Question 1

What happens when you withdraw cash from a bank?

Accepted Answer

A) The bank's reserves are reduced. 
B) The bank's reserves are increased. 
C) The bank's reserves are not affected. 
D) The bank's total reserves remain unchanged but the composition of required reserves and excess reserves change. 
A) The bank's reserves are reduced. 
B) The bank's reserves are increased. 
C) The bank's reserves are not affected. 
D) The bank's total reserves remain unchanged but the composition of required reserves and excess reserves change. A

Question 2

Use the following to answer questions 
Exhibit: Components of the Money System
  
-(Exhibit: Components of the Money System)
The money supply measured by M1 is

Accepted Answer

A) $325 billion. 
B) $450 billion. 
C) $1,425 billion. 
D) $1,875 billion. 
A) $325 billion. 
B) $450 billion. 
C) $1,425 billion. 
D) $1,875 billion. B

Question 3

Use the following to answer questions 
Exhibit: Balance Sheet of the Alpha-Beta Bank
  
-(Exhibit: Balance Sheet of the Alpha-Beta Bank)
If the required reserve ratio is 10%, what is the maximum amount of new loans that Alpha-Beta can create?

Accepted Answer

A) $25 million 
B) $40 million 
C) $60 million 
D) $75 million 
A) $25 million 
B) $40 million 
C) $60 million 
D) $75 million B

Question 4

Which organization is responsible for managing the nation's money supply?

Accepted Answer

A) The Federal Reserve Bank of New York 
B) The United States Treasury 
C) The Federal Open Market Committee 
D) The American Association of Bankers 
A) The Federal Reserve Bank of New York 
B) The United States Treasury 
C) The Federal Open Market Committee 
D) The American Association of Bankers

Question 5

Use the following to answer questions 
Exhibit: Balance Sheet of the Alpha-Beta Bank
  
-(Exhibit: Balance Sheet of the Alpha-Beta Bank)
If the required reserve ratio is 10%, what is the amount of excess reserves held by Alpha-Beta Bank?

Accepted Answer

A) $25 million 
B) $40 million 
C) $60 million 
D) $75 million 
A) $25 million 
B) $40 million 
C) $60 million 
D) $75 million

Question 6

The M1 money supply includes all currency in circulation, checkable deposits, and traveler's checks.

Accepted Answer

A) True 
 B)False

Question 7

If you withdraw currency from your savings account, you are

Accepted Answer

A) increasing M1, decreasing M2. 
B) increasing both M1 and M2. 
C) increasing M1 but not affecting M2. 
D) decreasing both M1 and M2. 
A) increasing M1, decreasing M2. 
B) increasing both M1 and M2. 
C) increasing M1 but not affecting M2. 
D) decreasing both M1 and M2.

Question 8

The Fed's most important and most frequently used tool of monetary policy is

Accepted Answer

A) moral suasion. 
B) open-market operations. 
C) changes in the discount rate. 
D) changes in required reserve ratios. 
A) moral suasion. 
B) open-market operations. 
C) changes in the discount rate. 
D) changes in required reserve ratios.

Question 9

Which of the following equations is correct?

Accepted Answer

A) assets = liabilities − net worth 
B) assets = liabilities + net worth 
C) liabilities = assets + net worth 
D) net worth = liabilities + assets 
A) assets = liabilities − net worth 
B) assets = liabilities + net worth 
C) liabilities = assets + net worth 
D) net worth = liabilities + assets

Question 10

What is the value of the deposit multiplier in a 100-percent reserve banking system?

Accepted Answer

A) 0. 
B) 1 
C) a value between 0 and 1 
D) a value greater than 1 
A) 0. 
B) 1 
C) a value between 0 and 1 
D) a value greater than 1

Question 11

The discount rate is the rate of interest charged when banks lend excess reserves to one another.

Accepted Answer

A) True 
 B)False

Question 12

Nita deposits a check for $750 drawn against Home Federal Bank into her account at Village Bank.Which pair of the T-accounts below shows this transaction on the respective bank's balance sheets?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 13

An institution that collects funds from lenders and distributes these funds to borrowers is called

Accepted Answer

A) a financial intermediary. 
B) the Federal Reserve System. 
C) a mercantile exchange. 
D) a currency market. 
A) a financial intermediary. 
B) the Federal Reserve System. 
C) a mercantile exchange. 
D) a currency market.

Question 14

Use the following to answer questions 
Exhibit: Money in the Economy
  
-(Exhibit: Money in the Economy)
In Year 2, if savings deposits had been $250 billion instead of $200 billion, M2 would have been

Accepted Answer

A) $575 billion. 
B) larger by $50 billion. 
C) smaller by $50 billion. 
D) unaffected. 
A) $575 billion. 
B) larger by $50 billion. 
C) smaller by $50 billion. 
D) unaffected.

Question 15

The seven members of the Board of Governors serve 14-year terms to

Accepted Answer

A) provide steady employment. 
B) reduce political influence. 
C) prevent illegal appointments. 
D) inhibit independent decisions. 
A) provide steady employment. 
B) reduce political influence. 
C) prevent illegal appointments. 
D) inhibit independent decisions.

Question 16

Keeping a $20 bill in your purse to purchase a movie DVD when it comes out next month means that money functions as a

Accepted Answer

A) medium of exchange. 
B) unit of account. 
C) standard of deferred payment. 
D) store of value. 
A) medium of exchange. 
B) unit of account. 
C) standard of deferred payment. 
D) store of value.

Question 17

When her $1,000 time deposit expires, Suneeta decides not to renew the time deposit and opts to cash out.As a result of her transaction

Accepted Answer

A) M1 and M2 increase. 
B) M1 increases and M2 decreases. 
C) M1 is unaffected and M2 decreases. 
D) M1 increases and M2 is unaffected. 
A) M1 and M2 increase. 
B) M1 increases and M2 decreases. 
C) M1 is unaffected and M2 decreases. 
D) M1 increases and M2 is unaffected.

Question 18

Which of the following is an example of a bank's reserves?

Accepted Answer

A) demand deposits with other banks 
B) deposits with the Federal Reserve 
C) Treasury bonds and bills 
D) state bonds of the state in which the bank is located but not state bonds of other states. 
A) demand deposits with other banks 
B) deposits with the Federal Reserve 
C) Treasury bonds and bills 
D) state bonds of the state in which the bank is located but not state bonds of other states.

Question 19

Which of the following are primary functions of a central bank?
I.act as a regulator of banks
II.issue government bonds
III.set monetary policy
IV.regulate dividend payments by corporations

Accepted Answer

A) I, II, III, and IV 
B) I, II, and III 
C) I and III 
D) I and II 
A) I, II, III, and IV 
B) I, II, and III 
C) I and III 
D) I and II

Question 20

Use the following to answer questions 
Exhibit: Money in the Economy
  
-(Exhibit: Money in the Economy)
In Year 1, if the supply of money measured by M2 was $650 billion, then the components of M2 not shown in the table must have totaled

Accepted Answer

A) less than $100 billion. 
B) $100 billion. 
C) $200 billion. 
D) $250 billion. 
A) less than $100 billion. 
B) $100 billion. 
C) $200 billion. 
D) $250 billion.

What happens when you withdraw cash from a bank?

Use the following to answer questions Exhibit: Components of the Money System -(Exhibit: Components of the Money System) The money supply measured by M1 is

Use the following to answer questions Exhibit: Balance Sheet of the Alpha-Beta Bank -(Exhibit: Balance Sheet of the Alpha-Beta Bank) If the required reserve ratio is 10%, what is the maximum amount of new loans that Alpha-Beta can create?

Which organization is responsible for managing the nation's money supply?

Use the following to answer questions Exhibit: Balance Sheet of the Alpha-Beta Bank -(Exhibit: Balance Sheet of the Alpha-Beta Bank) If the required reserve ratio is 10%, what is the amount of excess reserves held by Alpha-Beta Bank?

The M1 money supply includes all currency in circulation, checkable deposits, and traveler's checks.

If you withdraw currency from your savings account, you are

The Fed's most important and most frequently used tool of monetary policy is

Which of the following equations is correct?

What is the value of the deposit multiplier in a 100-percent reserve banking system?

The discount rate is the rate of interest charged when banks lend excess reserves to one another.

Nita deposits a check for $750 drawn against Home Federal Bank into her account at Village Bank.Which pair of the T-accounts below shows this transaction on the respective bank's balance sheets?

An institution that collects funds from lenders and distributes these funds to borrowers is called

Use the following to answer questions Exhibit: Money in the Economy -(Exhibit: Money in the Economy) In Year 2, if savings deposits had been $250 billion instead of $200 billion, M2 would have been

The seven members of the Board of Governors serve 14-year terms to

Keeping a $20 bill in your purse to purchase a movie DVD when it comes out next month means that money functions as a

When her $1,000 time deposit expires, Suneeta decides not to renew the time deposit and opts to cash out.As a result of her transaction

Which of the following is an example of a bank's reserves?

Which of the following are primary functions of a central bank? I.act as a regulator of banks II.issue government bonds III.set monetary policy IV.regulate dividend payments by corporations

Use the following to answer questions Exhibit: Money in the Economy -(Exhibit: Money in the Economy) In Year 1, if the supply of money measured by M2 was $650 billion, then the components of M2 not shown in the table must have totaled

Economics: the Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters

Exam 9: The Nature and Creation of Money

What happens when you withdraw cash from a bank?

Use the following to answer questions Exhibit: Components of the Money System -(Exhibit: Components of the Money System) The money supply measured by M1 is

Use the following to answer questions Exhibit: Balance Sheet of the Alpha-Beta Bank -(Exhibit: Balance Sheet of the Alpha-Beta Bank) If the required reserve ratio is 10%, what is the maximum amount of new loans that Alpha-Beta can create?

Which organization is responsible for managing the nation's money supply?

Use the following to answer questions Exhibit: Balance Sheet of the Alpha-Beta Bank -(Exhibit: Balance Sheet of the Alpha-Beta Bank) If the required reserve ratio is 10%, what is the amount of excess reserves held by Alpha-Beta Bank?

The M1 money supply includes all currency in circulation, checkable deposits, and traveler's checks.

If you withdraw currency from your savings account, you are

The Fed's most important and most frequently used tool of monetary policy is

Which of the following equations is correct?

What is the value of the deposit multiplier in a 100-percent reserve banking system?

The discount rate is the rate of interest charged when banks lend excess reserves to one another.

Nita deposits a check for $750 drawn against Home Federal Bank into her account at Village Bank.Which pair of the T-accounts below shows this transaction on the respective bank's balance sheets?

An institution that collects funds from lenders and distributes these funds to borrowers is called

Use the following to answer questions Exhibit: Money in the Economy -(Exhibit: Money in the Economy) In Year 2, if savings deposits had been $250 billion instead of $200 billion, M2 would have been

The seven members of the Board of Governors serve 14-year terms to

Keeping a $20 bill in your purse to purchase a movie DVD when it comes out next month means that money functions as a

When her $1,000 time deposit expires, Suneeta decides not to renew the time deposit and opts to cash out.As a result of her transaction

Which of the following is an example of a bank's reserves?

Which of the following are primary functions of a central bank? I.act as a regulator of banks II.issue government bonds III.set monetary policy IV.regulate dividend payments by corporations

Use the following to answer questions Exhibit: Money in the Economy -(Exhibit: Money in the Economy) In Year 1, if the supply of money measured by M2 was $650 billion, then the components of M2 not shown in the table must have totaled

Economics: the Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters