Question 1

Bank runs and the accompanying increase in the money multiplier caused the U.S. money supply to rise by 28 percent from 1929 to 1933.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is not included in M1?

Accepted Answer

A)  a $5 bill in your wallet 
B)  $100 in your checking account 
C)  $500 in your savings account 
D)  All of the above are included in M1. 
A)  a $5 bill in your wallet 
B)  $100 in your checking account 
C)  $500 in your savings account 
D)  All of the above are included in M1.

Question 3

Monetary policy is determined by a committee whose voting members include all the presidents of the regional Federal Reserve Banks.

Accepted Answer

A) True 
 B)False

Question 4

In order for currency to be widely used as a medium of exchange, it is sufficient for the government to designate it as legal tender.

Accepted Answer

A) True 
 B)False

Question 5

The Federal Reserve is a privately operated commercial bank.

Accepted Answer

A) True 
 B)False

Question 6

Consider the following traders who meet.   Which, if any, pairs of traders has a double coincidence of wants?

Accepted Answer

A)  Bob with Alice 
B)  Ted with Alice 
C)  Bob with Mary, Ted with Bob, and Ted with Alice 
D)  None of the pairs above has a double coincidence of wants. 
A)  Bob with Alice 
B)  Ted with Alice 
C)  Bob with Mary, Ted with Bob, and Ted with Alice 
D)  None of the pairs above has a double coincidence of wants.

Question 7

If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 20 percent, this action by itself initially makes the money supply

Accepted Answer

A)  and wealth increase by $100. 
B)  and wealth decrease by $100. 
C)  increase by $100 while wealth does not change. 
D)  decrease by $100 while wealth decreases by $100. 
A)  and wealth increase by $100. 
B)  and wealth decrease by $100. 
C)  increase by $100 while wealth does not change. 
D)  decrease by $100 while wealth decreases by $100.

Question 8

The amount of currency per person in the United States is about

Accepted Answer

A)  $125. 
B)  $300. 
C)  $2,500. 
D)  $3,700. 
A)  $125. 
B)  $300. 
C)  $2,500. 
D)  $3,700.

Question 9

Credit card limits are included in

Accepted Answer

A)  M1 but not M2. 
B)  M2 but not M1. 
C)  M1 and M2. 
D)  neither M1 nor M2. 
A)  M1 but not M2. 
B)  M2 but not M1. 
C)  M1 and M2. 
D)  neither M1 nor M2.

Question 10

Given the following information, what are the values of M1 and M2? Small time deposits
$1,100 billion
Demand deposits and other checkable deposits
$800 billion
Savings deposits
$1,350 billion
Money market mutual funds
$900 billion
Traveler's checks
$30 billion
Large time deposits
$750 billion
Currency
$150 billion
Miscellaneous categories in M2
$40 billion

Accepted Answer

A)  M1 = $830 billion, M2 = $4,370 billion. 
B)  M1 = $980 billion, M2 = $4,370 billion. 
C)  M1 = $980 billion, M2 = $3, 390 billion. 
D)  M1 = $1,020 billion, M2 = $3,390 billion. 
A)  M1 = $830 billion, M2 = $4,370 billion. 
B)  M1 = $980 billion, M2 = $4,370 billion. 
C)  M1 = $980 billion, M2 = $3, 390 billion. 
D)  M1 = $1,020 billion, M2 = $3,390 billion.

Question 11

The interest rate the Fed charges on loans it makes to banks is called

Accepted Answer

A)  the prime rate. 
B)  the federal funds rate. 
C)  the discount rate. 
D)  the LIBOR. 
A)  the prime rate. 
B)  the federal funds rate. 
C)  the discount rate. 
D)  the LIBOR.

Question 12

Compare the Board of Governors and the Federal Open Market Committee.

Accepted Answer

The Board of Governors runs the Federal

Question 13

If the central bank in some country lowered the reserve requirement, then the money multiplier for that country

Accepted Answer

A)  would increase. 
B)  would not change. 
C)  would decrease. 
D)  could do any of the above. 
A)  would increase. 
B)  would not change. 
C)  would decrease. 
D)  could do any of the above.

Question 14

Which of the following is correct?

Accepted Answer

A)  The Fed can control the money supply precisely. 
B)  The amount of money in the economy does not depend on the behavior of depositors. 
C)  The amount of money in the economy depends in part on the behavior of banks. 
D)  None of the above is correct. 
A)  The Fed can control the money supply precisely. 
B)  The amount of money in the economy does not depend on the behavior of depositors. 
C)  The amount of money in the economy depends in part on the behavior of banks. 
D)  None of the above is correct.

Question 15

A bank's reserve ratio is 5 percent and the bank has $1,000 in deposits. Its reserves amount to

Accepted Answer

A)  $5. 
B)  $50. 
C)  $95. 
D)  $950. 
A)  $5. 
B)  $50. 
C)  $95. 
D)  $950.

