Question 1

If people decide to hold less currency relative to deposits, the money supply

Accepted Answer

A)  falls. The Fed could lessen the impact of this by buying Treasury bonds. 
B)  falls. The Fed could lessen the impact of this by selling Treasury bonds. 
C)  rises. The Fed could lessen the impact of this by buying Treasury bonds. 
D)  rises. The Fed could lessen the impact of this by selling Treasury bonds. 
A)  falls. The Fed could lessen the impact of this by buying Treasury bonds. 
B)  falls. The Fed could lessen the impact of this by selling Treasury bonds. 
C)  rises. The Fed could lessen the impact of this by buying Treasury bonds. 
D)  rises. The Fed could lessen the impact of this by selling Treasury bonds.

Question 2

Consider five individuals with different occupations.   If this economy has money

Accepted Answer

A)  Allen will buy from Betty 
B)  Betty will buy from Calvin 
C)  Eric will buy from Allen 
D)  None of the above are correct. 
A)  Allen will buy from Betty 
B)  Betty will buy from Calvin 
C)  Eric will buy from Allen 
D)  None of the above are correct.

Question 3

A bank's reserve ratio is 6.5 percent and the bank has $1,950 in reserve. Its deposits amount to

Accepted Answer

A)  $62.25. 
B)  $126.75. 
C)  $22,500.00 
D)  $30,000.00. 
A)  $62.25. 
B)  $126.75. 
C)  $22,500.00 
D)  $30,000.00.

Question 4

Federal Reserve governors are given long terms to insulate them from politics.

Accepted Answer

A) True 
 B)False

Question 5

If traveler's checks were $500 higher and saving deposits were $1,000 higher, M1 would be

Accepted Answer

A)  $500 higher and M2 would be $1,000 higher 
B)  $500 higher and M2 would be $1,500 higher 
C)  M2 and M1 would be $1,500 higher 
D)  None of the above are correct. 
A)  $500 higher and M2 would be $1,000 higher 
B)  $500 higher and M2 would be $1,500 higher 
C)  M2 and M1 would be $1,500 higher 
D)  None of the above are correct.

Question 6

Demand deposits are a type of

Accepted Answer

A)  checking account. 
B)  time deposit. 
C)  money market mutual fund. 
D)  savings deposit. 
A)  checking account. 
B)  time deposit. 
C)  money market mutual fund. 
D)  savings deposit.

Question 7

One surprising thing about the U.S. money stock is that

Accepted Answer

A)  banks hold so much currency relative to the public. 
B)  the public holds so much currency relative to banks. 
C)  there is so little currency per person. 
D)  there is so much currency per person. 
A)  banks hold so much currency relative to the public. 
B)  the public holds so much currency relative to banks. 
C)  there is so little currency per person. 
D)  there is so much currency per person.

Question 8

The members of the Federal Reserve's Board of Governors

Accepted Answer

A)  are elected to office by the public every fourteen years. 
B)  are nominated by the U.S. Senate banking committee and confirmed by the U.S. house of representatives. 
C)  are elected by bankers in each Federal Reserve Region. 
D)  are appointed by the president of the U.S. and confirmed by the U.S. Senate. 
A)  are elected to office by the public every fourteen years. 
B)  are nominated by the U.S. Senate banking committee and confirmed by the U.S. house of representatives. 
C)  are elected by bankers in each Federal Reserve Region. 
D)  are appointed by the president of the U.S. and confirmed by the U.S. Senate.

Question 9

The money supply of Granov is $10,000 in a 100-percent-reserve banking system. If the Central Bank of Granov decreases the reserve requirement ratio to 10 percent, the money supply could increase by no more than $9,000.

Accepted Answer

A) True 
 B)False

Question 10

The manager of the bank where you work tells you that the bank has $300 million in deposits and $255 million dollars in loans. If the reserve requirement is 10 percent, how much is the bank holding in excess reserves?

Accepted Answer

A)  $15 million 
B)  $19.5 million 
C)  $25.5 million 
D)  $30 million 
A)  $15 million 
B)  $19.5 million 
C)  $25.5 million 
D)  $30 million

Question 11

At one time, people in a certain country had no access to banks; they relied exclusively on currency. Then, a fractional-reserve banking system was created. As a result, the money supply

Accepted Answer

A)  increased. The central bank could have reduced the size of this increase by buying bonds. 
B)  increased. The central bank could have reduced the size of this increase by selling bonds. 
C)  decreased. The central bank could have reduced the size of this decrease by buying bonds. 
D)  decreased. The central bank could have reduced the size of this decrease by selling bonds. 
A)  increased. The central bank could have reduced the size of this increase by buying bonds. 
B)  increased. The central bank could have reduced the size of this increase by selling bonds. 
C)  decreased. The central bank could have reduced the size of this decrease by buying bonds. 
D)  decreased. The central bank could have reduced the size of this decrease by selling bonds.

Question 12

When a bank loans out $1,000, the money supply

Accepted Answer

A)  does not change. 
B)  decreases. 
C)  increases. 
D)  may do any of the above. 
A)  does not change. 
B)  decreases. 
C)  increases. 
D)  may do any of the above.

Question 13

Other things the same, if banks decide to hold a smaller part of their deposits as excess reserves, the money supply will fall.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements is correct? In the special case of the 100-percent reserve banking the money multiplier is

Accepted Answer

A)  0 and banks create money. 
B)  0 and banks do not create money. 
C)  1 and banks create money 
D)  1 and banks do not create money. 
A)  0 and banks create money. 
B)  0 and banks do not create money. 
C)  1 and banks create money 
D)  1 and banks do not create money.

Question 15

Demand deposits 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 16

Currency includes

Accepted Answer

A)  paper bills and coins. 
B)  demand deposits. 
C)  credit cards. 
D)  Both (a) and (b) are correct. 
A)  paper bills and coins. 
B)  demand deposits. 
C)  credit cards. 
D)  Both (a) and (b) are correct.

Question 17

The federal funds rate is the interest rate

Accepted Answer

A)  the Federal Reserves charges for loans it makes to the federal government. 
B)  the Federal Reserve charges banks for short-term loans. 
C)  banks charge each other for short-term loans of reserves. 
D)  on newly issued one-year Treasury bonds. 
A)  the Federal Reserves charges for loans it makes to the federal government. 
B)  the Federal Reserve charges banks for short-term loans. 
C)  banks charge each other for short-term loans of reserves. 
D)  on newly issued one-year Treasury bonds.

Question 18

Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the

Accepted Answer

A)  money supply to fall. To reduce the impact of this the Fed could sell Treasury bonds. 
B)  money supply to fall. To reduce the impact of this the Fed could buy Treasury bonds. 
C)  money supply to rise. To reduce the impact of this the Fed could sell Treasury bonds. 
D)  money supply to rise. To reduce the impact of this the Fed could buy Treasury bonds. 
A)  money supply to fall. To reduce the impact of this the Fed could sell Treasury bonds. 
B)  money supply to fall. To reduce the impact of this the Fed could buy Treasury bonds. 
C)  money supply to rise. To reduce the impact of this the Fed could sell Treasury bonds. 
D)  money supply to rise. To reduce the impact of this the Fed could buy Treasury bonds.

Question 19

Table 11-4.
  
-Refer to Table 11-4. Suppose the bank faces a reserve requirement of 10 percent. Starting from the situation as depicted by the T-account, a customer deposits an additional $50,000 into his account at the bank. If the bank takes no other action it will

Accepted Answer

A)  have $65,000 in excess reserves. 
B)  have $55,000 in excess reserves. 
C)  need to raise an additional $5,000 of reserves to meet the reserve requirement ratio 
D)  None of the above is correct. 
A)  have $65,000 in excess reserves. 
B)  have $55,000 in excess reserves. 
C)  need to raise an additional $5,000 of reserves to meet the reserve requirement ratio 
D)  None of the above is correct.

Question 20

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

Accepted Answer

A)  currency 
B)  demand deposits 
C)  savings deposits 
D)  All of the above are included in both M1 and M2. 
A)  currency 
B)  demand deposits 
C)  savings deposits 
D)  All of the above are included in both M1 and M2.

If people decide to hold less currency relative to deposits, the money supply

Consider five individuals with different occupations. If this economy has money

A bank's reserve ratio is 6.5 percent and the bank has $1,950 in reserve. Its deposits amount to

Federal Reserve governors are given long terms to insulate them from politics.

If traveler's checks were $500 higher and saving deposits were $1,000 higher, M1 would be

Demand deposits are a type of

One surprising thing about the U.S. money stock is that

The members of the Federal Reserve's Board of Governors

The money supply of Granov is $10,000 in a 100-percent-reserve banking system. If the Central Bank of Granov decreases the reserve requirement ratio to 10 percent, the money supply could increase by no more than $9,000.

The manager of the bank where you work tells you that the bank has $300 million in deposits and $255 million dollars in loans. If the reserve requirement is 10 percent, how much is the bank holding in excess reserves?

At one time, people in a certain country had no access to banks; they relied exclusively on currency. Then, a fractional-reserve banking system was created. As a result, the money supply

When a bank loans out $1,000, the money supply

Other things the same, if banks decide to hold a smaller part of their deposits as excess reserves, the money supply will fall.

Which of the following statements is correct? In the special case of the 100-percent reserve banking the money multiplier is

Demand deposits are included in

Currency includes

The federal funds rate is the interest rate

Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the

Table 11-4. -Refer to Table 11-4. Suppose the bank faces a reserve requirement of 10 percent. Starting from the situation as depicted by the T-account, a customer deposits an additional $50,000 into his account at the bank. If the bank takes no other action it will

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

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 people decide to hold less currency relative to deposits, the money supply

Consider five individuals with different occupations. If this economy has money

A bank's reserve ratio is 6.5 percent and the bank has $1,950 in reserve. Its deposits amount to

Federal Reserve governors are given long terms to insulate them from politics.

If traveler's checks were $500 higher and saving deposits were $1,000 higher, M1 would be

Demand deposits are a type of

One surprising thing about the U.S. money stock is that

The members of the Federal Reserve's Board of Governors

The money supply of Granov is $10,000 in a 100-percent-reserve banking system. If the Central Bank of Granov decreases the reserve requirement ratio to 10 percent, the money supply could increase by no more than $9,000.

The manager of the bank where you work tells you that the bank has $300 million in deposits and $255 million dollars in loans. If the reserve requirement is 10 percent, how much is the bank holding in excess reserves?

At one time, people in a certain country had no access to banks; they relied exclusively on currency. Then, a fractional-reserve banking system was created. As a result, the money supply

When a bank loans out $1,000, the money supply

Other things the same, if banks decide to hold a smaller part of their deposits as excess reserves, the money supply will fall.

Which of the following statements is correct? In the special case of the 100-percent reserve banking the money multiplier is

Demand deposits are included in

Currency includes

The federal funds rate is the interest rate

Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the

Table 11-4. -Refer to Table 11-4. Suppose the bank faces a reserve requirement of 10 percent. Starting from the situation as depicted by the T-account, a customer deposits an additional $50,000 into his account at the bank. If the bank takes no other action it will

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

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