Question 1

The amount of money you should hold depends negatively on the interest rate.

Accepted Answer

A) True 
 B)False  True

Question 2

If interest rates decrease to a very low level, people will most likely hold

Accepted Answer

A)  more money in savings accounts and less cash. 
B)  less money in savings accounts and less cash. 
C)  less money in savings accounts and more cash. 
D)  more money in savings accounts and more cash. 
A)  more money in savings accounts and less cash. 
B)  less money in savings accounts and less cash. 
C)  less money in savings accounts and more cash. 
D)  more money in savings accounts and more cash. C

Question 3

Refer to the information provided in Table 10.6 below to answer the questions that follow.
Table 10.6  
-Refer to Table 10.6. Commerce Bank's excess reserves equal

Accepted Answer

A)  $1,200,000. 
B)  $2,000,000. 
C)  $2,800,000. 
D)  $4,500,000. 
A)  $1,200,000. 
B)  $2,000,000. 
C)  $2,800,000. 
D)  $4,500,000. A

Question 4

The Fed

Accepted Answer

A)  issues deposits to the public. 
B)  lends money to foreign governments. 
C)  clears inter-bank payments. 
D)  lends money to the public. 
A)  issues deposits to the public. 
B)  lends money to foreign governments. 
C)  clears inter-bank payments. 
D)  lends money to the public.

Question 5

The voting members of the Federal Open Market Committee are

Accepted Answer

A)  all of the members of the Board of Governors and all of the presidents of the 12 Federal Reserve banks. 
B)  all of the members of the Board of Governors and five of the presidents of the 12 Federal Reserve banks. 
C)  the presidents of the 12 Federal Reserve banks and three members of the Board of Governors. 
D)  only the members of the Board of Governors. 
A)  all of the members of the Board of Governors and all of the presidents of the 12 Federal Reserve banks. 
B)  all of the members of the Board of Governors and five of the presidents of the 12 Federal Reserve banks. 
C)  the presidents of the 12 Federal Reserve banks and three members of the Board of Governors. 
D)  only the members of the Board of Governors.

Question 6

When Argentina experiences a period of high inflation and Argentineans lose confidence in their peso as a store of value, which of the following would be least likely to occur?

Accepted Answer

A)  The demand for pesos would decrease. 
B)  The buying power of the peso would decrease. 
C)  The value of foreign currencies would depreciate relative to the peso. 
D)  Argentineans would use a different currency as a medium of exchange. 
A)  The demand for pesos would decrease. 
B)  The buying power of the peso would decrease. 
C)  The value of foreign currencies would depreciate relative to the peso. 
D)  Argentineans would use a different currency as a medium of exchange.

Question 7

As the interest rate rises, people hold ________ money in non-interest-bearing checking accounts instead of savings accounts because the opportunity cost of holding money has ________.

Accepted Answer

A)  more; fallen 
B)  less; fallen 
C)  less; risen 
D)  more; risen 
A)  more; fallen 
B)  less; fallen 
C)  less; risen 
D)  more; risen

Question 8

Government securities with terms of more than one year are called

Accepted Answer

A)  Treasury bills. 
B)  federal funds bonds. 
C)  capital bills. 
D)  government bonds. 
A)  Treasury bills. 
B)  federal funds bonds. 
C)  capital bills. 
D)  government bonds.

Question 9

Demand deposits are included in

Accepted Answer

A)  M1. 
B)  M2. 
C)  neither M1 nor M2. 
D)  both M1 and M2. 
A)  M1. 
B)  M2. 
C)  neither M1 nor M2. 
D)  both M1 and M2.

Question 10

Firms and governments can borrow funds by issuing bonds.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following would not be counted as part of M1?

Accepted Answer

A)  demand deposits 
B)  traveler's check 
C)  money market accounts 
D)  currency 
A)  demand deposits 
B)  traveler's check 
C)  money market accounts 
D)  currency

Question 12

When a bank has no excess reserves, and thus can make no more loans, it is said to be

Accepted Answer

A)  bankrupt. 
B)  ripe for a takeover. 
C)  in receivership. 
D)  loaned up. 
A)  bankrupt. 
B)  ripe for a takeover. 
C)  in receivership. 
D)  loaned up.

Question 13

A barter transaction involves exchanging

Accepted Answer

A)  one good for another good. 
B)  money for a service. 
C)  one good for money. 
D)  a service for a promise of a future monetary payment. 
A)  one good for another good. 
B)  money for a service. 
C)  one good for money. 
D)  a service for a promise of a future monetary payment.

Question 14

The discount rate cannot be used to control the money supply with great precision because its effects on banks' demand for reserves are uncertain.

Accepted Answer

A) True 
 B)False

Question 15

After World War II, cigarettes were used as money in Germany. This is an example of

Accepted Answer

A)  fiat money. 
B)  legal money. 
C)  token money. 
D)  commodity money. 
A)  fiat money. 
B)  legal money. 
C)  token money. 
D)  commodity money.

Question 16

In April 2015, the assets with the largest value on the Fed's balance sheet was

Accepted Answer

A)  gold. 
B)  U.S. Treasury securities. 
C)  mortgage-backed securities. 
D)  federal agency debt securities. 
A)  gold. 
B)  U.S. Treasury securities. 
C)  mortgage-backed securities. 
D)  federal agency debt securities.

Question 17

________ in a bank is considered a liability of that bank.

Accepted Answer

A)  Excess reserves 
B)  A bank loan 
C)  A checking deposit 
D)  Required reserves 
A)  Excess reserves 
B)  A bank loan 
C)  A checking deposit 
D)  Required reserves

Question 18

The Federal Reserve System consists of ________ Federal Reserve Banks.

Accepted Answer

A)  8 
B)  10 
C)  12 
D)  14 
A)  8 
B)  10 
C)  12 
D)  14

Question 19

Money is anything that generally is accepted as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 20

A decrease in the discount rate will most likely

Accepted Answer

A)  decrease the money supply. 
B)  not effect the money supply. 
C)  increase the money supply. 
D)  have an unclear affect on the money supply. 
A)  decrease the money supply. 
B)  not effect the money supply. 
C)  increase the money supply. 
D)  have an unclear affect on the money supply.

Exam 10: Money, the Federal Reserve, and the Interest Rate

The amount of money you should hold depends negatively on the interest rate.

If interest rates decrease to a very low level, people will most likely hold

Refer to the information provided in Table 10.6 below to answer the questions that follow. Table 10.6 -Refer to Table 10.6. Commerce Bank's excess reserves equal

The Fed

The voting members of the Federal Open Market Committee are

When Argentina experiences a period of high inflation and Argentineans lose confidence in their peso as a store of value, which of the following would be least likely to occur?

As the interest rate rises, people hold ________ money in non-interest-bearing checking accounts instead of savings accounts because the opportunity cost of holding money has ________.

Government securities with terms of more than one year are called

Demand deposits are included in

Firms and governments can borrow funds by issuing bonds.

Which of the following would not be counted as part of M1?

When a bank has no excess reserves, and thus can make no more loans, it is said to be

A barter transaction involves exchanging

The discount rate cannot be used to control the money supply with great precision because its effects on banks' demand for reserves are uncertain.

After World War II, cigarettes were used as money in Germany. This is an example of

In April 2015, the assets with the largest value on the Fed's balance sheet was

________ in a bank is considered a liability of that bank.

The Federal Reserve System consists of ________ Federal Reserve Banks.

Money is anything that generally is accepted as a medium of exchange.

A decrease in the discount rate will most likely

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Cost Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

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As the interest rate rises, people hold money in non-interest-bearing checking accounts instead of savings accounts because the opportunity cost of holding money has .