Question 1

Which of the following statements is correct?

Accepted Answer

A)  All items that are included in M1 are included also in M2. 
B)  All items that are included in M2 are included also in M1. 
C)  Credit cards are included in both M1 and M2. 
D)  Savings deposits are included in both M1 and M2. 
A)  All items that are included in M1 are included also in M2. 
B)  All items that are included in M2 are included also in M1. 
C)  Credit cards are included in both M1 and M2. 
D)  Savings deposits are included in both M1 and M2.

Question 2

Table 11-2. An economy starts with $10,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $9,250. The T-account of the bank is shown below.
  
-Refer to Table 11-2. If all banks in the economy have the same reserve ratio as this bank, then the value of the economy's money multiplier is

Accepted Answer

A)  1.33. 
B)  10.00. 
C)  10.81. 
D)  13.33. 
A)  1.33. 
B)  10.00. 
C)  10.81. 
D)  13.33.

Question 3

To increase the money supply, the Fed could

Accepted Answer

A)  sell government bonds. 
B)  decrease the discount rate. 
C)  increase the reserve requirement. 
D)  None of the above is correct. 
A)  sell government bonds. 
B)  decrease the discount rate. 
C)  increase the reserve requirement. 
D)  None of the above is correct.

Question 4

Which of the following is a store of value?

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 5

Which of the following individuals serve a four-year term?

Accepted Answer

A)  the members of the Board of Governors 
B)  the Chair of the Board of Governors 
C)  the members of the FOMC 
D)  All of the above are correct. 
A)  the members of the Board of Governors 
B)  the Chair of the Board of Governors 
C)  the members of the FOMC 
D)  All of the above are correct.

Question 6

At the Federal Reserve,

Accepted Answer

A)  the nation's monetary and fiscal policies are made by the Federal Open Market Committee, which meets about every six weeks. 
B)  the nation's monetary and fiscal policies are made by the Federal Open Market Committee, which meets twice a year. 
C)  the nation's monetary policy is made by the Federal Open Market Committee, which meets about every six weeks. 
D)  the nation's monetary policy is made by the Federal Open Market Committee, which meets twice a year. 
A)  the nation's monetary and fiscal policies are made by the Federal Open Market Committee, which meets about every six weeks. 
B)  the nation's monetary and fiscal policies are made by the Federal Open Market Committee, which meets twice a year. 
C)  the nation's monetary policy is made by the Federal Open Market Committee, which meets about every six weeks. 
D)  the nation's monetary policy is made by the Federal Open Market Committee, which meets twice a year.

Question 7

Table 11-7
Metropolis National Bank is currently holding 2% of its deposits as excess reserves.
  
-Refer to Balance Sheet of Metropolis National Bank. Metropolis National Bank is holding 2% of its deposits as excess reserves. Assume that no banks in the economy want to maintain holdings of excess reserves and that people only hold deposits and no currency. The Fed makes open market purchases of $10,000. The person who sold bonds to the Fed deposits all the funds in Metropolis National Bank. If the bank now loans out all its excess reserves, by how much will the money supply increase?

Accepted Answer

A)  $190,000 
B)  $200,000 
C)  $240,000 
D)  None of the above are correct. 
A)  $190,000 
B)  $200,000 
C)  $240,000 
D)  None of the above are correct.

Question 8

In a 100-percent-reserve banking system, if people decided to decrease the amount of currency they held by increasing the amount they held in checkable deposits, then

Accepted Answer

A)  M1 would increase. 
B)  M1 would decrease. 
C)  M1 would not change. 
D)  M1 might rise or fall. 
A)  M1 would increase. 
B)  M1 would decrease. 
C)  M1 would not change. 
D)  M1 might rise or fall.

Question 9

The Federal Deposit Insurance Corporation

Accepted Answer

A)  protects depositors in the event of bank failures. 
B)  has become insolvent in recent years due to a large number of bank failures. 
C)  is part of the Federal Reserve System. 
D)  in practice has seldom been of much use. 
A)  protects depositors in the event of bank failures. 
B)  has become insolvent in recent years due to a large number of bank failures. 
C)  is part of the Federal Reserve System. 
D)  in practice has seldom been of much use.

Question 10

Table 11-2. An economy starts with $10,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $9,250. The T-account of the bank is shown below.
  
-Refer to Table 11-2. If all banks in the economy have the same reserve ratio as this bank, then an increase in reserves of $150 for this bank has the potential to increase deposits for all banks by

Accepted Answer

A)  $866.67. 
B)  $1,666.67. 
C)  $2,000.00. 
D)  an infinite amount. 
A)  $866.67. 
B)  $1,666.67. 
C)  $2,000.00. 
D)  an infinite amount.

Question 11

Designers of the Federal Reserve System were concerned that the Fed might form policy favorable to one part of the country or to a particular party. What are some ways that the organization of the Fed reflects such concerns?

Accepted Answer

The answer of Designers of the Federal Reserve System were...

Question 12

Economists use the word "money" to refer to

Accepted Answer

A)  income generated by the production of goods and services. 
B)  those assets regularly used to buy goods and services. 
C)  fianncial assets such as stocks and bonds. 
D)  any type of wealth. 
A)  income generated by the production of goods and services. 
B)  those assets regularly used to buy goods and services. 
C)  fianncial assets such as stocks and bonds. 
D)  any type of wealth.

