Question 1

The reserve-requirement ratio is the interest rate the Federal Reserve System charges banks for loans.

Accepted Answer

A) True 
 B)False

Question 2

Use the following to answer questions 
Exhibit: Reserves, Loans, and Money
  
-(Exhibit: Reserves, Loans, and Money)
If the required reserve ratio is 10% and the market interest rate is 8%, what is Bolton Bank's opportunity cost of holding the excess reserves it is currently holding?

Accepted Answer

A) $5.6 million 
B) $3.2 million 
C) $0.8 million 
D) 0; Bolton Bank has no excess reserves. 
A) $5.6 million 
B) $3.2 million 
C) $0.8 million 
D) 0; Bolton Bank has no excess reserves.

Question 3

M1 includes

Accepted Answer

A) currency only. 
B) currency plus checkable deposits. 
C) currency in circulation plus checkable deposits. 
D) currency in circulation plus checkable deposits plus traveler's checks. 
A) currency only. 
B) currency plus checkable deposits. 
C) currency in circulation plus checkable deposits. 
D) currency in circulation plus checkable deposits plus traveler's checks.

Question 4

The Federal Reserve System was established in 1913 in response to the

Accepted Answer

A) First World War. 
B) bank panic of 1907. 
C) depression of 1883. 
D) prosperity of the 1920s. 
A) First World War. 
B) bank panic of 1907. 
C) depression of 1883. 
D) prosperity of the 1920s.

Question 5

The discount rate

Accepted Answer

A) is determined by markets forces of demand and supply in the market for bank reserves. 
B) is set by the Board of Governors. 
C) is determined by investment banks. 
D) is determined by market forces of demand and supply in the credit market. 
A) is determined by markets forces of demand and supply in the market for bank reserves. 
B) is set by the Board of Governors. 
C) is determined by investment banks. 
D) is determined by market forces of demand and supply in the credit market.

Question 6

The required reserve ratio is the percentage of checkable deposits that must be held as reserves.

Accepted Answer

A) True 
 B)False

Question 7

Decreasing the reserve requirement ratio is

Accepted Answer

A) a contractionary policy because it lowers the amount of total reserves in the banking system. 
B) a contractionary policy because it lowers the amount of excess reserves in the banking system. 
C) an expansionary policy because it raises the amount of excess reserves in the banking system. 
D) an expansionary policy because it raises the amount of required reserves in the banking system. 
A) a contractionary policy because it lowers the amount of total reserves in the banking system. 
B) a contractionary policy because it lowers the amount of excess reserves in the banking system. 
C) an expansionary policy because it raises the amount of excess reserves in the banking system. 
D) an expansionary policy because it raises the amount of required reserves in the banking system.

Question 8

Use the following to answer questions 
Exhibit: Fed Sells Bonds
Scenario 2: Fed sells bonds to Henry Hyde
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 sells a $50,000 bond to Henry Hyde, who pays for the bond by writing a check drawn against Jekyll Bank.
-Commodity money is paper currency that may be redeemed for a specific commodity at a specified rate on the currency.

Accepted Answer

A) True 
 B)False

Question 9

If Naruz is in the car dealer's showroom looking at the sticker price on a 2013 car, that sticker price serves as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 10

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 value of the bank's required reserves?

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 11

Suppose the Fed sells $1,000 of government securities to Commercial Banks.Which pair of the T-accounts below shows this transaction?

Accepted Answer

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

Question 12

The Federal Depository Insurance Corporation (FDIC)
Has the power to close a bank when

Accepted Answer

A) the bank's net worth falls below a certain level. 
B) the bank's excess reserves fall below a certain level. 
C) the bank's total deposits fall below a certain level. 
D) the bank has inadequate insurance. 
A) the bank's net worth falls below a certain level. 
B) the bank's excess reserves fall below a certain level. 
C) the bank's total deposits fall below a certain level. 
D) the bank has inadequate insurance.

Question 13

If the Fed raises its target for the federal fund rate, this indicates

Accepted Answer

A) the Fed is pursuing an expansionary monetary policy. 
B) the Fed is pursuing a contractionary monetary policy. 
C) the Fed is attempting to lower unemployment. 
D) the Fed is concerned that the growth in aggregate demand will exceed potential GDP. 
A) the Fed is pursuing an expansionary monetary policy. 
B) the Fed is pursuing a contractionary monetary policy. 
C) the Fed is attempting to lower unemployment. 
D) the Fed is concerned that the growth in aggregate demand will exceed potential GDP.

Question 14

Use the following to answer questions 
Exhibit: Money in the Economy
  
-(Exhibit: Money in the Economy)
In Year 1, the supply of money measured by M1 was

Accepted Answer

A) $150 billion. 
B) $300 billion. 
C) $450 billion. 
D) $950 billion. 
A) $150 billion. 
B) $300 billion. 
C) $450 billion. 
D) $950 billion.

Question 15

Credit cards are

Accepted Answer

A) not money. 
B) not money, because they can't be used to purchase goods and services. 
C) considered to be money. 
D) counted as a part of M2 but not M1. 
A) not money. 
B) not money, because they can't be used to purchase goods and services. 
C) considered to be money. 
D) counted as a part of M2 but not M1.

