Question 1

Which of the following might explain why the United States has so much currency per person?

Accepted Answer

A)  U.S. citizens are holding a lot of foreign currency. 
B)  Currency may be a preferable store of wealth for criminals. 
C)  People use credit and debit cards more frequently. 
D)  All of the above help explain the abundance of currency. 
A)  U.S. citizens are holding a lot of foreign currency. 
B)  Currency may be a preferable store of wealth for criminals. 
C)  People use credit and debit cards more frequently. 
D)  All of the above help explain the abundance of currency.

Question 2

The primary difference between commodity money and fiat money is that

Accepted Answer

A)  commodity money is a medium of exchange but fiat money is not. 
B)  fiat money is a medium of exchange but commodity money is not. 
C)  commodity money has intrinsic value but fiat money does not. 
D)  fiat money has intrinsic value but commodity money does not. 
A)  commodity money is a medium of exchange but fiat money is not. 
B)  fiat money is a medium of exchange but commodity money is not. 
C)  commodity money has intrinsic value but fiat money does not. 
D)  fiat money has intrinsic value but commodity money does not.

Question 3

If the federal funds rate were below 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 4

If the Fed raised the reserve requirement, the demand for reserves would

Accepted Answer

A)  increase, so the federal funds rate would fall. 
B)  increase, so the federal funds rate would rise. 
C)  decrease, so the federal funds rate would fall. 
D)  decrease, so the federal funds rate would rise. 
A)  increase, so the federal funds rate would fall. 
B)  increase, so the federal funds rate would rise. 
C)  decrease, so the federal funds rate would fall. 
D)  decrease, so the federal funds rate would rise.

Question 5

If the discount rate is lowered, banks borrow

Accepted Answer

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

Question 6

If the reserve requirement is 10 percent, which of the following pairs of changes would both allow a bank to lend out an additional $10,000?

Accepted Answer

A)  the Fed buys a $10,000 bond from the bank or someone deposits $10,000 in the bank 
B)  the Fed buys a $10,000 bond from the bank or the Fed lends the bank $10,000 
C)  the Fed sells a $10,000 bond to the bank or someone deposits $10,000 in the bank 
D)  the Fed sells a $10,000 bond to the bank or the Fed lends the bank $10,000 
A)  the Fed buys a $10,000 bond from the bank or someone deposits $10,000 in the bank 
B)  the Fed buys a $10,000 bond from the bank or the Fed lends the bank $10,000 
C)  the Fed sells a $10,000 bond to the bank or someone deposits $10,000 in the bank 
D)  the Fed sells a $10,000 bond to the bank or the Fed lends the bank $10,000

Question 7

A bank has $200,000 in deposits and $190,000 in loans. It has loaned out all it can. It has a reserve ratio of

Accepted Answer

A)  2.5 percent. 
B)  5 percent. 
C)  9.5 percent. 
D)  10 percent. 
A)  2.5 percent. 
B)  5 percent. 
C)  9.5 percent. 
D)  10 percent.

Question 8

Reserve requirements are regulations concerning

Accepted Answer

A)  the amount banks are allowed to borrow from the Fed. 
B)  the amount of reserves banks must hold against deposits. 
C)  reserves banks must hold based on the number and type of loans they make. 
D)  the interest rate at which banks can borrow from the Fed. 
A)  the amount banks are allowed to borrow from the Fed. 
B)  the amount of reserves banks must hold against deposits. 
C)  reserves banks must hold based on the number and type of loans they make. 
D)  the interest rate at which banks can borrow from the Fed.

Question 9

Which of the following is not a reason the New York Federal Reserve Bank president always gets to vote at the Federal Open Market Committee meetings?

Accepted Answer

A)  New York is the traditional financial center of the U.S. economy. 
B)  All Fed purchases and sales of bonds go through the New York Fed's trading desk. 
C)  New York has higher population than other cities in the U.S. 
D)  All of the above are reasons. 
A)  New York is the traditional financial center of the U.S. economy. 
B)  All Fed purchases and sales of bonds go through the New York Fed's trading desk. 
C)  New York has higher population than other cities in the U.S. 
D)  All of the above are reasons.

Question 10

Which of the following is included in M1 and M2?

Accepted Answer

A)  traveler's checks 
B)  savings deposits 
C)  money market mutual funds 
D)  small time deposits 
A)  traveler's checks 
B)  savings deposits 
C)  money market mutual funds 
D)  small time deposits

Question 11

Any item that people can use to transfer purchasing power from the present to the future is called

Accepted Answer

A)  a medium of exchange. 
B)  a unit of account. 
C)  a store of value. 
D)  None of the above is correct. 
A)  a medium of exchange. 
B)  a unit of account. 
C)  a store of value. 
D)  None of the above is correct.

Question 12

The Fed increases the reserve requirement, but it wants to offset the effects on the money supply. Which of the following should it do?

Accepted Answer

A)  sell bonds to increase reserves 
B)  sell bonds to decrease reserves 
C)  buy bonds to increase reserves 
D)  buy bonds to decrease reserves 
A)  sell bonds to increase reserves 
B)  sell bonds to decrease reserves 
C)  buy bonds to increase reserves 
D)  buy bonds to decrease reserves

Question 13

During a bank run, depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits.

Accepted Answer

A)  Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply increase. 
B)  Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply decrease. 
C)  The decision to hold relatively more currency would make the money supply increase. The decision to hold relatively more excess reserves would make the money supply decrease. 
D)  The decision to hold relatively more currency would make the money supply increase. The decision to hold relatively more excess reserves would make the money supply decrease 
A)  Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply increase. 
B)  Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply decrease. 
C)  The decision to hold relatively more currency would make the money supply increase. The decision to hold relatively more excess reserves would make the money supply decrease. 
D)  The decision to hold relatively more currency would make the money supply increase. The decision to hold relatively more excess reserves would make the money supply decrease

Question 14

When the Fed conducts open-market sales,

Accepted Answer

A)  it sells Treasury securities, which increases the money supply. 
B)  it sells Treasury securities, which decreases the money supply. 
C)  it auctions term loans, which increases the money supply. 
D)  it auctions term loans, which decreases the money supply. 
A)  it sells Treasury securities, which increases the money supply. 
B)  it sells Treasury securities, which decreases the money supply. 
C)  it auctions term loans, which increases the money supply. 
D)  it auctions term loans, which decreases the money supply.

Question 15

Bank runs

Accepted Answer

A)  will affect neither the money supply nor the money multiplier. 
B)  are only a problem for insolvent banks. 
C)  can be neither prevented nor mitigated by the Federal Reserve. 
D)  are a problem because banks only hold a fraction of deposits as reserves. 
A)  will affect neither the money supply nor the money multiplier. 
B)  are only a problem for insolvent banks. 
C)  can be neither prevented nor mitigated by the Federal Reserve. 
D)  are a problem because banks only hold a fraction of deposits as reserves.

Question 16

If a bank desires to hold no excess reserves, the reserve requirement is 5 percent, and it receives a new deposit of $1,000

Accepted Answer

A)  its required reserves increase by $50. 
B)  its total reserves initially increase by $1,000. 
C)  it will be able to make a new loan of up to $950. 
D)  All of the above are correct. 
A)  its required reserves increase by $50. 
B)  its total reserves initially increase by $1,000. 
C)  it will be able to make a new loan of up to $950. 
D)  All of the above are correct.

Question 17

Scenario 11-2.
The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the taz. Aggregate banking statistics show that collectively the banks of Tazi hold 300 million tazes of required reserves, 75 million tazes of excess reserves, have issued 7,500 million tazes of deposits, and hold 225 million tazes of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank.
-Refer to Scenario 11-2. Suppose the Bank of Tazi purchased 50 million tazes of Tazian Treasury Bonds from the banks. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much does the money supply change?

Accepted Answer

A)  625 million tazes 
B)  1,000 million tazes 
C)  1,250 million tazes 
D)  None of the above is correct. 
A)  625 million tazes 
B)  1,000 million tazes 
C)  1,250 million tazes 
D)  None of the above is correct.

Question 18

Just after the terrorist attack on September 11, 2001, the Fed stood ready to lend financial institutions funds. When the Fed did this, it was acting in its role of lender of last resort.

Accepted Answer

A) True 
 B)False

Question 19

The Fed decreases reserves if it conducts open market

Accepted Answer

A)  purchases or auctions term credit. 
B)  purchases but not if it auctions term credit 
C)  sales or auctions term credit 
D)  sales but not if it auctions term credit 
A)  purchases or auctions term credit. 
B)  purchases but not if it auctions term credit 
C)  sales or auctions term credit 
D)  sales but not if it auctions term credit

Question 20

If the public decides to hold less currency and more deposits in banks, bank reserves

Accepted Answer

A)  decrease and the money supply eventually decreases. 
B)  decrease but the money supply does not change. 
C)  increase and the money supply eventually increases. 
D)  increase but the money supply does not change. 
A)  decrease and the money supply eventually decreases. 
B)  decrease but the money supply does not change. 
C)  increase and the money supply eventually increases. 
D)  increase but the money supply does not change.

Which of the following might explain why the United States has so much currency per person?

The primary difference between commodity money and fiat money is that

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

If the Fed raised the reserve requirement, the demand for reserves would

If the discount rate is lowered, banks borrow

If the reserve requirement is 10 percent, which of the following pairs of changes would both allow a bank to lend out an additional $10,000?

A bank has $200,000 in deposits and $190,000 in loans. It has loaned out all it can. It has a reserve ratio of

Reserve requirements are regulations concerning

Which of the following is not a reason the New York Federal Reserve Bank president always gets to vote at the Federal Open Market Committee meetings?

Which of the following is included in M1 and M2?

Any item that people can use to transfer purchasing power from the present to the future is called

The Fed increases the reserve requirement, but it wants to offset the effects on the money supply. Which of the following should it do?

During a bank run, depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits.

When the Fed conducts open-market sales,

Bank runs

If a bank desires to hold no excess reserves, the reserve requirement is 5 percent, and it receives a new deposit of $1,000

Just after the terrorist attack on September 11, 2001, the Fed stood ready to lend financial institutions funds. When the Fed did this, it was acting in its role of lender of last resort.

The Fed decreases reserves if it conducts open market

If the public decides to hold less currency and more deposits in banks, bank reserves

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

Exam 11: The Monetary System

Which of the following might explain why the United States has so much currency per person?

The primary difference between commodity money and fiat money is that

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

If the Fed raised the reserve requirement, the demand for reserves would

If the discount rate is lowered, banks borrow

If the reserve requirement is 10 percent, which of the following pairs of changes would both allow a bank to lend out an additional $10,000?

A bank has $200,000 in deposits and $190,000 in loans. It has loaned out all it can. It has a reserve ratio of

Reserve requirements are regulations concerning

Which of the following is not a reason the New York Federal Reserve Bank president always gets to vote at the Federal Open Market Committee meetings?

Which of the following is included in M1 and M2?

Any item that people can use to transfer purchasing power from the present to the future is called

The Fed increases the reserve requirement, but it wants to offset the effects on the money supply. Which of the following should it do?

During a bank run, depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits.

When the Fed conducts open-market sales,

Bank runs

If a bank desires to hold no excess reserves, the reserve requirement is 5 percent, and it receives a new deposit of $1,000

Just after the terrorist attack on September 11, 2001, the Fed stood ready to lend financial institutions funds. When the Fed did this, it was acting in its role of lender of last resort.

The Fed decreases reserves if it conducts open market

If the public decides to hold less currency and more deposits in banks, bank reserves

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