Question 1

The manager of the bank where you work tells you that the bank has $300 million in deposits and $255 million dollars in loans.If the reserve requirement is 10 percent,how much is the bank holding in excess reserves?

Accepted Answer

A)   $15 million
B)   $19.5 million
C)   $25.5 million
D)   $30 millionE) None of the above
F) All of the above

Question 2

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Accepted Answer

A) True 
 B)False

Question 3

Consider five individuals with different occupations.  If this economy has money

Accepted Answer

A)   Allen will buy from Betty
B)   Betty will buy from Calvin
C)   Eric will buy from Allen
D)   None of the above are correct.E) All of the above
F) A) and B)

Question 4

Table 21-6.
 
-Refer to Table 21-6.Assume the Fed's reserve requirement is 6 percent and that the Bank of Springfield makes new loans so as to make its new reserve ratio 6 percent.From then on,no bank holds any excess reserves.Assume also that people hold only deposits and no currency.Then by what amount does the economy's money supply increase?

Accepted Answer

A)   $50,200
B)   $60,000
C)   $72,000
D)   $106,000E) B) and C)
F) A) and D)

Question 5

Table 21-4.
 
-Refer to Table 21-4.If the bank faces a reserve requirement of 10 percent,then the bank

Accepted Answer

A)   is in a position to make a new loan of $15,000.
B)   has fewer reserves than are required.
C)   has excess reserves of $10,000.
D)   None of the above is correct.E) B) and C)
F) All of the above

Question 6

Money is

Accepted Answer

A)   the most liquid asset and a perfect store of value.
B)   the most liquid asset but an imperfect store of value.
C)   not the most liquid asset but a perfect store of value.
D)   neither the most liquid asset and nor a perfect store of value.E) None of the above
F) All of the above

Question 7

Explain how each of the following changes the money supply.
a.
the Fed buys bonds
b.
the Fed auctions credit
c.
the Fed raises the discount rate
d.
the Fed raises the reserve requirement

Accepted Answer

a. If the Fed buys bonds,it pays for the...

Question 8

In the special case of the 100 percent-reserve banking the money multiplier is

Accepted Answer

A)   1 and banks create money.
B)   1 and banks do not create money.
C)   2 and banks create money
D)   2 and banks do not create money.E) A) and B)
F) A) and C)

Question 9

Under a fractional-reserve banking system,banks

Accepted Answer

A)   hold more reserves than deposits.
B)   generally lend out a majority of the funds deposited.
C)   cause the money supply to fall by lending out reserves.
D)   All of the above are correct.E) A) and C)
F) B) and D)

Question 10

The money supply increases when the Fed

Accepted Answer

A)   lowers the discount rate.The increase will be larger the smaller the reserve ratio is.
B)   lowers the discount rate.The increase will be larger the larger the reserve ratio is.
C)   raises the discount rate.The increase will be larger the smaller the reserve ratio is.
D)   raises the discount rate.The increase will be larger the larger the reserve ratio is.E) A) and B)
F) None of the above

Question 11

A bank's reserve ratio is 6.5 percent and the bank has $1,950 in reserve.Its deposits amount to

Accepted Answer

A)   $62.25.
B)   $126.75.
C)   $22,500.00
D)   $30,000.00.E) B) and C)
F) B) and D)

Question 12

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.E) All of the above
F) C) and D)

Question 13

If the discount rate is lowered,banks borrow

Accepted Answer

A)   less from the Fed so reserves increase.
B)   less from the Fed so reserves decrease.
C)   more from the Fed so reserves increase.
D)   more from the Fed so reserves decrease.E) C) and D)
F) B) and C)

Question 14

The Fed has the power to increase or decrease the number of dollars in the economy through the decisions of

Accepted Answer

A)   the Board of Governors.
B)   the FOMC.
C)   the regional Federal Reserve Bank presidents.
D)   the U.S.Treasury.E) B) and D)
F) A) and C)

Question 15

Because of the multiple tools at its disposal,the Fed can control the money supply very precisely.

Accepted Answer

A) True 
 B)False

Question 16

For purposes of analyzing the money stock and its relationship to relevant economic variables,money is best thought of as

Accepted Answer

A)   those items that can be readily accessed and used to buy goods and services.
B)   currency only.
C)   currency plus all bank accounts.
D)   currency plus all bank accounts plus bonds.E) B) and D)
F) None of the above

Question 17

Fiat money

Accepted Answer

A)   is worthless.
B)   has no intrinsic value.
C)   may be used as a medium of exchange,but is not legal tender.
D)   refers to highly liquid assets that do not serve as a medium of exchange.E) A) and C)
F) C) and D)

Question 18

If traveler's checks were $500 higher and saving deposits were $1,000 higher,M1 would be

Accepted Answer

A)   $500 higher and M2 would be $1,000 higher
B)   $500 higher and M2 would be $1,500 higher
C)   M2 and M1 would be $1,500 higher
D)   None of the above are correct.E) B) and C)
F) A) and C)

Question 19

All of the presidents of the regional Federal Reserve banks

Accepted Answer

A)   attend each FOMC meeting.
B)   have voting rights at each FOMC meeting.
C)   are appointed by the president of the U.S.and confirmed by the U.S.Senate.
D)   All of the above are correct.E) A) and B)
F) B) and D)

Question 20

Demand deposits are a type of

Accepted Answer

A)   checking account.
B)   time deposit.
C)   money market mutual fund.
D)   savings deposit.E) A) and B)
F) A) and C)

Exam 21: The Monetary System

In the special case of the 100 percent-reserve banking the money multiplier is

Correct Answer
verified

All of the presidents of the regional Federal Reserve banks

Correct Answer
verified

For purposes of analyzing the money stock and its relationship to relevant economic variables,money is best thought of as

Correct Answer
verified

In a system of 100-percent-reserve banking,

Correct Answer
verified

The manager of the bank where you work tells you that the bank has $300 million in deposits and $255 million dollars in loans.If the reserve requirement is 10 percent,how much is the bank holding in excess reserves?

Correct Answer
verified

If the discount rate is lowered,banks borrow

Correct Answer
verified

Fiat money

Correct Answer
verified

Money is

Correct Answer
verified

The money supply increases when the Fed

Correct Answer
verified

Correct Answer
verified

Explain how each of the following changes the money supply. a. the Fed buys bonds b. the Fed auctions credit c. the Fed raises the discount rate d. the Fed raises the reserve requirement

Correct Answer
verified
a. If the Fed buys bonds,it pays for the...
View Answer

Table 21-4. -Refer to Table 21-4.If the bank faces a reserve requirement of 10 percent,then the bank

Correct Answer
verified

The Fed has the power to increase or decrease the number of dollars in the economy through the decisions of

Correct Answer
verified

Because of the multiple tools at its disposal,the Fed can control the money supply very precisely.

Correct Answer
verified

A bank's reserve ratio is 6.5 percent and the bank has $1,950 in reserve.Its deposits amount to

Correct Answer
verified

Consider five individuals with different occupations. If this economy has money

Correct Answer
verified

Under a fractional-reserve banking system,banks

Correct Answer
verified

Demand deposits are a type of

Correct Answer
verified

If traveler's checks were $500 higher and saving deposits were $1,000 higher,M1 would be

Correct Answer
verified

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Correct Answer
verified

Exam 21: The Monetary System

In the special case of the 100 percent-reserve banking the money multiplier is

Correct AnswerverifiedShow Answer

All of the presidents of the regional Federal Reserve banks

Correct AnswerverifiedShow Answer

For purposes of analyzing the money stock and its relationship to relevant economic variables,money is best thought of as

Correct AnswerverifiedShow Answer

In a system of 100-percent-reserve banking,

Correct AnswerverifiedShow Answer

The manager of the bank where you work tells you that the bank has $300 million in deposits and $255 million dollars in loans.If the reserve requirement is 10 percent,how much is the bank holding in excess reserves?

Correct AnswerverifiedShow Answer

If the discount rate is lowered,banks borrow

Correct AnswerverifiedShow Answer

Fiat money

Correct AnswerverifiedShow Answer

Money is

Correct AnswerverifiedShow Answer

The money supply increases when the Fed

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Explain how each of the following changes the money supply. a. the Fed buys bonds b. the Fed auctions credit c. the Fed raises the discount rate d. the Fed raises the reserve requirement

Correct Answerverifieda. If the Fed buys bonds,it pays for the...View AnswerShow Answer

Table 21-4. -Refer to Table 21-4.If the bank faces a reserve requirement of 10 percent,then the bank

Correct AnswerverifiedShow Answer

The Fed has the power to increase or decrease the number of dollars in the economy through the decisions of

Correct AnswerverifiedShow Answer

Because of the multiple tools at its disposal,the Fed can control the money supply very precisely.

Correct AnswerverifiedShow Answer

A bank's reserve ratio is 6.5 percent and the bank has $1,950 in reserve.Its deposits amount to

Correct AnswerverifiedShow Answer

Consider five individuals with different occupations. If this economy has money

Correct AnswerverifiedShow Answer

Under a fractional-reserve banking system,banks

Correct AnswerverifiedShow Answer

Demand deposits are a type of

Correct AnswerverifiedShow Answer

If traveler's checks were $500 higher and saving deposits were $1,000 higher,M1 would be

Correct AnswerverifiedShow Answer

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Correct AnswerverifiedShow Answer

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a. If the Fed buys bonds,it pays for the...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
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