loans 
B)  the required reserve ratio 
C)  the income tax rate 
D)  buying and selling U.S. government securities 
A)  last resort loans 
B)  the required reserve ratio 
C)  the income tax rate 
D)  buying and selling U.S. government securities

Question 10

The major role of a commercial bank is to

Accepted Answer

A)  make mortgage loans. 
B)  sell shares and use the proceeds to buy stocks. 
C)  receive deposits and make loans. 
D)  restrain the growth of the quantity of money. 
A)  make mortgage loans. 
B)  sell shares and use the proceeds to buy stocks. 
C)  receive deposits and make loans. 
D)  restrain the growth of the quantity of money.

Question 11

What are the three functions of money?

Accepted Answer

Money serves as a medium of exchange (so

Question 12

An open market purchase of securities by the Fed

Accepted Answer

A)  increases banks' reserves and decreases banks' securities. 
B)  decreases banks' reserves and increases banks' securities. 
C)  decreases banks' total assets. 
D)  involves a bank purchasing government securities from the Fed. 
A)  increases banks' reserves and decreases banks' securities. 
B)  decreases banks' reserves and increases banks' securities. 
C)  decreases banks' total assets. 
D)  involves a bank purchasing government securities from the Fed.

Question 13

-The above table gives the initial balance sheet for Mini Bank. Mini Bank's actual reserve ratio equals

Accepted Answer

A)  25 percent. 
B)  12.5 percent. 
C)  33.3 percent. 
D)  20 percent. 
A)  25 percent. 
B)  12.5 percent. 
C)  33.3 percent. 
D)  20 percent.

Question 14

In February, 2010 the U.S. M1 money multiplier crashed to 0.786. Each $1 increase in the monetary base resulted in the quantity of money increasing by only $0.79. Where did the remaining $0.21 disappear?

Accepted Answer

A)  Banks held part of the $0.21 as unplanned reserves. 
B)  Banks loaned out the $0.21. 
C)  Consumers held part of the $0.21 as currency. 
D)  Both A and C are correct. 
A)  Banks held part of the $0.21 as unplanned reserves. 
B)  Banks loaned out the $0.21. 
C)  Consumers held part of the $0.21 as currency. 
D)  Both A and C are correct.

Question 15

Money as a medium of exchange
I. facilitates the exchange of goods.
II. reduces or eliminates the need for barter.

Accepted Answer

A)  I is true and II is false 
B)  I is false and II is true 
C)  both I and II are true 
D)  both I and II are false 
A)  I is true and II is false 
B)  I is false and II is true 
C)  both I and II are true 
D)  both I and II are false

Question 16

Which of the following is a liability on the balance sheet of the Federal Reserve System?

Accepted Answer

A)  currency 
B)  U.S. government securities 
C)  mortgage-backed securities 
D)  None of the above are correct because they are all assets of the Federal Reserve. 
A)  currency 
B)  U.S. government securities 
C)  mortgage-backed securities 
D)  None of the above are correct because they are all assets of the Federal Reserve.

Question 17

According to the quantity theory, in the long run, an increase in the growth rate of ________ leads to an increase in the ________.

Accepted Answer

A)  real GDP; inflation rate 
B)  the quantity of money; growth rate of real GDP 
C)  the quantity of money; inflation rate 
D)  real GDP; growth rate of velocity 
A)  real GDP; inflation rate 
B)  the quantity of money; growth rate of real GDP 
C)  the quantity of money; inflation rate 
D)  real GDP; growth rate of velocity

Question 18

The difference between actual reserves and required reserves is

Accepted Answer

A)  unplanned reserves. 
B)  excess reserves. 
C)  illegal reserves. 
D)  desired reserves. 
A)  unplanned reserves. 
B)  excess reserves. 
C)  illegal reserves. 
D)  desired reserves.

Question 19

In the short run, how is the interest rate determined? If the interest rate is less than the equilibrium interest rate, what occurs?

Accepted Answer

The interest rate is determined in the m

Question 20

Explain which of the following count as money.
a) a check in Ann's checkbook
b) currency in Ann's bank
c) currency in Ann's purse
d) Ann's checking deposit

Accepted Answer

Only parts (c), currency in Ann's purse,

TBK Bank Balance Sheet Assets Liabilities -The above table presents the balance sheet of the TBK commercial bank. What is this bank's actual reserve ratio?

Which of the following is an example of using money as a store of value?

The interest rate banks charge other banks for overnight loans is

The quantity theory of money predicts how changes in

The Federal Reserve System

Cash assets of a commercial bank consist of

The Fed buys $50,000 of government securities from Commerce Bank. The desired reserve ratio is 25 percent. What is the change in Commerce Bank's total reserves and its unplanned reserves?

The Fed's purchase of government securities could

Which of the following is NOT one of the Fed's monetary policy tools?

The major role of a commercial bank is to

What are the three functions of money?

An open market purchase of securities by the Fed

-The above table gives the initial balance sheet for Mini Bank. Mini Bank's actual reserve ratio equals

In February, 2010 the U.S. M1 money multiplier crashed to 0.786. Each $1 increase in the monetary base resulted in the quantity of money increasing by only $0.79. Where did the remaining $0.21 disappear?

Money as a medium of exchange I. facilitates the exchange of goods. II. reduces or eliminates the need for barter.

Which of the following is a liability on the balance sheet of the Federal Reserve System?

According to the quantity theory, in the long run, an increase in the growth rate of leads to an increase in the .

The difference between actual reserves and required reserves is

In the short run, how is the interest rate determined? If the interest rate is less than the equilibrium interest rate, what occurs?

Explain which of the following count as money. a) a check in Ann's checkbook b) currency in Ann's bank c) currency in Ann's purse d) Ann's checking deposit

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 8: Money, the Price Level, and Inflation

TBK Bank Balance Sheet Assets Liabilities -The above table presents the balance sheet of the TBK commercial bank. What is this bank's actual reserve ratio?

Which of the following is an example of using money as a store of value?

The interest rate banks charge other banks for overnight loans is

The quantity theory of money predicts how changes in

The Federal Reserve System

Cash assets of a commercial bank consist of

The Fed buys $50,000 of government securities from Commerce Bank. The desired reserve ratio is 25 percent. What is the change in Commerce Bank's total reserves and its unplanned reserves?

The Fed's purchase of government securities could

Which of the following is NOT one of the Fed's monetary policy tools?

The major role of a commercial bank is to

What are the three functions of money?

An open market purchase of securities by the Fed

-The above table gives the initial balance sheet for Mini Bank. Mini Bank's actual reserve ratio equals

In February, 2010 the U.S. M1 money multiplier crashed to 0.786. Each $1 increase in the monetary base resulted in the quantity of money increasing by only $0.79. Where did the remaining $0.21 disappear?

Money as a medium of exchange I. facilitates the exchange of goods. II. reduces or eliminates the need for barter.

Which of the following is a liability on the balance sheet of the Federal Reserve System?

According to the quantity theory, in the long run, an increase in the growth rate of ________ leads to an increase in the ________.

The difference between actual reserves and required reserves is

In the short run, how is the interest rate determined? If the interest rate is less than the equilibrium interest rate, what occurs?

Explain which of the following count as money. a) a check in Ann's checkbook b) currency in Ann's bank c) currency in Ann's purse d) Ann's checking deposit

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

According to the quantity theory, in the long run, an increase in the growth rate of leads to an increase in the .