Question 1

Which of the following is not included in M1?

Accepted Answer

A)  currency 
B)  demand deposits 
C)  savings deposits 
D)  traveler's checks 
A)  currency 
B)  demand deposits 
C)  savings deposits 
D)  traveler's checks

Question 2

In a system of 100-percent-reserve banking,

Accepted Answer

A)  banks do not make loans. 
B)  currency is the only form of money. 
C)  deposits are banks' only assets. 
D)  All of the above are correct. 
A)  banks do not make loans. 
B)  currency is the only form of money. 
C)  deposits are banks' only assets. 
D)  All of the above are correct.

Question 3

The existence of money

Accepted Answer

A)  reduces specialization. 
B)  makes trade easier. 
C)  allows for barter. 
D)  hinders production. 
A)  reduces specialization. 
B)  makes trade easier. 
C)  allows for barter. 
D)  hinders production.

Question 4

A double coincidence of wants

Accepted Answer

A)  is required when there is no item in an economy that is widely accepted in exchange for goods and services. 
B)  is required in an economy that relies on barter. 
C)  is a hindrance to the allocation of resources when it is required for trade. 
D)  All of the above are correct. 
A)  is required when there is no item in an economy that is widely accepted in exchange for goods and services. 
B)  is required in an economy that relies on barter. 
C)  is a hindrance to the allocation of resources when it is required for trade. 
D)  All of the above are correct.

Question 5

Any item that people can use to transfer purchasing power from the present to the future is called

Accepted Answer

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

Question 6

You use U.S. currency to pay the owner of a restaurant for a delicious meal. The currency

Accepted Answer

A)  has no intrinsic value. The exchange is an example of barter. 
B)  has no intrinsic value. The exchange is not an example of barter. 
C)  has intrinsic value. The exchange is not an example of barter. 
D)  has intrinsic value. The exchange is not an example of barter 
A)  has no intrinsic value. The exchange is an example of barter. 
B)  has no intrinsic value. The exchange is not an example of barter. 
C)  has intrinsic value. The exchange is not an example of barter. 
D)  has intrinsic value. The exchange is not an example of barter

Question 7

Scenario 29-1.
The monetary policy of Namdian is determined by the Namdian Central Bank. The local currency is the dia. Namdian banks collectively hold 100 million dias of required reserves, 25 million dias of excess reserves, 250 million dias of Namdian Treasury Bonds, and their customers hold 1,000 million dias of deposits. Namdians prefer to use only demand deposits and so the money supply consists of demand deposits.
-Refer to Scenario 29-1. Suppose the Central Bank of Namdia loaned the banks of Namdia 5 million dias. 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 of Namdia change?

Accepted Answer

A)  60 million dias 
B)  50 million dias 
C)  40 million dias 
D)  None of the above is correct. 
A)  60 million dias 
B)  50 million dias 
C)  40 million dias 
D)  None of the above is correct.

Question 8

Table 29-7.
  
-Refer to Table 29-7. If the Fed requires a reserve ratio of 6 percent, then what quantity of excess reserves does the Bank of Springfield now hold?

Accepted Answer

A)  $9,600 
B)  $10,800 
C)  $10,200 
D)  $9,000 
A)  $9,600 
B)  $10,800 
C)  $10,200 
D)  $9,000

Question 9

In a fractional-reserve banking system, an increase in reserve requirements

Accepted Answer

A)  increases both the money multiplier and the money supply. 
B)  decreases both the money multiplier and the money supply. 
C)  increases the money multiplier, but decreases the money supply. 
D)  decreases the money multiplier, but increases the money supply. 
A)  increases both the money multiplier and the money supply. 
B)  decreases both the money multiplier and the money supply. 
C)  increases the money multiplier, but decreases the money supply. 
D)  decreases the money multiplier, but increases the money supply.

Question 10

The measure of the money stock called M1 includes

Accepted Answer

A)  wealth held by people in their checking accounts. 
B)  wealth held by people in their savings accounts. 
C)  wealth held by people in money market mutual funds. 
D)  everything that is included in M2 plus some additional items. 
A)  wealth held by people in their checking accounts. 
B)  wealth held by people in their savings accounts. 
C)  wealth held by people in money market mutual funds. 
D)  everything that is included in M2 plus some additional items.

Question 11

Suppose the Federal Reserve increases bank reserves and banks lend out some of these reserves, but at some point banks still have $5 million more they wish to lend out. If the reserve requirement is 10 percent, how much more money can banks create if they lend out the remaining amount?

Accepted Answer

A)  $55 million 
B)  $50 million 
C)  $45 million 
D)  $40 million 
A)  $55 million 
B)  $50 million 
C)  $45 million 
D)  $40 million

Question 12

An increase in the money supply might indicate that the Fed had

Accepted Answer

A)  purchased bonds to increase banks reserves. 
B)  purchased bonds to decrease banks reserves. 
C)  sold bonds to increase banks reserves. 
D)  sold bonds to decrease banks reserves. 
A)  purchased bonds to increase banks reserves. 
B)  purchased bonds to decrease banks reserves. 
C)  sold bonds to increase banks reserves. 
D)  sold bonds to decrease banks reserves.

Question 13

If the reserve requirement is 12 percent and banks desire to hold no excess reserves, when a bank receives a new deposit of $1,000,

Accepted Answer

A)  it must increase its required reserves by more than $150. 
B)  its total reserves initially increase by $120. 
C)  it will be able to make new loans up to a maximum of $880. 
D)  None of the above is correct. 
A)  it must increase its required reserves by more than $150. 
B)  its total reserves initially increase by $120. 
C)  it will be able to make new loans up to a maximum of $880. 
D)  None of the above is correct.

Question 14

If the federal funds rate were below the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Accepted Answer

A)  buying bonds. This buying would increase the money supply. 
B)  buying bonds. This buying would reduce the money supply. 
C)  selling bonds. This selling would increase the money supply. 
D)  selling bonds. This selling would reduce the money supply. 
A)  buying bonds. This buying would increase the money supply. 
B)  buying bonds. This buying would reduce the money supply. 
C)  selling bonds. This selling would increase the money supply. 
D)  selling bonds. This selling would reduce the money supply.

Question 15

During the early 1930s there were a number of bank failures in the United States. What did this do to the money supply? The New York Federal Reserve Bank advocated open market purchases. Would these purchases have reversed the change in the money supply and helped banks? Explain.

Accepted Answer

Bank failures cause people to lose confi

Question 16

Which of the following items is included in M2?

Accepted Answer

A)  credit cards 
B)  money market mutual funds 
C)  corporate bonds 
D)  large time deposits 
A)  credit cards 
B)  money market mutual funds 
C)  corporate bonds 
D)  large time deposits

Question 17

An open-market purchase

Accepted Answer

A)  increases the number of dollars and the number of bonds in the hands of the public. 
B)  increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public. 
C)  decreases the number of dollars and the number of bonds in the hands of the public. 
D)  decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public. 
A)  increases the number of dollars and the number of bonds in the hands of the public. 
B)  increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public. 
C)  decreases the number of dollars and the number of bonds in the hands of the public. 
D)  decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public.

Question 18

Which of the following is an asset of a bank and a liability for its customers?

Accepted Answer

A)  deposits of its customers and loans to its customers 
B)  deposits of its customers but not loans to its customers 
C)  loans to its customers but not the deposits of its customers 
D)  neither the deposits of its customers nor the loans to its customers 
A)  deposits of its customers and loans to its customers 
B)  deposits of its customers but not loans to its customers 
C)  loans to its customers but not the deposits of its customers 
D)  neither the deposits of its customers nor the loans to its customers

Question 19

The Fed increases the reserve requirement, but it wants to offset the effects on the money supply. Which of the following should it do?

Accepted Answer

A)  sell bonds to increase reserves 
B)  sell bonds to decrease reserves 
C)  buy bonds to increase reserves 
D)  buy bonds to decrease reserves 
A)  sell bonds to increase reserves 
B)  sell bonds to decrease reserves 
C)  buy bonds to increase reserves 
D)  buy bonds to decrease reserves

Question 20

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.

Which of the following is not included in M1?

In a system of 100-percent-reserve banking,

The existence of money

A double coincidence of wants

Any item that people can use to transfer purchasing power from the present to the future is called

You use U.S. currency to pay the owner of a restaurant for a delicious meal. The currency

Table 29-7. -Refer to Table 29-7. If the Fed requires a reserve ratio of 6 percent, then what quantity of excess reserves does the Bank of Springfield now hold?

In a fractional-reserve banking system, an increase in reserve requirements

The measure of the money stock called M1 includes

Suppose the Federal Reserve increases bank reserves and banks lend out some of these reserves, but at some point banks still have $5 million more they wish to lend out. If the reserve requirement is 10 percent, how much more money can banks create if they lend out the remaining amount?

An increase in the money supply might indicate that the Fed had

If the reserve requirement is 12 percent and banks desire to hold no excess reserves, when a bank receives a new deposit of $1,000,

If the federal funds rate were below the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

During the early 1930s there were a number of bank failures in the United States. What did this do to the money supply? The New York Federal Reserve Bank advocated open market purchases. Would these purchases have reversed the change in the money supply and helped banks? Explain.

Which of the following items is included in M2?

An open-market purchase

Which of the following is an asset of a bank and a liability for its customers?

The Fed increases the reserve requirement, but it wants to offset the effects on the money supply. Which of the following should it do?

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

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

Which of the following is not included in M1?

In a system of 100-percent-reserve banking,

The existence of money

A double coincidence of wants

Any item that people can use to transfer purchasing power from the present to the future is called

You use U.S. currency to pay the owner of a restaurant for a delicious meal. The currency

Table 29-7. -Refer to Table 29-7. If the Fed requires a reserve ratio of 6 percent, then what quantity of excess reserves does the Bank of Springfield now hold?

In a fractional-reserve banking system, an increase in reserve requirements

The measure of the money stock called M1 includes

Suppose the Federal Reserve increases bank reserves and banks lend out some of these reserves, but at some point banks still have $5 million more they wish to lend out. If the reserve requirement is 10 percent, how much more money can banks create if they lend out the remaining amount?

An increase in the money supply might indicate that the Fed had

If the reserve requirement is 12 percent and banks desire to hold no excess reserves, when a bank receives a new deposit of $1,000,

If the federal funds rate were below the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

During the early 1930s there were a number of bank failures in the United States. What did this do to the money supply? The New York Federal Reserve Bank advocated open market purchases. Would these purchases have reversed the change in the money supply and helped banks? Explain.

Which of the following items is included in M2?

An open-market purchase

Which of the following is an asset of a bank and a liability for its customers?

The Fed increases the reserve requirement, but it wants to offset the effects on the money supply. Which of the following should it do?

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

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