Question 1

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

Accepted Answer

When the reserve requirement is less tha

Question 2

In many circumstances, prisoners are not allowed to possess cash. Does this mean there is no money in prison? Explain.

Accepted Answer

No.
Any good that provides the three fun

Question 3

List the two main functions performed by the Fed?

Accepted Answer

The Fed performs two main func

Question 4

The Federal Reserve is a privately operated commercial bank.

Accepted Answer

A) True 
 B)False

Question 5

If the reserve ratio is 8 percent, then an additional $800 of reserves can increase the money supply by as much as

Accepted Answer

A)  $6,400. 
B)  $8,000. 
C)  $12,500. 
D)  $10,000. 
A)  $6,400. 
B)  $8,000. 
C)  $12,500. 
D)  $10,000.

Question 6

One of the features of money is its store of value. However, most people do not hold their wealth as currency. Given that currency is the most liquid type of asset, why don't people hold all their wealth as currency?

Accepted Answer

Currency is not a perfect store of value

Question 7

Today, bank runs are not a major problem for the U.S. banking system because

Accepted Answer

A)  bank runs are now illegal. 
B)  banks now hold 100 percent of their deposits in reserve. 
C)  banks are now all government-operated. 
D)  the federal government now guarantees the safety of deposits at most banks. 
A)  bank runs are now illegal. 
B)  banks now hold 100 percent of their deposits in reserve. 
C)  banks are now all government-operated. 
D)  the federal government now guarantees the safety of deposits at most banks.

Question 8

If the Fed increases the reserve ratio from 5 percent to 12.5 percent, then the money multiplier

Accepted Answer

A)  decreases from 20 to 8. 
B)  decreases from 12.5 to 5. 
C)  increases from 8 to 20. 
D)  increases from 5 to 12.5. 
A)  decreases from 20 to 8. 
B)  decreases from 12.5 to 5. 
C)  increases from 8 to 20. 
D)  increases from 5 to 12.5.

Question 9

You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money?

Accepted Answer

A)  medium of exchange 
B)  unit of account 
C)  store of value 
D)  liquidity 
A)  medium of exchange 
B)  unit of account 
C)  store of value 
D)  liquidity

Question 10

Money is the only asset that functions as a store of value.

Accepted Answer

A) True 
 B)False

Question 11

The reserve requirement is 12 percent. Lucy deposits $600 into a bank. By how much do excess reserves change?

Accepted Answer

A)  $600 
B)  $528 
C)  $72 
D)  $12 
A)  $600 
B)  $528 
C)  $72 
D)  $12

Question 12

If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the Fed sells $25.5 million worth of bonds to the public, bank reserves

Accepted Answer

A)  increase by $25.5 million and the money supply eventually increases by $382.5 million. 
B)  increase by $25.5 million and the money supply eventually increases by $170 million. 
C)  decrease by $25.5 million and the money supply eventually decreases by $382.5 million. 
D)  decrease by $25.5 million and the money supply eventually decreases by $170 million. 
A)  increase by $25.5 million and the money supply eventually increases by $382.5 million. 
B)  increase by $25.5 million and the money supply eventually increases by $170 million. 
C)  decrease by $25.5 million and the money supply eventually decreases by $382.5 million. 
D)  decrease by $25.5 million and the money supply eventually decreases by $170 million.

Question 13

M1 equals currency plus demand deposits plus

Accepted Answer

A)  nothing else. 
B)  other checkable deposits. 
C)  traveler's checks plus other checkable deposits. 
D)  traveler's checks plus other checkable deposits plus savings deposits. 
A)  nothing else. 
B)  other checkable deposits. 
C)  traveler's checks plus other checkable deposits. 
D)  traveler's checks plus other checkable deposits plus savings deposits.

Question 14

Which of the following is not a central bank?

Accepted Answer

A)  The Bank of England 
B)  The Bank of Japan 
C)  The Bank of America 
D)  The Federal Reserve 
A)  The Bank of England 
B)  The Bank of Japan 
C)  The Bank of America 
D)  The Federal Reserve

Question 15

Suppose the banking system currently has $300 billion in reserves, the reserve requirement is 5 percent, and excess reserves are $30 billion. What is the level of loans?

Accepted Answer

A)  $270 billion 
B)  $5,400 billion 
C)  $6,000 billion 
D)  $5,100 billion 
A)  $270 billion 
B)  $5,400 billion 
C)  $6,000 billion 
D)  $5,100 billion

Question 16

Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A bank has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have to lend out if it decides to hold only required reserves?

Accepted Answer

A)  $27,000 
B)  $27,190 
C)  $26,190 
D)  $9,000 
A)  $27,000 
B)  $27,190 
C)  $26,190 
D)  $9,000

Question 17

When you purchase school supplies at the book store using cash, you are using money as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 18

If the reserve ratio is 7.5 percent, the money multiplier is

Accepted Answer

A)  7.5. 
B)  10.3. 
C)  13.3. 
D)  11.3. 
A)  7.5. 
B)  10.3. 
C)  13.3. 
D)  11.3.

Question 19

Consider the following traders who meet.
 
Which, if any, pairs of traders has a double coincidence of wants?

Accepted Answer

A)  Bill with Mike 
B)  Time with Amy 
C)  Bill with Mike, and Tim with Amy 
D)  Bill with Tim, and Mike with Amy 
A)  Bill with Mike 
B)  Time with Amy 
C)  Bill with Mike, and Tim with Amy 
D)  Bill with Tim, and Mike with Amy

Question 20

The Fed can directly protect a bank during a bank run by

Accepted Answer

A)  increasing reserve requirements. 
B)  selling government bonds to the bank. 
C)  lending reserves to the bank. 
D)  doing any of the above. 
A)  increasing reserve requirements. 
B)  selling government bonds to the bank. 
C)  lending reserves to the bank. 
D)  doing any of the above.

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

In many circumstances, prisoners are not allowed to possess cash. Does this mean there is no money in prison? Explain.

List the two main functions performed by the Fed?

The Federal Reserve is a privately operated commercial bank.

If the reserve ratio is 8 percent, then an additional $800 of reserves can increase the money supply by as much as

One of the features of money is its store of value. However, most people do not hold their wealth as currency. Given that currency is the most liquid type of asset, why don't people hold all their wealth as currency?

Today, bank runs are not a major problem for the U.S. banking system because

If the Fed increases the reserve ratio from 5 percent to 12.5 percent, then the money multiplier

You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money?

Money is the only asset that functions as a store of value.

The reserve requirement is 12 percent. Lucy deposits $600 into a bank. By how much do excess reserves change?

If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the Fed sells $25.5 million worth of bonds to the public, bank reserves

M1 equals currency plus demand deposits plus

Which of the following is not a central bank?

Suppose the banking system currently has $300 billion in reserves, the reserve requirement is 5 percent, and excess reserves are $30 billion. What is the level of loans?

Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A bank has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have to lend out if it decides to hold only required reserves?

When you purchase school supplies at the book store using cash, you are using money as a medium of exchange.

If the reserve ratio is 7.5 percent, the money multiplier is

Consider the following traders who meet. Which, if any, pairs of traders has a double coincidence of wants?

The Fed can directly protect a bank during a bank run 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

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

In many circumstances, prisoners are not allowed to possess cash. Does this mean there is no money in prison? Explain.

List the two main functions performed by the Fed?

The Federal Reserve is a privately operated commercial bank.

If the reserve ratio is 8 percent, then an additional $800 of reserves can increase the money supply by as much as

One of the features of money is its store of value. However, most people do not hold their wealth as currency. Given that currency is the most liquid type of asset, why don't people hold all their wealth as currency?

Today, bank runs are not a major problem for the U.S. banking system because

If the Fed increases the reserve ratio from 5 percent to 12.5 percent, then the money multiplier

You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money?

Money is the only asset that functions as a store of value.

The reserve requirement is 12 percent. Lucy deposits $600 into a bank. By how much do excess reserves change?

If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the Fed sells $25.5 million worth of bonds to the public, bank reserves

M1 equals currency plus demand deposits plus

Which of the following is not a central bank?

Suppose the banking system currently has $300 billion in reserves, the reserve requirement is 5 percent, and excess reserves are $30 billion. What is the level of loans?

Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A bank has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have to lend out if it decides to hold only required reserves?

When you purchase school supplies at the book store using cash, you are using money as a medium of exchange.

If the reserve ratio is 7.5 percent, the money multiplier is

Consider the following traders who meet. Which, if any, pairs of traders has a double coincidence of wants?

The Fed can directly protect a bank during a bank run 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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