Question 1

Which list ranks assets from most to least liquid?

Accepted Answer

A)   money,bonds,cars,houses
B)   money,cars,houses,bonds
C)   bonds,money,cars,houses
D)   bonds,cars,money,housesE) A) and D)
F) A) and C)

Question 2

Who was reappointed Chair of the Board of Governors in 2009 by President Barrack Obama?

Accepted Answer

A)   Ben Bernanke
B)   Christina Romer
C)   Timothy Geithner
D)   Bernie MadoffE) C) and D)
F) B) and D)

Question 3

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

Accepted Answer

A)   Bob with Alice
B)   Ted with Alice
C)   Bob with Mary,Ted with Bob,and Ted with Alice
D)   None of the pairs above has a double coincidence of wants.E) A) and D)
F) None of the above B

Question 4

Fractional reserve banking is a system where banks must hold an amount of cash based on a percentage of its loans.

Accepted Answer

A) True 
 B)False

Question 5

In recent years the Federal Open Market Committee has focused on a target for

Accepted Answer

A)   M1 growth.
B)   the federal funds rate.
C)   the number of Treasury Securities issued by the federal government.
D)   total reserves of banks.E) None of the above
F) A) and B) B

Question 6

M2 is both larger and less liquid than M1.

Accepted Answer

A) True 
 B)False

Question 7

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.E) A) and D)
F) B) and D)

Question 8

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 9

A bank has $200,000 in deposits and $190,000 in loans.It has loaned out all it can.It has a reserve ratio of

Accepted Answer

A)   2.5 percent.
B)   5 percent.
C)   9.5 percent.
D)   10 percent.E) B) and C)
F) A) and D)

Question 10

The interest rate the Fed charges on loans it makes to banks is called

Accepted Answer

A)   the prime rate.
B)   the federal funds rate.
C)   the discount rate.
D)   the LIBOR.E) B) and C)
F) A) and D)

Question 11

Small time deposits are included in

Accepted Answer

A)   M1 but not M2.
B)   M2 but not M1.
C)   M1 and M2.
D)   neither M1 nor M2.E) All of the above
F) B) and C) B

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Credit cards

Accepted Answer

A)   defer payments.
B)   are a store of value.
C)   have led to wider use of currency.
D)   are part of the money supply.E) All of the above
F) C) and D)

Question 14

Demand deposits are included in

Accepted Answer

A)   M1 but not M2.
B)   M2 but not M1.
C)   M1 and M2.
D)   neither M1 nor M2.E) A) and B)
F) A) and C)

Question 15

Which of the following statements is correct? In the special case of the 100-percent reserve banking the money multiplier is

Accepted Answer

A)   0 and banks create money.
B)   0 and banks do not create money.
C)   1 and banks create money
D)   1 and banks do not create money.E) A) and B)
F) B) and C)

Question 16

Which of the following is not included in either M1 or M2?

Accepted Answer

A)   money market deposit accounts
B)   large time deposit
C)   demand deposits
D)   money market mutual fundsE) A) and B)
F) A) and C)

Question 17

Monetary policy affects employment

Accepted Answer

A)   only in the long run.
B)   only in the short run.
C)   in both the long run and the short run.
D)   in neither the long run nor the short run.E) A) and B)
F) A) and D)

Question 18

Table 21-5.
 
-Refer to Table 21-5.Assume there is a reserve requirement and the Bank of Pleasantville is exactly in compliance with that requirement.Assume the same is true for all other banks.Lastly,assume people hold only deposits and no currency.What is the money multiplier?

Accepted Answer

A)   5
B)   10
C)   15
D)   20E) A) and C)
F) B) and D)

Question 19

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 20

If the reserve ratio is 5 percent,then $1,000 of additional reserves can create up to

Accepted Answer

A)   $5,500 of new money.
B)   $5,000 of new money.
C)   $4,000 of new money.
D)   None of the above is correct.E) C) and D)
F) All of the above

Exam 21: The Monetary System

Which list ranks assets from most to least liquid?

Correct AnswerverifiedShow Answer

Who was reappointed Chair of the Board of Governors in 2009 by President Barrack Obama?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedB

Fractional reserve banking is a system where banks must hold an amount of cash based on a percentage of its loans.

Correct AnswerverifiedShow Answer

In recent years the Federal Open Market Committee has focused on a target for

Correct AnswerverifiedB

M2 is both larger and less liquid than M1.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A bank has $200,000 in deposits and $190,000 in loans.It has loaned out all it can.It has a reserve ratio of

Correct AnswerverifiedShow Answer

The interest rate the Fed charges on loans it makes to banks is called

Correct AnswerverifiedShow Answer

Small time deposits are included in

Correct AnswerverifiedB

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

Correct AnswerverifiedShow Answer

Credit cards

Correct AnswerverifiedShow Answer

Demand deposits are included in

Correct AnswerverifiedShow Answer

Which of the following statements is correct? In the special case of the 100-percent reserve banking the money multiplier is

Correct AnswerverifiedShow Answer

Which of the following is not included in either M1 or M2?

Correct AnswerverifiedShow Answer

Monetary policy affects employment

Correct AnswerverifiedShow Answer

Table 21-5. -Refer to Table 21-5.Assume there is a reserve requirement and the Bank of Pleasantville is exactly in compliance with that requirement.Assume the same is true for all other banks.Lastly,assume people hold only deposits and no currency.What is the money multiplier?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the reserve ratio is 5 percent,then $1,000 of additional reserves can create up to

Correct AnswerverifiedShow Answer

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B

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B

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B

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