Question 13

Which of the following is an example of barter?

Accepted Answer

A)  A parent gives a teenager a $10 bill in exchange for her babysitting services. 
B)  A homeowner gives an exterminator a check for $50 in exchange for extermination services. 
C)  A barber gives a plumber a haircut in exchange for the plumber fixing the barber's leaky faucet. 
D)  All of the above are examples of barter. 
A)  A parent gives a teenager a $10 bill in exchange for her babysitting services. 
B)  A homeowner gives an exterminator a check for $50 in exchange for extermination services. 
C)  A barber gives a plumber a haircut in exchange for the plumber fixing the barber's leaky faucet. 
D)  All of the above are examples of barter.

Question 14

Draw a simple T-account for First National Bank which has $5,000 of deposits, a required reserve ratio of 10 percent, and excess reserves of $300. Make sure your balance sheet balances.

Accepted Answer

The answer of Draw a simple T-account for First National...

Question 15

Members of the Board of Governors of the Federal Reserve System are appointed for life.

Accepted Answer

A) True 
 B)False

Question 16

One plausible explanation for the large amount of U.S. currency outstanding is that many dollars are held abroad.

Accepted Answer

A) True 
 B)False

Question 17

People can write checks against

Accepted Answer

A)  demand deposits and money market mutual funds 
B)  demand deposits but not money market mutual funds 
C)  money market mutual funds but not demand deposits 
D)  neither demand deposits nor money market mutual funds 
A)  demand deposits and money market mutual funds 
B)  demand deposits but not money market mutual funds 
C)  money market mutual funds but not demand deposits 
D)  neither demand deposits nor money market mutual funds

Question 18

Table 11-3.
  
-Refer to Table 11-3. If $1,000 is deposited into the First Bank of Fairfield, and the bank takes no other actions, its

Accepted Answer

A)  reserves will increase by $200. 
B)  liabilities will decrease by $1,000. 
C)  assets will increase by $1,000. 
D)  reserves will increase by $800. 
A)  reserves will increase by $200. 
B)  liabilities will decrease by $1,000. 
C)  assets will increase by $1,000. 
D)  reserves will increase by $800.

Question 19

The agency responsible for regulating the money supply in the United States is

Accepted Answer

A)  the Comptroller of the Currency. 
B)  the U.S. Treasury. 
C)  the Federal Reserve. 
D)  the U.S. Bank. 
A)  the Comptroller of the Currency. 
B)  the U.S. Treasury. 
C)  the Federal Reserve. 
D)  the U.S. Bank.

Question 20

In December 1999 people feared that there might be computer problems at banks as the century changed. Consequently, people wanted to hold relatively more in currency and relatively less in deposits. In anticipation banks raised their reserve ratios to have enough cash on hand to meet depositors' demands. These actions by the public

Accepted Answer

A)  would increase the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds. 
B)  would increase the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds. 
C)  would reduce the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds. 
D)  would reduce the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds. 
A)  would increase the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds. 
B)  would increase the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds. 
C)  would reduce the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds. 
D)  would reduce the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds.

Which of the following statements is correct?

To increase the money supply, the Fed could

Which of the following is a store of value?

Which of the following individuals serve a four-year term?

At the Federal Reserve,

In a 100-percent-reserve banking system, if people decided to decrease the amount of currency they held by increasing the amount they held in checkable deposits, then

The Federal Deposit Insurance Corporation

Designers of the Federal Reserve System were concerned that the Fed might form policy favorable to one part of the country or to a particular party. What are some ways that the organization of the Fed reflects such concerns?

Economists use the word "money" to refer to

Which of the following is an example of barter?

Draw a simple T-account for First National Bank which has $5,000 of deposits, a required reserve ratio of 10 percent, and excess reserves of $300. Make sure your balance sheet balances.

Members of the Board of Governors of the Federal Reserve System are appointed for life.

One plausible explanation for the large amount of U.S. currency outstanding is that many dollars are held abroad.

People can write checks against

Table 11-3. -Refer to Table 11-3. If $1,000 is deposited into the First Bank of Fairfield, and the bank takes no other actions, its

The agency responsible for regulating the money supply in the United States 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

Which of the following statements is correct?

To increase the money supply, the Fed could

Which of the following is a store of value?

Which of the following individuals serve a four-year term?

At the Federal Reserve,

In a 100-percent-reserve banking system, if people decided to decrease the amount of currency they held by increasing the amount they held in checkable deposits, then

The Federal Deposit Insurance Corporation

Designers of the Federal Reserve System were concerned that the Fed might form policy favorable to one part of the country or to a particular party. What are some ways that the organization of the Fed reflects such concerns?

Economists use the word "money" to refer to

Which of the following is an example of barter?

Draw a simple T-account for First National Bank which has $5,000 of deposits, a required reserve ratio of 10 percent, and excess reserves of $300. Make sure your balance sheet balances.

Members of the Board of Governors of the Federal Reserve System are appointed for life.

One plausible explanation for the large amount of U.S. currency outstanding is that many dollars are held abroad.

People can write checks against

Table 11-3. -Refer to Table 11-3. If $1,000 is deposited into the First Bank of Fairfield, and the bank takes no other actions, its

The agency responsible for regulating the money supply in the United States 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

Filters