Question 16

The banking system currently has $10 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the Fed raises the reserve requirement to 20 percent and at the same time buys $1 billion worth of bonds, then by how much does the money supply change?

Accepted Answer

A)  It falls by $45 billion. 
B)  It falls by $52 billion. 
C)  It falls by $55 billion. 
D)  None of the above is correct. 
A)  It falls by $45 billion. 
B)  It falls by $52 billion. 
C)  It falls by $55 billion. 
D)  None of the above is correct.

Question 17

The discount rate is

Accepted Answer

A)  the rate at which public banks lend to other public banks. 
B)  the rate at which the Fed lends to banks. 
C)  the percentage difference between the face value of a Treasury bond and what the Fed pays for it. 
D)  the percentage of deposits banks hold as excess reserves. 
A)  the rate at which public banks lend to other public banks. 
B)  the rate at which the Fed lends to banks. 
C)  the percentage difference between the face value of a Treasury bond and what the Fed pays for it. 
D)  the percentage of deposits banks hold as excess reserves.

Question 18

If the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Accepted Answer

A)  buying bonds. This buying would reduce reserves. 
B)  buying bonds. This buying would increase reserves. 
C)  selling bonds. This selling would reduce reserves. 
D)  selling bonds. This selling would increase reserves. 
A)  buying bonds. This buying would reduce reserves. 
B)  buying bonds. This buying would increase reserves. 
C)  selling bonds. This selling would reduce reserves. 
D)  selling bonds. This selling would increase reserves.

Question 19

In the special case of the 100 percent-reserve banking the money multiplier is

Accepted Answer

A)  1 and banks create money. 
B)  1 and banks do not create money. 
C)  2 and banks create money 
D)  2 and banks do not create money. 
A)  1 and banks create money. 
B)  1 and banks do not create money. 
C)  2 and banks create money 
D)  2 and banks do not create money.

Question 20

A bank loans Greg's Ice Cream $250,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is

Accepted Answer

A)  a liability for the bank and an asset for Greg's Ice Cream. The loan increases the money supply. 
B)  a liability for the bank and an asset for Greg's Ice Cream. The loan does not increase the money supply. 
C)  an asset for the bank and a liability for Greg's Ice Cream. The loan increases the money supply. 
D)  an asset for the bank and a liability for Greg's Ice Cream. The loan does not increase the money supply. 
A)  a liability for the bank and an asset for Greg's Ice Cream. The loan increases the money supply. 
B)  a liability for the bank and an asset for Greg's Ice Cream. The loan does not increase the money supply. 
C)  an asset for the bank and a liability for Greg's Ice Cream. The loan increases the money supply. 
D)  an asset for the bank and a liability for Greg's Ice Cream. The loan does not increase the money supply.

Bank runs and the accompanying increase in the money multiplier caused the U.S. money supply to rise by 28 percent from 1929 to 1933.

Which of the following is not included in M1?

Monetary policy is determined by a committee whose voting members include all the presidents of the regional Federal Reserve Banks.

In order for currency to be widely used as a medium of exchange, it is sufficient for the government to designate it as legal tender.

The Federal Reserve is a privately operated commercial bank.

Consider the following traders who meet. Which, if any, pairs of traders has a double coincidence of wants?

If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 20 percent, this action by itself initially makes the money supply

The amount of currency per person in the United States is about

Credit card limits are included in

The interest rate the Fed charges on loans it makes to banks is called

Compare the Board of Governors and the Federal Open Market Committee.

If the central bank in some country lowered the reserve requirement, then the money multiplier for that country

Which of the following is correct?

A bank's reserve ratio is 5 percent and the bank has $1,000 in deposits. Its reserves amount to

The discount rate is

If the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

In the special case of the 100 percent-reserve banking the money multiplier is

A bank loans Greg's Ice Cream $250,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is

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

Bank runs and the accompanying increase in the money multiplier caused the U.S. money supply to rise by 28 percent from 1929 to 1933.

Which of the following is not included in M1?

Monetary policy is determined by a committee whose voting members include all the presidents of the regional Federal Reserve Banks.

In order for currency to be widely used as a medium of exchange, it is sufficient for the government to designate it as legal tender.

The Federal Reserve is a privately operated commercial bank.

Consider the following traders who meet. Which, if any, pairs of traders has a double coincidence of wants?

If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 20 percent, this action by itself initially makes the money supply

The amount of currency per person in the United States is about

Credit card limits are included in

The interest rate the Fed charges on loans it makes to banks is called

Compare the Board of Governors and the Federal Open Market Committee.

If the central bank in some country lowered the reserve requirement, then the money multiplier for that country

Which of the following is correct?

A bank's reserve ratio is 5 percent and the bank has $1,000 in deposits. Its reserves amount to

The discount rate is

If the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

In the special case of the 100 percent-reserve banking the money multiplier is

A bank loans Greg's Ice Cream $250,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is

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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