Question 1

If the reserve ratio is 12.5 percent, then $2,000 of additional reserves can create up to

Accepted Answer

A)  $8,000 of new money. 
B)  $16,000 of new money. 
C)  $32,000 of new money. 
D)  None of the above is correct. 
A)  $8,000 of new money. 
B)  $16,000 of new money. 
C)  $32,000 of new money. 
D)  None of the above is correct.

Question 2

Which of the following is a function of money?

Accepted Answer

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

Question 3

Which of the following statements regarding the Federal Open Market Committee is correct?

Accepted Answer

A)  Only the five voting regional Fed presidents attend the meetings. 
B)  All regional Fed presidents attend and vote at the meetings. 
C)  All regional Fed presidents attend the meetings, but only five get to vote. 
D)  Regional Fed presidents may neither attend nor vote the meetings. 
A)  Only the five voting regional Fed presidents attend the meetings. 
B)  All regional Fed presidents attend and vote at the meetings. 
C)  All regional Fed presidents attend the meetings, but only five get to vote. 
D)  Regional Fed presidents may neither attend nor vote the meetings.

Question 4

The reserve requirement is 10%. Lucy deposits $200 into a bank. By how much do excess reserves change?

Accepted Answer

A)  $200 
B)  $180 
C)  $20 
D)  $10 
A)  $200 
B)  $180 
C)  $20 
D)  $10

Question 5

The money supply decreases if

Accepted Answer

A)  households decide to hold relatively more currency and relatively fewer deposits and banks decide to hold relatively more excess reserves and make fewer loans. 
B)  households decide to hold relatively more currency and relatively fewer deposits and banks decide to hold relatively fewer excess reserves and make more loans. 
C)  households decide to hold relatively less currency and relatively more deposits and banks decide to hold relatively more excess reserves and make fewer loans. 
D)  households decide to hold relatively less currency and relatively more deposits and banks decide to hold relatively less excess reserves and make more loans. 
A)  households decide to hold relatively more currency and relatively fewer deposits and banks decide to hold relatively more excess reserves and make fewer loans. 
B)  households decide to hold relatively more currency and relatively fewer deposits and banks decide to hold relatively fewer excess reserves and make more loans. 
C)  households decide to hold relatively less currency and relatively more deposits and banks decide to hold relatively more excess reserves and make fewer loans. 
D)  households decide to hold relatively less currency and relatively more deposits and banks decide to hold relatively less excess reserves and make more loans.

Question 6

To decrease the money supply, the Fed could

Accepted Answer

A)  sell government bonds. 
B)  increase the discount rate. 
C)  increase the reserve requirement. 
D)  All of the above are correct. 
A)  sell government bonds. 
B)  increase the discount rate. 
C)  increase the reserve requirement. 
D)  All of the above are correct.

Question 7

Which of the following does the Federal Reserve not do?

Accepted Answer

A)  conduct monetary policy 
B)  act as a lender of last resort 
C)  convert Federal Reserve Notes into gold 
D)  serve as a bank regulator 
A)  conduct monetary policy 
B)  act as a lender of last resort 
C)  convert Federal Reserve Notes into gold 
D)  serve as a bank regulator

Question 8

For purposes of analyzing the money stock and its relationship to relevant economic variables, money is best thought of as

Accepted Answer

A)  those items that can be readily accessed and used to buy goods and services. 
B)  currency only. 
C)  currency plus all bank accounts. 
D)  currency plus all bank accounts plus bonds. 
A)  those items that can be readily accessed and used to buy goods and services. 
B)  currency only. 
C)  currency plus all bank accounts. 
D)  currency plus all bank accounts plus bonds.

Question 9

If the discount rate is raised then banks borrow

Accepted Answer

A)  more from the Fed so reserves increase. 
B)  more from the Fed so reserves decrease. 
C)  less from the Fed so reserves increase. 
D)  less from the Fed so reserves decrease. 
A)  more from the Fed so reserves increase. 
B)  more from the Fed so reserves decrease. 
C)  less from the Fed so reserves increase. 
D)  less from the Fed so reserves decrease.

Question 10

Because of the multiple tools at its disposal, the Fed can control the money supply very precisely.

Accepted Answer

A) True 
 B)False

Question 11

Which two of the Ten Principles of Economics imply that the Fed can profoundly affect the economy?

Accepted Answer

The answer of Which two of the Ten Principles of...

Question 12

Which of the following increases when the Fed makes open-market sales?

Accepted Answer

A)  currency and reserves 
B)  currency but not reserves 
C)  reserves but not currency 
D)  neither currency nor reserves 
A)  currency and reserves 
B)  currency but not reserves 
C)  reserves but not currency 
D)  neither currency nor reserves

Question 13

The Soviet government in the 1980's never abandoned the ruble as the official currency. However, the people of Moscow preferred to accept

Accepted Answer

A)  cigarettes in exchange for goods and services, because they were convinced that cigarettes were going to soon become hard to come by. 
B)  American dollars in exchange for goods and services, because rubles were extremely hard to come by. 
C)  goods such as cigarettes or American dollars in exchange for goods and services, reminding us of the fact that government decree by itself is not sufficient for the success of a commodity money. 
D)  All of the above are correct. 
A)  cigarettes in exchange for goods and services, because they were convinced that cigarettes were going to soon become hard to come by. 
B)  American dollars in exchange for goods and services, because rubles were extremely hard to come by. 
C)  goods such as cigarettes or American dollars in exchange for goods and services, reminding us of the fact that government decree by itself is not sufficient for the success of a commodity money. 
D)  All of the above are correct.

Question 14

Which type of money has intrinsic value?

Accepted Answer

A)  commodity money 
B)  fiat money 
C)  both commodity money and fiat money 
D)  neither commodity money nor fiat money 
A)  commodity money 
B)  fiat money 
C)  both commodity money and fiat money 
D)  neither commodity money nor fiat money

Question 15

The money supply decreases if the Fed

Accepted Answer

A)  sells Treasury bonds. The larger the reserve requirement, the larger the decrease will be. 
B)  sells Treasury bonds. The smaller the reserve requirement, the larger the decrease will be. 
C)  buys Treasury bonds. The larger the reserve requirement, the larger the decrease will be. 
D)  buys Treasury bonds. The smaller the reserve requirement, the larger the decrease will be. 
A)  sells Treasury bonds. The larger the reserve requirement, the larger the decrease will be. 
B)  sells Treasury bonds. The smaller the reserve requirement, the larger the decrease will be. 
C)  buys Treasury bonds. The larger the reserve requirement, the larger the decrease will be. 
D)  buys Treasury bonds. The smaller the reserve requirement, the larger the decrease will be.

Question 16

When the Soviet Union began breaking up in the late 1980s, cigarettes began replacing the ruble as the medium of exchange even though the ruble was legal tender. The cigarettes provide an example of commodity money.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is both a store of value and regularly used as a medium of exchange?

Accepted Answer

A)  cash and stocks 
B)  cash but not stocks 
C)  stocks but not cash 
D)  neither cash nor stocks 
A)  cash and stocks 
B)  cash but not stocks 
C)  stocks but not cash 
D)  neither cash nor stocks

Question 18

The federal funds rate is the

Accepted Answer

A)  percentage of face value that the Federal Reserve is willing to pay for Treasury Securities. 
B)  percentage of deposits that banks must hold as reserves. 
C)  interest rate at which the Federal Reserve makes short-term loans to banks. 
D)  interest rate at which banks lend reserves to each other overnight. 
A)  percentage of face value that the Federal Reserve is willing to pay for Treasury Securities. 
B)  percentage of deposits that banks must hold as reserves. 
C)  interest rate at which the Federal Reserve makes short-term loans to banks. 
D)  interest rate at which banks lend reserves to each other overnight.

Question 19

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

Accepted Answer

A)  You list prices for candy sold on your Web site, www.sweettooth.com, in dollars. 
B)  You pay for your theater tickets with dollars. 
C)  You hold currency even though you don't intend to spend it right away. 
D)  None of the above is correct. 
A)  You list prices for candy sold on your Web site, www.sweettooth.com, in dollars. 
B)  You pay for your theater tickets with dollars. 
C)  You hold currency even though you don't intend to spend it right away. 
D)  None of the above is correct.

Question 20

Demand deposits are balances in bank accounts that depositors can access by writing a check or using a debit card.

Accepted Answer

A) True 
 B)False

If the reserve ratio is 12.5 percent, then $2,000 of additional reserves can create up to

Which of the following is a function of money?

Which of the following statements regarding the Federal Open Market Committee is correct?

The reserve requirement is 10%. Lucy deposits $200 into a bank. By how much do excess reserves change?

The money supply decreases if

To decrease the money supply, the Fed could

Which of the following does the Federal Reserve not do?

For purposes of analyzing the money stock and its relationship to relevant economic variables, money is best thought of as

If the discount rate is raised then banks borrow

Because of the multiple tools at its disposal, the Fed can control the money supply very precisely.

Which two of the Ten Principles of Economics imply that the Fed can profoundly affect the economy?

Which of the following increases when the Fed makes open-market sales?

The Soviet government in the 1980's never abandoned the ruble as the official currency. However, the people of Moscow preferred to accept

Which type of money has intrinsic value?

The money supply decreases if the Fed

When the Soviet Union began breaking up in the late 1980s, cigarettes began replacing the ruble as the medium of exchange even though the ruble was legal tender. The cigarettes provide an example of commodity money.

Which of the following is both a store of value and regularly used as a medium of exchange?

The federal funds rate is the

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

Demand deposits are balances in bank accounts that depositors can access by writing a check or using a debit card.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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Exam 11: The Monetary System

If the reserve ratio is 12.5 percent, then $2,000 of additional reserves can create up to

Which of the following is a function of money?

Which of the following statements regarding the Federal Open Market Committee is correct?

The reserve requirement is 10%. Lucy deposits $200 into a bank. By how much do excess reserves change?

The money supply decreases if

To decrease the money supply, the Fed could

Which of the following does the Federal Reserve not do?

For purposes of analyzing the money stock and its relationship to relevant economic variables, money is best thought of as

If the discount rate is raised then banks borrow

Because of the multiple tools at its disposal, the Fed can control the money supply very precisely.

Which two of the Ten Principles of Economics imply that the Fed can profoundly affect the economy?

Which of the following increases when the Fed makes open-market sales?

The Soviet government in the 1980's never abandoned the ruble as the official currency. However, the people of Moscow preferred to accept

Which type of money has intrinsic value?

The money supply decreases if the Fed

When the Soviet Union began breaking up in the late 1980s, cigarettes began replacing the ruble as the medium of exchange even though the ruble was legal tender. The cigarettes provide an example of commodity money.

Which of the following is both a store of value and regularly used as a medium of exchange?

The federal funds rate is the

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

Demand deposits are balances in bank accounts that depositors can access by writing a check or using a debit card.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters