Question 1

To reduce the political influence on the Board of Governors,

Accepted Answer

A) the president of the United States appoints a new board every four years. 
B) the reelection campaign for each member is less than one year. 
C) each member is appointed for 7 years, with one term expiring every year. 
D) each member is appointed for 14 years, with one term expiring every two years. 
A) the president of the United States appoints a new board every four years. 
B) the reelection campaign for each member is less than one year. 
C) each member is appointed for 7 years, with one term expiring every year. 
D) each member is appointed for 14 years, with one term expiring every two years.

Question 2

The Federal Reserve System was created in order to provide a constant money supply for the economy.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is the most liquid asset?

Accepted Answer

A) season tickets to the Yankees' games 
B) the cash that your Aunt Ursula stuffs in her mattress 
C) a $5,000 6-month certificate of deposit (time deposit) 
D) one hundred shares of IBM stock 
A) season tickets to the Yankees' games 
B) the cash that your Aunt Ursula stuffs in her mattress 
C) a $5,000 6-month certificate of deposit (time deposit) 
D) one hundred shares of IBM stock

Question 4

What happens to the value of the deposit multiplier when banks hold excess reserves?

Accepted Answer

A) It is larger than the value implied by the formula. 
B) It is smaller than the value implied by the formula. 
C) It is only affected by the amount of loans that banks are willing to make, not the amount of excess reserves held. 
D) There is insufficient information to answer the question. 
A) It is larger than the value implied by the formula. 
B) It is smaller than the value implied by the formula. 
C) It is only affected by the amount of loans that banks are willing to make, not the amount of excess reserves held. 
D) There is insufficient information to answer the question.

Question 5

Suppose a bank has $10,000 in deposits and $1,000 in reserves.The required reserve ratio is 5%.Which of the following occurs if the required reserve ratio is increased to 10%?

Accepted Answer

A) The bank's required reserves will decrease to $500. 
B) The bank's excess reserves will increase to $1,000. 
C) The bank's required reserves will increase to $1,000. 
D) The bank's ability to create loans increases by 5%. 
A) The bank's required reserves will decrease to $500. 
B) The bank's excess reserves will increase to $1,000. 
C) The bank's required reserves will increase to $1,000. 
D) The bank's ability to create loans increases by 5%.

Question 6

The banking system is able to make new loans equal to

Accepted Answer

A) total legal reserves of the system. 
B) total excess reserves of the system. 
C) total required reserves of the system. 
D) a multiple of total excess reserves of the system. 
A) total legal reserves of the system. 
B) total excess reserves of the system. 
C) total required reserves of the system. 
D) a multiple of total excess reserves of the system.

Question 7

Use the following to answer questions 
Exhibit: Components of the Money System
  
-Which of the following statements is false about M1 and M2?

Accepted Answer

A) M2 is a broader measure of the money supply than M1. 
B) M2 contains assets that are less liquid than those in M1. 
C) All the assets included in M1 are also included in M2. 
D) All the assets included in M2 are also included in M1. 
A) M2 is a broader measure of the money supply than M1. 
B) M2 contains assets that are less liquid than those in M1. 
C) All the assets included in M1 are also included in M2. 
D) All the assets included in M2 are also included in M1.

Question 8

Use the following to answer questions 
Exhibit: Acme Bank: Partial Balance Sheet
  
-(Exhibit: Acme Bank: Partial Balance Sheet)
Assume Acme Bank initially has no excess reserves.If Guevara withdraws $6,000 from her checking account at Acme Bank, which of the following will occur?

Accepted Answer

A) Acme's excess reserves are reduced by $6,000. 
B) Acme will have excess reserves of $2,000. 
C) Acme will have a required reserve deficiency of $3,000. 
D) Acme will have a required reserve deficiency of $5, 400. 
A) Acme's excess reserves are reduced by $6,000. 
B) Acme will have excess reserves of $2,000. 
C) Acme will have a required reserve deficiency of $3,000. 
D) Acme will have a required reserve deficiency of $5, 400.

Question 9

Assume that banks do not hold excess reserves, all deposits remain in the banking system and that the required reserve ratio is 20%.If one bank obtains excess reserves of $10,000, then the maximum increase in money supply is

Accepted Answer

A) $10,000. 
B) $20,000. 
C) $40,000. 
D) $50,000. 
A) $10,000. 
B) $20,000. 
C) $40,000. 
D) $50,000.

Question 10

The price of an iPhone 7 is $650.What is the function of money in this context?

Accepted Answer

A) a medium of exchange 
B) a means of payment 
C) a unit of account 
D) a measure of quality 
A) a medium of exchange 
B) a means of payment 
C) a unit of account 
D) a measure of quality

Question 11

Which of the following is true regarding the reserve requirements?

Accepted Answer

A) The Fed changes them frequently because they are a power monetary policy tool. 
B) The Fed does not change them much at all because taxation is a more impactful monetary policy tool. 
C) The Fed changes them frequently because doing so simplifies banking operations. 
D) The Fed does not change them much at all because doing so would make banking operations difficult. 
A) The Fed changes them frequently because they are a power monetary policy tool. 
B) The Fed does not change them much at all because taxation is a more impactful monetary policy tool. 
C) The Fed changes them frequently because doing so simplifies banking operations. 
D) The Fed does not change them much at all because doing so would make banking operations difficult.

Question 12

Money that some authority has declared legal tender is called

Accepted Answer

A) fiat money. 
B) currency. 
C) convertible paper money. 
D) commodity money. 
A) fiat money. 
B) currency. 
C) convertible paper money. 
D) commodity money.

Question 13

Which of the following is an interest rate that is set directly by the Fed?

