Question 1

If the reserve ratio is 15 percent, the money multiplier is

Accepted Answer

A)  7.7. 
B)  6.7. 
C)  5.7. 
D)  15. 
A)  7.7. 
B)  6.7. 
C)  5.7. 
D)  15.

Question 2

The money multiplier equals

Accepted Answer

A)  1/R, where R represents the quantity of reserves in the economy. 
B)  1/R, where R represents the reserve ratio for all banks in the economy. 
C)  1/1+R), where R represents the quantity of reserves in the economy. 
D)  1/1+R), where R represents the reserve ratio for all banks in the economy. 
A)  1/R, where R represents the quantity of reserves in the economy. 
B)  1/R, where R represents the reserve ratio for all banks in the economy. 
C)  1/1+R), where R represents the quantity of reserves in the economy. 
D)  1/1+R), where R represents the reserve ratio for all banks in the economy.

Question 3

Bank capital is

Accepted Answer

A)  the machinery, structures, and equipment of the bank. 
B)  the resources that owners have put into the bank. 
C)  the reserves of the bank. 
D)  the bank's total assets. 
A)  the machinery, structures, and equipment of the bank. 
B)  the resources that owners have put into the bank. 
C)  the reserves of the bank. 
D)  the bank's total assets.

Question 4

If the Federal Open Market Committee decides to decrease the money supply, it will

Accepted Answer

A)  sell government bonds. 
B)  purchase corporate bonds. 
C)  purchase government bonds. 
D)  reduce interest rates. 
A)  sell government bonds. 
B)  purchase corporate bonds. 
C)  purchase government bonds. 
D)  reduce interest rates.

Question 5

Which tool of monetary policy does the Federal Reserve use most often?

Accepted Answer

A)  term auctions 
B)  open-market operations 
C)  changes in reserve requirements 
D)  changes in the discount rate 
A)  term auctions 
B)  open-market operations 
C)  changes in reserve requirements 
D)  changes in the discount rate

Question 6

The banking system currently has $50 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 12.5 percent and at the same time sells $10 billion worth of bonds, then by how much does the money supply change?

Accepted Answer

A)  It falls by $20 billion. 
B)  It falls by $110 billion. 
C)  It falls by $180 billion. 
D)  None of the above is correct. 
A)  It falls by $20 billion. 
B)  It falls by $110 billion. 
C)  It falls by $180 billion. 
D)  None of the above is correct.

Question 7

The confidence you have that a retailer will accept dollars in exchange for goods is based primarily on money

Accepted Answer

A)  being a unit of account. 
B)  being a medium of exchange. 
C)  serving as a store of value. 
D)  having intrinsic value. 
A)  being a unit of account. 
B)  being a medium of exchange. 
C)  serving as a store of value. 
D)  having intrinsic value.

Question 8

In an economy that relies upon barter,

Accepted Answer

A)  trade does not require a double coincidence of wants. 
B)  scarce resources are allocated just as easily as they are in economies that do not rely upon barter. 
C)  there is no item in the economy that is widely accepted in exchange for goods and services. 
D)  All of the above are correct. 
A)  trade does not require a double coincidence of wants. 
B)  scarce resources are allocated just as easily as they are in economies that do not rely upon barter. 
C)  there is no item in the economy that is widely accepted in exchange for goods and services. 
D)  All of the above are correct.

Question 9

Which of the following statements regarding the Federal Open Market Committee is correct?

Accepted Answer

A)  Only the five voting regional Fed presidents attend the meetings. 
B)  All regional Fed presidents attend and vote at the meetings. 
C)  All regional Fed presidents attend the meetings, but only five get to vote. 
D)  Regional Fed presidents may neither attend nor vote the meetings. 
A)  Only the five voting regional Fed presidents attend the meetings. 
B)  All regional Fed presidents attend and vote at the meetings. 
C)  All regional Fed presidents attend the meetings, but only five get to vote. 
D)  Regional Fed presidents may neither attend nor vote the meetings.

Question 10

The reserve ratio is 10 percent, banks do not hold excess reserves, and people hold only deposits and no currency. When the Fed sells $20 million worth of bonds to the public, bank reserves

Accepted Answer

A)  increase by $20 million and the money supply eventually increases by $20 million. 
B)  increase by $20 million and the money supply eventually increases by $200 million. 
C)  decrease by $2 million and the money supply eventually increases by $20 million. 
D)  decrease by $20 million and the money supply eventually decreases by $200 million. 
A)  increase by $20 million and the money supply eventually increases by $20 million. 
B)  increase by $20 million and the money supply eventually increases by $200 million. 
C)  decrease by $2 million and the money supply eventually increases by $20 million. 
D)  decrease by $20 million and the money supply eventually decreases by $200 million.

Question 11

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

Accepted Answer

A)  $110. 
B)  $300. 
C)  $2,450. 
D)  $4,490. 
A)  $110. 
B)  $300. 
C)  $2,450. 
D)  $4,490.

Question 12

Given the following information, what are the values of M1 and M2?
Small time deposits $1,800 billion
Demand deposits and other checkable deposits $1,000 billion
Savings deposits $1,400 billion
Money market mutual funds $1,000 billion
Traveler's checks $50 billion
Large time deposits $600 billion
Currency $300 billion
Miscellaneous categories in M2 $50 billion

Accepted Answer

A)  M1 = $3,150 billion, M2 = $6,200 billion. 
B)  M1 = $1,350 billion, M2 = $5,600 billion. 
C)  M1 = $1,400 billion, M2 = $6,200 billion. 
D)  M1 = $1,300 billion, M2 = $5,600 billion. 
A)  M1 = $3,150 billion, M2 = $6,200 billion. 
B)  M1 = $1,350 billion, M2 = $5,600 billion. 
C)  M1 = $1,400 billion, M2 = $6,200 billion. 
D)  M1 = $1,300 billion, M2 = $5,600 billion.

Question 13

Most financial assets other than money function as

Accepted Answer

A)  a medium of exchange, a unit of account, and a store of value. 
B)  a medium of exchange and a store of value, but not a unit of account. 
C)  a store of value and a unit of account, but not a medium of exchange. 
D)  a store of value, but not a unit of account nor a medium of exchange 
A)  a medium of exchange, a unit of account, and a store of value. 
B)  a medium of exchange and a store of value, but not a unit of account. 
C)  a store of value and a unit of account, but not a medium of exchange. 
D)  a store of value, but not a unit of account nor a medium of exchange

Question 14

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 15

The series of bank failures in 1907 occurred despite the creation of the Federal Reserve many years earlier.

Accepted Answer

A) True 
 B)False

Question 16

M1 includes

Accepted Answer

A)  small time deposits. 
B)  savings deposits. 
C)  other checkable deposits. 
D)  money market mutual funds. 
A)  small time deposits. 
B)  savings deposits. 
C)  other checkable deposits. 
D)  money market mutual funds.

Question 17

Table 29-6.
  
-Refer to Table 29-6. If the Fed's reserve requirement is 5 percent, then what quantity of excess reserves does the Bank of Pleasantville now hold?

Accepted Answer

A)  $500 
B)  $250 
C)  $2,000 
D)  $3,600 
A)  $500 
B)  $250 
C)  $2,000 
D)  $3,600

Question 18

Suppose banks decide to hold fewer 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

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 20

The Fed can reduce the federal funds rate by

Accepted Answer

A)  decreasing the money supply. To decrease the money supply it could sell bonds. 
B)  decreasing the money supply. To decrease the money supply it could buy bonds. 
C)  increasing the money supply. To increase the money supply it could sell bonds. 
D)  increasing the money supply. To increase the money supply it could buy bonds. 
A)  decreasing the money supply. To decrease the money supply it could sell bonds. 
B)  decreasing the money supply. To decrease the money supply it could buy bonds. 
C)  increasing the money supply. To increase the money supply it could sell bonds. 
D)  increasing the money supply. To increase the money supply it could buy bonds.

If the reserve ratio is 15 percent, the money multiplier is

The money multiplier equals

Bank capital is

If the Federal Open Market Committee decides to decrease the money supply, it will

Which tool of monetary policy does the Federal Reserve use most often?

The confidence you have that a retailer will accept dollars in exchange for goods is based primarily on money

In an economy that relies upon barter,

Which of the following statements regarding the Federal Open Market Committee is correct?

The reserve ratio is 10 percent, banks do not hold excess reserves, and people hold only deposits and no currency. When the Fed sells $20 million worth of bonds to the public, bank reserves

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

Most financial assets other than money function as

The Federal Deposit Insurance Corporation

The series of bank failures in 1907 occurred despite the creation of the Federal Reserve many years earlier.

M1 includes

Table 29-6. -Refer to Table 29-6. If the Fed's reserve requirement is 5 percent, then what quantity of excess reserves does the Bank of Pleasantville now hold?

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

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

The Fed can reduce the federal funds rate by

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 and Its Natural Rate

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

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 Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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Exam 11: The Monetary System

If the reserve ratio is 15 percent, the money multiplier is

The money multiplier equals

Bank capital is

If the Federal Open Market Committee decides to decrease the money supply, it will

Which tool of monetary policy does the Federal Reserve use most often?

The confidence you have that a retailer will accept dollars in exchange for goods is based primarily on money

In an economy that relies upon barter,

Which of the following statements regarding the Federal Open Market Committee is correct?

The reserve ratio is 10 percent, banks do not hold excess reserves, and people hold only deposits and no currency. When the Fed sells $20 million worth of bonds to the public, bank reserves

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

Most financial assets other than money function as

The Federal Deposit Insurance Corporation

The series of bank failures in 1907 occurred despite the creation of the Federal Reserve many years earlier.

M1 includes

Table 29-6. -Refer to Table 29-6. If the Fed's reserve requirement is 5 percent, then what quantity of excess reserves does the Bank of Pleasantville now hold?

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

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

The Fed can reduce the federal funds rate by

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 and Its Natural Rate

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

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 Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters