Question 1

If an economy used gold as money, its money would be

Accepted Answer

A)  commodity money, but not fiat money. 
B)  fiat money, but not commodity money. 
C)  both fiat and commodity money. 
D)  functioning as a store of value and as a unit of account, but not as a medium of exchange. 
A)  commodity money, but not fiat money. 
B)  fiat money, but not commodity money. 
C)  both fiat and commodity money. 
D)  functioning as a store of value and as a unit of account, but not as a medium of exchange.

Question 2

If you withdraw $500 from your savings account and deposit it in your checking account, then M1 will change by and M2 will change by .

Accepted Answer

The answer of If you withdraw $500 from your savings...

Question 3

When the Fed decreases the discount rate, banks will

Accepted Answer

A)  borrow more from the Fed and lend more to the public. The money supply increases. 
B)  borrow more from the Fed and lend less to the public. The money supply decreases. 
C)  borrow less from the Fed and lend more to the public. The money supply increases. 
D)  borrow less from the Fed and lend less to the public. The money supply decreases. 
A)  borrow more from the Fed and lend more to the public. The money supply increases. 
B)  borrow more from the Fed and lend less to the public. The money supply decreases. 
C)  borrow less from the Fed and lend more to the public. The money supply increases. 
D)  borrow less from the Fed and lend less to the public. The money supply decreases.

Question 4

The use of money allows trade to be roundabout.

Accepted Answer

A) True 
 B)False

Question 5

What are the functions of money?

Accepted Answer

Medium of exchange,

Question 6

If the reserve ratio is 20 percent, then $100 of new reserves can generate

Accepted Answer

A)  $60 of new money in the economy. 
B)  $250 of new money in the economy. 
C)  $500 of new money in the economy. 
D)  $2,000 of new money in the economy. 
A)  $60 of new money in the economy. 
B)  $250 of new money in the economy. 
C)  $500 of new money in the economy. 
D)  $2,000 of new money in the economy.

Question 7

Banks can hold deposits at the Federal Reserve. Balances in these accounts can be used by banks to meet their reserve requirements, but the Fed pays no interest on these deposits.

Accepted Answer

A) True 
 B)False

Question 8

Sam wants to trade eggs for sausage. Sally wants to trade sausage for eggs. Sam and Sally have a double- coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 9

When the Fed makes open-market purchases bank

Accepted Answer

A)  withdrawals and lending increase. 
B)  withdrawals increase and lending decreases. 
C)  deposits and lending increase. 
D)  deposits increase and lending decreases. 
A)  withdrawals and lending increase. 
B)  withdrawals increase and lending decreases. 
C)  deposits and lending increase. 
D)  deposits increase and lending decreases.

Question 10

Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate?

Accepted Answer

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

Question 11

Currently, bank runs are a major problem for the U.S. banking system and the Fed.

Accepted Answer

A) True 
 B)False

Question 12

The federal funds rate is the interest rate that

Accepted Answer

A)  banks charge one another for loans. 
B)  banks charge the Fed for loans. 
C)  the Fed charges banks for loans. 
D)  the Fed charges Congress for loans. 
A)  banks charge one another for loans. 
B)  banks charge the Fed for loans. 
C)  the Fed charges banks for loans. 
D)  the Fed charges Congress for loans.

Question 13

In a system of 100-percent-reserve banking,

Accepted Answer

A)  banks do not accept deposits. 
B)  banks do not influence the supply of money. 
C)  loans are the only asset item for banks. 
D)  All of the above are correct. 
A)  banks do not accept deposits. 
B)  banks do not influence the supply of money. 
C)  loans are the only asset item for banks. 
D)  All of the above are correct.

Question 14

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 15

Which of the following is a store of value?

Accepted Answer

A)  currency 
B)  U.S. government bonds 
C)  fine art 
D)  All of the above are correct. 
A)  currency 
B)  U.S. government bonds 
C)  fine art 
D)  All of the above are correct.

Question 16

Table 29-3. An economy starts with $50,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $45,750. The T-account of the bank is shown below.
  
-Refer to Table 29-3. The bank's reserve ratio is

Accepted Answer

A)  17.5 percent. 
B)  8.5 percent. 
C)  91.5 percent. 
D)  100 percent. 
A)  17.5 percent. 
B)  8.5 percent. 
C)  91.5 percent. 
D)  100 percent.

Question 17

Compare the Board of Governors and the Federal Open Market Committee.

Accepted Answer

The Board of Governors runs the Federal

Question 18

Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control.

Accepted Answer

First, the Fed does not control the amou

Question 19

A central bank's setting or altering) of the money supply is known as

Accepted Answer

A)  open-market operation. 
B)  interest rate policy. 
C)  monetary policy. 
D)  employment policy. 
A)  open-market operation. 
B)  interest rate policy. 
C)  monetary policy. 
D)  employment policy.

Question 20

If a bank uses $200 of excess reserves to make a new loan when the reserve ratio is 15 percent, this action by itself initially makes the money supply

Accepted Answer

A)  and wealth increase by $200. 
B)  and wealth decrease by $200. 
C)  increase by $200 while wealth does not change. 
D)  decrease by $200 while wealth decreases by $200. 
A)  and wealth increase by $200. 
B)  and wealth decrease by $200. 
C)  increase by $200 while wealth does not change. 
D)  decrease by $200 while wealth decreases by $200.

If an economy used gold as money, its money would be

If you withdraw $500 from your savings account and deposit it in your checking account, then M1 will change by and M2 will change by .

When the Fed decreases the discount rate, banks will

The use of money allows trade to be roundabout.

What are the functions of money?

If the reserve ratio is 20 percent, then $100 of new reserves can generate

Banks can hold deposits at the Federal Reserve. Balances in these accounts can be used by banks to meet their reserve requirements, but the Fed pays no interest on these deposits.

Sam wants to trade eggs for sausage. Sally wants to trade sausage for eggs. Sam and Sally have a double- coincidence of wants.

When the Fed makes open-market purchases bank

Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate?

Currently, bank runs are a major problem for the U.S. banking system and the Fed.

The federal funds rate is the interest rate that

In a system of 100-percent-reserve banking,

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.

Which of the following is a store of value?

Table 29-3. An economy starts with $50,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $45,750. The T-account of the bank is shown below. -Refer to Table 29-3. The bank's reserve ratio is

Compare the Board of Governors and the Federal Open Market Committee.

Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control.

A central bank's setting or altering) of the money supply is known as

If a bank uses $200 of excess reserves to make a new loan when the reserve ratio is 15 percent, this action by itself initially makes the money supply

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 an economy used gold as money, its money would be

If you withdraw $500 from your savings account and deposit it in your checking account, then M1 will change by and M2 will change by .

When the Fed decreases the discount rate, banks will

The use of money allows trade to be roundabout.

What are the functions of money?

If the reserve ratio is 20 percent, then $100 of new reserves can generate

Banks can hold deposits at the Federal Reserve. Balances in these accounts can be used by banks to meet their reserve requirements, but the Fed pays no interest on these deposits.

Sam wants to trade eggs for sausage. Sally wants to trade sausage for eggs. Sam and Sally have a double- coincidence of wants.

When the Fed makes open-market purchases bank

Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate?

Currently, bank runs are a major problem for the U.S. banking system and the Fed.

The federal funds rate is the interest rate that

In a system of 100-percent-reserve banking,

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.

Which of the following is a store of value?

Table 29-3. An economy starts with $50,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $45,750. The T-account of the bank is shown below. -Refer to Table 29-3. The bank's reserve ratio is

Compare the Board of Governors and the Federal Open Market Committee.

Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control.

A central bank's setting or altering) of the money supply is known as

If a bank uses $200 of excess reserves to make a new loan when the reserve ratio is 15 percent, this action by itself initially makes the money supply

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