Question 1

If the Fed lowers the reserve requirement,then this

Accepted Answer

A)  increases excess reserves, encourages banks to make more loans, and increases the money supply. 
B)  decreases excess reserves, causes banks to reduce their loans, and decreases the money supply. 
C)  decreases excess reserves, causes banks to reduce their loans, and increases the money supply. 
D)  increases excess reserves, causes banks to reduce their loans, and increases the money supply. 
A)  increases excess reserves, encourages banks to make more loans, and increases the money supply. 
B)  decreases excess reserves, causes banks to reduce their loans, and decreases the money supply. 
C)  decreases excess reserves, causes banks to reduce their loans, and increases the money supply. 
D)  increases excess reserves, causes banks to reduce their loans, and increases the money supply. A

Question 2

The portion of ________ that a bank does not loan out or spend on securities is known as ________.

Accepted Answer

A)  loans; reserves 
B)  deposits; reserves 
C)  deposits; securities 
D)  loans; securities 
A)  loans; reserves 
B)  deposits; reserves 
C)  deposits; securities 
D)  loans; securities B

Question 3

A problem confronting government regarding the penny is that

Accepted Answer

A)  it often costs more to produce than its face value. 
B)  it costs less to produce than its face value. 
C)  the metals used to produce the penny are in limited supply. 
D)  it no longer serves as store of value. 
A)  it often costs more to produce than its face value. 
B)  it costs less to produce than its face value. 
C)  the metals used to produce the penny are in limited supply. 
D)  it no longer serves as store of value. A

Question 4

The solution proposed by Francois Velde,an economist at the Federal Reserve Bank of Chicago,to the "problem of the penny" includes

Accepted Answer

A)  declaring Lincoln pennies to be worth five cents. 
B)  suspending production of Jefferson nickels. 
C)  producing no one cent coins. 
D)  all of the above. 
A)  declaring Lincoln pennies to be worth five cents. 
B)  suspending production of Jefferson nickels. 
C)  producing no one cent coins. 
D)  all of the above.

Question 5

Which of the following is a function that money serves?

Accepted Answer

A)  medium of exchange 
B)  unit of account 
C)  store of value 
D)  All of the above are correct. 
A)  medium of exchange 
B)  unit of account 
C)  store of value 
D)  All of the above are correct.

Question 6

Which of the following tools of monetary policy is used least often?

Accepted Answer

A)  open market operations 
B)  setting the required reserve ratio 
C)  setting the discount rate 
D)  acting as a lender of last resort 
A)  open market operations 
B)  setting the required reserve ratio 
C)  setting the discount rate 
D)  acting as a lender of last resort

Question 7

The quantity equation becomes the basis for a theory when we assume that velocity of money is constant.

Accepted Answer

A) True 
 B)False

Question 8

How effective is discount policy as compared to open market operations in managing the money supply? Explain how The Federal Reserve uses discount policy today.

Accepted Answer

The effectiveness of discount policy in

Question 9

When you open a checking account at Bank of America,Bank of America

Accepted Answer

A)  has more reserves and more excess reserves. 
B)  has more reserves, but excess reserves remain unchanged. 
C)  has more deposits and less in excess reserves. 
D)  has more deposits, but excess reserves remain unchanged. 
A)  has more reserves and more excess reserves. 
B)  has more reserves, but excess reserves remain unchanged. 
C)  has more deposits and less in excess reserves. 
D)  has more deposits, but excess reserves remain unchanged.

Question 10

A bank's liabilities are

Accepted Answer

A)  things owned by or owed to the bank. 
B)  things the bank owes to someone else. 
C)  a measure of the bank's net losses. 
D)  included as part of the bank's reserves. 
A)  things owned by or owed to the bank. 
B)  things the bank owes to someone else. 
C)  a measure of the bank's net losses. 
D)  included as part of the bank's reserves.

Question 11

Why is the real-world deposit multiplier smaller than 1/RR,where RR is the required reserve ratio?

Accepted Answer

There are two reasons why the real world

Question 12

Suppose a transaction changes a bank's balance sheet as indicated in the following T-account,and the required reserve ratio is 10 percent.
 
As a result of the transaction,the bank can make a maximum loan of

Accepted Answer

A)  $0. 
B)  $200. 
C)  $1,800. 
D)  $2,000. 
A)  $0. 
B)  $200. 
C)  $1,800. 
D)  $2,000.

Question 13

In 2007,the British government bailed out the Northern Rock bank following a bank run,a situation in which

Accepted Answer

A)  a majority of the shareholders in a bank decide to sell off all their shares of stock. 
B)  many depositors simultaneously decide to withdraw money from a bank. 
C)  a majority of the bank's loans go into default all at once. 
D)  a bank stops paying interest on all of its interest-bearing accounts. 
A)  a majority of the shareholders in a bank decide to sell off all their shares of stock. 
B)  many depositors simultaneously decide to withdraw money from a bank. 
C)  a majority of the bank's loans go into default all at once. 
D)  a bank stops paying interest on all of its interest-bearing accounts.

Question 14

The narrowest official definition of the money supply is

Accepted Answer

A)  M1. 
B)  M2. 
C)  M3. 
D)  L. 
A)  M1. 
B)  M2. 
C)  M3. 
D)  L.

Question 15

Suppose a bank has the following balance sheet:
   
If the required reserve ratio is 10 percent,how much excess reserves does the bank have? What is the maximum amount that the bank can expand its loans?

Accepted Answer

If the required reserve ratio is 10 perc

Question 16

Hyperinflation is caused by

Accepted Answer

A)  a constant increase in the money supply. 
B)  a high rate of growth in the money supply. 
C)  Real GDP growing more rapidly than the money supply. 
D)  the money supply growing more slowly than GDP. 
A)  a constant increase in the money supply. 
B)  a high rate of growth in the money supply. 
C)  Real GDP growing more rapidly than the money supply. 
D)  the money supply growing more slowly than GDP.

Question 17

A car dealer sells you a car today in exchange for money in the future.This illustrates which function of money?

Accepted Answer

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

Question 18

Consider the following T-account for National City Bank
 
If the required reserve ratio is lowered to 8 percent,how much can National City loan out?

Accepted Answer

A)  $10,000 
B)  $8,000 
C)  $2,000 
D)  $0 
A)  $10,000 
B)  $8,000 
C)  $2,000 
D)  $0

Question 19

Most payments in the United States for goods and services are made using

Accepted Answer

A)  currency. 
B)  checking account deposits. 
C)  traveler's checks. 
D)  gold. 
A)  currency. 
B)  checking account deposits. 
C)  traveler's checks. 
D)  gold.

Question 20

The discount rate is

Accepted Answer

A)  the interest rate banks charge each other for overnight loans. 
B)  the interest rate banks charge their best customers. 
C)  the interest rate the Fed charges to banks for loans from the Fed. 
D)  the interest rate the U.S. Treasury pays on Treasury Bills. 
A)  the interest rate banks charge each other for overnight loans. 
B)  the interest rate banks charge their best customers. 
C)  the interest rate the Fed charges to banks for loans from the Fed. 
D)  the interest rate the U.S. Treasury pays on Treasury Bills.

If the Fed lowers the reserve requirement,then this

The portion of that a bank does not loan out or spend on securities is known as .

A problem confronting government regarding the penny is that

The solution proposed by Francois Velde,an economist at the Federal Reserve Bank of Chicago,to the "problem of the penny" includes

Which of the following is a function that money serves?

Which of the following tools of monetary policy is used least often?

The quantity equation becomes the basis for a theory when we assume that velocity of money is constant.

How effective is discount policy as compared to open market operations in managing the money supply? Explain how The Federal Reserve uses discount policy today.

When you open a checking account at Bank of America,Bank of America

A bank's liabilities are

Why is the real-world deposit multiplier smaller than 1/RR,where RR is the required reserve ratio?

Suppose a transaction changes a bank's balance sheet as indicated in the following T-account,and the required reserve ratio is 10 percent. As a result of the transaction,the bank can make a maximum loan of

In 2007,the British government bailed out the Northern Rock bank following a bank run,a situation in which

The narrowest official definition of the money supply is

Suppose a bank has the following balance sheet: If the required reserve ratio is 10 percent,how much excess reserves does the bank have? What is the maximum amount that the bank can expand its loans?

Hyperinflation is caused by

A car dealer sells you a car today in exchange for money in the future.This illustrates which function of money?

Consider the following T-account for National City Bank If the required reserve ratio is lowered to 8 percent,how much can National City loan out?

Most payments in the United States for goods and services are made using

The discount rate is

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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Exam 14: Money, banks, and the Federal Reserve System

If the Fed lowers the reserve requirement,then this

The portion of ________ that a bank does not loan out or spend on securities is known as ________.

A problem confronting government regarding the penny is that

The solution proposed by Francois Velde,an economist at the Federal Reserve Bank of Chicago,to the "problem of the penny" includes

Which of the following is a function that money serves?

Which of the following tools of monetary policy is used least often?

The quantity equation becomes the basis for a theory when we assume that velocity of money is constant.

How effective is discount policy as compared to open market operations in managing the money supply? Explain how The Federal Reserve uses discount policy today.

When you open a checking account at Bank of America,Bank of America

A bank's liabilities are

Why is the real-world deposit multiplier smaller than 1/RR,where RR is the required reserve ratio?

Suppose a transaction changes a bank's balance sheet as indicated in the following T-account,and the required reserve ratio is 10 percent. As a result of the transaction,the bank can make a maximum loan of

In 2007,the British government bailed out the Northern Rock bank following a bank run,a situation in which

The narrowest official definition of the money supply is

Suppose a bank has the following balance sheet: If the required reserve ratio is 10 percent,how much excess reserves does the bank have? What is the maximum amount that the bank can expand its loans?

Hyperinflation is caused by

A car dealer sells you a car today in exchange for money in the future.This illustrates which function of money?

Consider the following T-account for National City Bank If the required reserve ratio is lowered to 8 percent,how much can National City loan out?

Most payments in the United States for goods and services are made using

The discount rate is

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

The portion of that a bank does not loan out or spend on securities is known as .