Question 1

John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account. As a result of this transfer by itself

Accepted Answer

A)  M1 increases by $2,500 and M2 decreases by $2,500. 
B)  M1 increases by $2,500 and M2 stays the same. 
C)  M1 decreases by $2,500 and M2 stays the same. 
D)  M1 decreases by $2,500 and M2 decreases by $2,500. 
A)  M1 increases by $2,500 and M2 decreases by $2,500. 
B)  M1 increases by $2,500 and M2 stays the same. 
C)  M1 decreases by $2,500 and M2 stays the same. 
D)  M1 decreases by $2,500 and M2 decreases by $2,500.

Question 2

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 loaned the banks of Tazi 10 million tazes. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply change?

Accepted Answer

A)  250 million tazes 
B)  200 million tazes 
C)  125 million tazes 
D)  None of the above is correct. 
A)  250 million tazes 
B)  200 million tazes 
C)  125 million tazes 
D)  None of the above is correct.

Question 3

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 currently holding 2% of deposits as excess reserves. Assuming that all banks have the same required reserve ratio, and then none want to hold excess reserves what is the value of the money multiplier?

Accepted Answer

A)  8.25 
B)  10 
C)  12 
D)  20 
A)  8.25 
B)  10 
C)  12 
D)  20

Question 4

The banking system currently has $100 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 lowers the reserve requirement to 8 percent and at the same time buys $10 billion worth of bonds, then by how much does the money supply change?

Accepted Answer

A)  It rises by $225 billion. 
B)  It rises by $375 billion. 
C)  It rises by $675 billion. 
D)  None of the above is correct. 
A)  It rises by $225 billion. 
B)  It rises by $375 billion. 
C)  It rises by $675 billion. 
D)  None of the above is correct.

Question 5

When we say that trade is roundabout we mean that

Accepted Answer

A)  people sometimes trade goods for goods. 
B)  trades require a double coincidence of wants. 
C)  currency is accepted primarily to make further trades. 
D)  people must spend time searching for the products they wish to purchase. 
A)  people sometimes trade goods for goods. 
B)  trades require a double coincidence of wants. 
C)  currency is accepted primarily to make further trades. 
D)  people must spend time searching for the products they wish to purchase.

Question 6

Economists argue that the move from barter to money increased trade and production. How is this possible?

Accepted Answer

The use of money allows people

Question 7

Table 11-4.
  
-Refer to Table 11-4. If the bank faces a reserve requirement of 10 percent, then the bank

Accepted Answer

A)  is in a position to make a new loan of $10,000. 
B)  has fewer reserves than are required. 
C)  has excess reserves of $12,500. 
D)  None of the above is correct. 
A)  is in a position to make a new loan of $10,000. 
B)  has fewer reserves than are required. 
C)  has excess reserves of $12,500. 
D)  None of the above is correct.

Question 8

If the Fed increases the reserve ratio from 4 percent to 10 percent, then the money multiplier

Accepted Answer

A)  decreases from 25 to 10. 
B)  decreases from 20 to 10. 
C)  increases from 10 to 25. 
D)  increases from 10 to 20. 
A)  decreases from 25 to 10. 
B)  decreases from 20 to 10. 
C)  increases from 10 to 25. 
D)  increases from 10 to 20.

Question 9

Liquidity refers to

Accepted Answer

A)  the ease with which an asset is converted to the medium of exchange. 
B)  the measurement of the intrinsic value of commodity money. 
C)  the measurment of the durability of a good. 
D)  how many time a dollar circulates in a given year. 
A)  the ease with which an asset is converted to the medium of exchange. 
B)  the measurement of the intrinsic value of commodity money. 
C)  the measurment of the durability of a good. 
D)  how many time a dollar circulates in a given year.

Question 10

People hold $400 million of bank deposits but no currency. Banks have made $380 million dollars of loans and only hold enough reserves to satisfy reserve requirements. Because of uncertainty, banks choose to hold $10 million more in reserves. The Fed takes no action. What happens to bank loans?

Accepted Answer

A)  they fall $220 million 
B)  they fall $200 million 
C)  they rise $200 million 
D)  they rise $220 million 
A)  they fall $220 million 
B)  they fall $200 million 
C)  they rise $200 million 
D)  they rise $220 million

Question 11

Credit cards

Accepted Answer

A)  defer payments. 
B)  are a store of value. 
C)  have led to wider use of currency. 
D)  are part of the money supply. 
A)  defer payments. 
B)  are a store of value. 
C)  have led to wider use of currency. 
D)  are part of the money supply.

Question 12

Which of the following best illustrates the concept of a store of value?

Accepted Answer

A)  You are a precious-metals dealer, and you are always aware of how many ounces of platinum trade for an ounce of gold. 
B)  You sell items on eBay, and your prices are stated in terms of dollars. 
C)  You keep 6 ounces of gold in your safe-deposit box at the bank for emergencies. 
D)  None of the above is correct. 
A)  You are a precious-metals dealer, and you are always aware of how many ounces of platinum trade for an ounce of gold. 
B)  You sell items on eBay, and your prices are stated in terms of dollars. 
C)  You keep 6 ounces of gold in your safe-deposit box at the bank for emergencies. 
D)  None of the above is correct.

Question 13

To increase the money supply, the Fed could

Accepted Answer

A)  sell government bonds. 
B)  auction more loans to banks. 
C)  increase the reserve requirement. 
D)  None of the above is correct. 
A)  sell government bonds. 
B)  auction more loans to banks. 
C)  increase the reserve requirement. 
D)  None of the above is correct.

Question 14

During wars the public tends to hold relatively more currency and relatively fewer deposits. This decision makes reserves

Accepted Answer

A)  and the money supply increase. 
B)  and the money supply decrease. 
C)  increase, but leaves the money supply unchanged. 
D)  decrease, but leaves the money supply unchanged. 
A)  and the money supply increase. 
B)  and the money supply decrease. 
C)  increase, but leaves the money supply unchanged. 
D)  decrease, but leaves the money supply unchanged.

Question 15

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. Assume that banks desire to continue holding the same ratio of excess reserves to deposits. What is the reserve requirement and the reserve ratio for Tazian Banks?

Accepted Answer

A)  5 percent, 8 percent 
B)  4 percent, 8 percent 
C)  4 percent, 5 percent 
D)  None of the above is correct. 
A)  5 percent, 8 percent 
B)  4 percent, 8 percent 
C)  4 percent, 5 percent 
D)  None of the above is correct.

Question 16

To decrease the money supply, the Fed can

Accepted Answer

A)  buy government bonds or increase the discount rate. 
B)  buy government bonds or decrease the discount rate. 
C)  sell government bonds or increase the discount rate. 
D)  sell government bonds or decrease the discount rate. 
A)  buy government bonds or increase the discount rate. 
B)  buy government bonds or decrease the discount rate. 
C)  sell government bonds or increase the discount rate. 
D)  sell government bonds or decrease the discount rate.

Question 17

Consider five high school students working on homework in study hall.   Which of the following pairs of students has a double coincidence of wants?

Accepted Answer

A)  Rosie and Piper 
B)  Piper and Molly 
C)  Dewey and Molly 
D)  Bob and Dewey 
A)  Rosie and Piper 
B)  Piper and Molly 
C)  Dewey and Molly 
D)  Bob and Dewey

Question 18

M1 includes savings deposits.

Accepted Answer

A) True 
 B)False

Question 19

Which of the three functions of money are commonly met by each of the following assets in the U.S. economy?
a.paper dollar
b.precious metals
c.collectibles such as baseball cards, stamps, and antiques

Accepted Answer

a.
medium of exchang

Question 20

When in France you notice that prices are posted in euros, this best illustrates money's function as

Accepted Answer

A)  a store of value. 
B)  a medium of exchange. 
C)  a unit of account. 
D)  a method of barter. 
A)  a store of value. 
B)  a medium of exchange. 
C)  a unit of account. 
D)  a method of barter.

John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account. As a result of this transfer by itself

When we say that trade is roundabout we mean that

Economists argue that the move from barter to money increased trade and production. How is this possible?

Table 11-4. -Refer to Table 11-4. If the bank faces a reserve requirement of 10 percent, then the bank

If the Fed increases the reserve ratio from 4 percent to 10 percent, then the money multiplier

Liquidity refers to

People hold $400 million of bank deposits but no currency. Banks have made $380 million dollars of loans and only hold enough reserves to satisfy reserve requirements. Because of uncertainty, banks choose to hold $10 million more in reserves. The Fed takes no action. What happens to bank loans?

Credit cards

Which of the following best illustrates the concept of a store of value?

To increase the money supply, the Fed could

During wars the public tends to hold relatively more currency and relatively fewer deposits. This decision makes reserves

To decrease the money supply, the Fed can

Consider five high school students working on homework in study hall. Which of the following pairs of students has a double coincidence of wants?

M1 includes savings deposits.

Which of the three functions of money are commonly met by each of the following assets in the U.S. economy? a.paper dollar b.precious metals c.collectibles such as baseball cards, stamps, and antiques

When in France you notice that prices are posted in euros, this best illustrates money's function as

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

John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account. As a result of this transfer by itself

When we say that trade is roundabout we mean that

Economists argue that the move from barter to money increased trade and production. How is this possible?

Table 11-4. -Refer to Table 11-4. If the bank faces a reserve requirement of 10 percent, then the bank

If the Fed increases the reserve ratio from 4 percent to 10 percent, then the money multiplier

Liquidity refers to

People hold $400 million of bank deposits but no currency. Banks have made $380 million dollars of loans and only hold enough reserves to satisfy reserve requirements. Because of uncertainty, banks choose to hold $10 million more in reserves. The Fed takes no action. What happens to bank loans?

Credit cards

Which of the following best illustrates the concept of a store of value?

To increase the money supply, the Fed could

During wars the public tends to hold relatively more currency and relatively fewer deposits. This decision makes reserves

To decrease the money supply, the Fed can

Consider five high school students working on homework in study hall. Which of the following pairs of students has a double coincidence of wants?

M1 includes savings deposits.

Which of the three functions of money are commonly met by each of the following assets in the U.S. economy? a.paper dollar b.precious metals c.collectibles such as baseball cards, stamps, and antiques

When in France you notice that prices are posted in euros, this best illustrates money's function as

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