Accepted Answer

A) the prime lending rate 
B) the required reserve rate 
C) the discount rate 
D) the federal funds rate 
A) the prime lending rate 
B) the required reserve rate 
C) the discount rate 
D) the federal funds rate

Question 14

When banks hold more reserves than are required, such reserves are called

Accepted Answer

A) total reserves. 
B) required reserves. 
C) excess reserves. 
D) loan reserves. 
A) total reserves. 
B) required reserves. 
C) excess reserves. 
D) loan reserves.

Question 15

An activity performed by commercial banks that is not performed by insurance companies is

Accepted Answer

A) functioning as financial intermediaries. 
B) creating financial obligations against themselves. 
C) accepting deposits and offering checking accounts. 
D) allocating financial resources between borrowers and lenders. 
A) functioning as financial intermediaries. 
B) creating financial obligations against themselves. 
C) accepting deposits and offering checking accounts. 
D) allocating financial resources between borrowers and lenders.

Question 16

Use the following to answer questions 
Exhibit: Fed Buys Bonds
Scenario 1: Fed Buys Bonds from Sheila Jones
Consider a banking system in which the reserve requirement is 10%, banks try not to hold excess reserves, consumers and firms hold money only in the form of checking account balances, and all loan proceeds are spent.Suppose initially all banks in the system are loaned up.Now, suppose that the Fed buys a $100,000 bond from Sheila Jones, who banks at the Perez Bank, and that she deposits her check in her checking account at Perez Bank.
-(Exhibit: Fed Buys Bonds)
Immediately following Sheila's $100,000 deposit into her checking account, Perez Bank

Accepted Answer

A) has no excess reserves. 
B) has $10,000 in excess reserves. 
C) has $90,000 in excess reserves. 
D) has $100,000 in excess reserves. 
A) has no excess reserves. 
B) has $10,000 in excess reserves. 
C) has $90,000 in excess reserves. 
D) has $100,000 in excess reserves.

Question 17

When the Fed buys government bonds in the open market the money supply will increase.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is part of M1?
I.currency in a bank's vault
II.cash in your wallet
III.checkable deposits
IV.savings deposits

Accepted Answer

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

Question 19

Which of the following is included in M2 but not in M1?

Accepted Answer

A) currency 
B) demand deposits 
C) small-denomination time deposits 
D) debit cards 
A) currency 
B) demand deposits 
C) small-denomination time deposits 
D) debit cards

Question 20

Which of the following is a store of value and a common medium of exchange?

Accepted Answer

A) corporate bonds 
B) stocks 
C) checking account balances 
D) debit cards 
A) corporate bonds 
B) stocks 
C) checking account balances 
D) debit cards

To reduce the political influence on the Board of Governors,

The Federal Reserve System was created in order to provide a constant money supply for the economy.

Which of the following is the most liquid asset?

What happens to the value of the deposit multiplier when banks hold excess reserves?

Suppose a bank has $10,000 in deposits and $1,000 in reserves.The required reserve ratio is 5%.Which of the following occurs if the required reserve ratio is increased to 10%?

The banking system is able to make new loans equal to

Use the following to answer questions Exhibit: Components of the Money System -Which of the following statements is false about M1 and M2?

Use the following to answer questions Exhibit: Acme Bank: Partial Balance Sheet -(Exhibit: Acme Bank: Partial Balance Sheet) Assume Acme Bank initially has no excess reserves.If Guevara withdraws $6,000 from her checking account at Acme Bank, which of the following will occur?

Assume that banks do not hold excess reserves, all deposits remain in the banking system and that the required reserve ratio is 20%.If one bank obtains excess reserves of $10,000, then the maximum increase in money supply is

The price of an iPhone 7 is $650.What is the function of money in this context?

Which of the following is true regarding the reserve requirements?

Money that some authority has declared legal tender is called

Which of the following is an interest rate that is set directly by the Fed?

When banks hold more reserves than are required, such reserves are called

An activity performed by commercial banks that is not performed by insurance companies is

When the Fed buys government bonds in the open market the money supply will increase.

Which of the following is part of M1? I.currency in a bank's vault II.cash in your wallet III.checkable deposits IV.savings deposits

Which of the following is included in M2 but not in M1?

Which of the following is a store of value and a common medium of exchange?

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

To reduce the political influence on the Board of Governors,

The Federal Reserve System was created in order to provide a constant money supply for the economy.

Which of the following is the most liquid asset?

What happens to the value of the deposit multiplier when banks hold excess reserves?

Suppose a bank has $10,000 in deposits and $1,000 in reserves.The required reserve ratio is 5%.Which of the following occurs if the required reserve ratio is increased to 10%?

The banking system is able to make new loans equal to

Use the following to answer questions Exhibit: Components of the Money System -Which of the following statements is false about M1 and M2?

Use the following to answer questions Exhibit: Acme Bank: Partial Balance Sheet -(Exhibit: Acme Bank: Partial Balance Sheet) Assume Acme Bank initially has no excess reserves.If Guevara withdraws $6,000 from her checking account at Acme Bank, which of the following will occur?

Assume that banks do not hold excess reserves, all deposits remain in the banking system and that the required reserve ratio is 20%.If one bank obtains excess reserves of $10,000, then the maximum increase in money supply is

The price of an iPhone 7 is $650.What is the function of money in this context?

Which of the following is true regarding the reserve requirements?

Money that some authority has declared legal tender is called

Which of the following is an interest rate that is set directly by the Fed?

When banks hold more reserves than are required, such reserves are called

An activity performed by commercial banks that is not performed by insurance companies is

When the Fed buys government bonds in the open market the money supply will increase.

Which of the following is part of M1? I.currency in a bank's vault II.cash in your wallet III.checkable deposits IV.savings deposits

Which of the following is included in M2 but not in M1?

Which of the following is a store of value and a common medium of exchange?

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