Question 16

Use the following to answer questions 
Exhibit: Balance Sheet of the Alpha-Beta Bank
  
-(Exhibit: Balance Sheet of the Alpha-Beta Bank)
What is the value of the bank's net worth?

Accepted Answer

A) $200 million 
B) $2,000 million 
C) $2,800 million 
D) $3,000 million 
A) $200 million 
B) $2,000 million 
C) $2,800 million 
D) $3,000 million

Question 17

Inflation reduces the ability of money to function as a

Accepted Answer

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

Question 18

The largest component of M1 is

Accepted Answer

A) checkable deposits. 
B) credit card balances. 
C) currency. 
D) savings deposits. 
A) checkable deposits. 
B) credit card balances. 
C) currency. 
D) savings deposits.

Question 19

Which of the following best illustrates the unit of account function of money?

Accepted Answer

A) You list prices for clothing sold on your Web site, www.nattydresser.com, in dollars. 
B) You pay for your cruise tickets with dollars. 
C) You keep $50 in your backpack for emergencies. 
D) You keep your tips earned from your tour guide job in a separate jar at home. 
A) You list prices for clothing sold on your Web site, www.nattydresser.com, in dollars. 
B) You pay for your cruise tickets with dollars. 
C) You keep $50 in your backpack for emergencies. 
D) You keep your tips earned from your tour guide job in a separate jar at home.

Question 20

The maximum amount of increase in the money supply that can be caused by an increase in excess reserves is equal to the

Accepted Answer

A) deposit multiplier * the required reserve ratio. 
B) loan multiplier * the change in excess reserves. 
C) deposit multiplier ÷ the change in excess reserves. 
D) deposit multiplier * the change in excess reserves. 
A) deposit multiplier * the required reserve ratio. 
B) loan multiplier * the change in excess reserves. 
C) deposit multiplier ÷ the change in excess reserves. 
D) deposit multiplier * the change in excess reserves.

The reserve-requirement ratio is the interest rate the Federal Reserve System charges banks for loans.

Use the following to answer questions Exhibit: Reserves, Loans, and Money -(Exhibit: Reserves, Loans, and Money) If the required reserve ratio is 10% and the market interest rate is 8%, what is Bolton Bank's opportunity cost of holding the excess reserves it is currently holding?

M1 includes

The Federal Reserve System was established in 1913 in response to the

The discount rate

The required reserve ratio is the percentage of checkable deposits that must be held as reserves.

Decreasing the reserve requirement ratio is

If Naruz is in the car dealer's showroom looking at the sticker price on a 2013 car, that sticker price serves as a medium of exchange.

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 value of the bank's required reserves?

Suppose the Fed sells $1,000 of government securities to Commercial Banks.Which pair of the T-accounts below shows this transaction?

The Federal Depository Insurance Corporation (FDIC) Has the power to close a bank when

If the Fed raises its target for the federal fund rate, this indicates

Use the following to answer questions Exhibit: Money in the Economy -(Exhibit: Money in the Economy) In Year 1, the supply of money measured by M1 was

Credit cards are

Use the following to answer questions Exhibit: Balance Sheet of the Alpha-Beta Bank -(Exhibit: Balance Sheet of the Alpha-Beta Bank) What is the value of the bank's net worth?

Inflation reduces the ability of money to function as a

The largest component of M1 is

Which of the following best illustrates the unit of account function of money?

The maximum amount of increase in the money supply that can be caused by an increase in excess reserves is equal to the

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

The reserve-requirement ratio is the interest rate the Federal Reserve System charges banks for loans.

Use the following to answer questions Exhibit: Reserves, Loans, and Money -(Exhibit: Reserves, Loans, and Money) If the required reserve ratio is 10% and the market interest rate is 8%, what is Bolton Bank's opportunity cost of holding the excess reserves it is currently holding?

M1 includes

The Federal Reserve System was established in 1913 in response to the

The discount rate

The required reserve ratio is the percentage of checkable deposits that must be held as reserves.

Decreasing the reserve requirement ratio is

If Naruz is in the car dealer's showroom looking at the sticker price on a 2013 car, that sticker price serves as a medium of exchange.

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 value of the bank's required reserves?

Suppose the Fed sells $1,000 of government securities to Commercial Banks.Which pair of the T-accounts below shows this transaction?

The Federal Depository Insurance Corporation (FDIC) Has the power to close a bank when

If the Fed raises its target for the federal fund rate, this indicates

Use the following to answer questions Exhibit: Money in the Economy -(Exhibit: Money in the Economy) In Year 1, the supply of money measured by M1 was

Credit cards are

Use the following to answer questions Exhibit: Balance Sheet of the Alpha-Beta Bank -(Exhibit: Balance Sheet of the Alpha-Beta Bank) What is the value of the bank's net worth?

Inflation reduces the ability of money to function as a

The largest component of M1 is

Which of the following best illustrates the unit of account function of money?

The maximum amount of increase in the money supply that can be caused by an increase in excess reserves is equal to the

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