Question 1

Table 21-4.
 
-Refer to Table 21-4.Suppose the bank faces a reserve requirement of 10 percent.Starting from the situation as depicted by the T-account,a customer deposits an additional $50,000 into his account at the bank.If the bank takes no other action it will

Accepted Answer

A)   have $65,000 in excess reserves.
B)   have $55,000 in excess reserves.
C)   need to raise an additional $5,000 of reserves to meet the reserve requirement ratio
D)   None of the above is correct.E) None of the above
F) A) and C)

Question 2

Credit cards are

Accepted Answer

A)   a medium of exchange.
B)   counted as part of M2 but not as part of M1.
C)   important for analyzing the monetary system.
D)   All of the above are correct.E) A) and C)
F) C) and D)

Question 3

Which tool of monetary policy does the Federal Reserve use most often?

Accepted Answer

A)   term auctions
B)   open-market operations
C)   changes in reserve requirements
D)   changes in the discount rateE) B) and C)
F) A) and D)

Question 4

The Fed's policy decisions have an important influence on

Accepted Answer

A)   inflation in the long run and employment and production in the short run.
B)   inflation in the long run and employment and production in the long run.
C)   inflation in the short run and employment and production in the short run.
D)   inflation in the short run and employment and production in the long run.E) C) and D)
F) None of the above

Question 5

What makes the New York Federal Reserve regional bank so important?

Accepted Answer

The president of the New York Federal Re...

Question 6

If the reserve ratio is 12.5 percent,then $1,000 of additional reserves can create up to

Accepted Answer

A)   $7,000 of new money.
B)   $8,000 of new money.
C)   $11,500 of new money.
D)   $12,500 of new money.E) B) and C)
F) A) and B)

Question 7

If the reserve ratio is 4 percent,then $81,250 of new money can be generated by

Accepted Answer

A)   $325 of new reserves.
B)   $3,250 of new reserves.
C)   $20,312.50 of new reserves.
D)   $2,031,250 of new reserves.E) A) and B)
F) A) and C)

Question 8

The ease with which an asset can be

Accepted Answer

A)   traded for another asset determines whether or not that asset is a unit of account.
B)   transported from one place to another determines whether or not that asset could serve as fiat money.
C)   converted into a store of value determines the liquidity of that asset.
D)   converted into the economy's medium of exchange determines the liquidity of that asset.E) All of the above
F) B) and D)

Question 9

Derek decides to forego a major appliance purchase and save the money.He transfers $2,100 from his checking account to his savings account.As a result of this transfer by itself

Accepted Answer

A)   M1 increases by $2,100 and M2 stays the same.
B)   M1 increases by $2,100 and M2 increases by $2,100.
C)   M1 decreases by $2,100 and M2 increases by $2,100.
D)   M1 decreases by $2,100 and M2 stays the same.E) C) and D)
F) B) and D)

Question 10

To increase the money supply,the Fed can

Accepted Answer

A)   buy government bonds or increase the discount rate.
B)   buy government bonds or decrease the discount rate.
C)   sell government bonds or increase the discount rate.
D)   sell government bonds or decrease the discount rate.E) A) and C)
F) A) and B)

Question 11

If banks hold any amount of their deposits in reserve,then they do not have the ability to influence the money supply.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is included in M1 and M2?

Accepted Answer

A)   traveler's checks
B)   savings deposits
C)   money market mutual funds
D)   small time depositsE) B) and D)
F) A) and D)

Question 13

During a bank run,depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits.

Accepted Answer

A)   Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply increase
B)   Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply decrease.
C)   The decision to hold relatively more currency would make the money supply increase.The decision to hold relatively more excess reserves would make the money supply decrease
D)   The decision to hold relatively more currency would make the money supply increase.The decision to hold relatively more excess reserves would make the money supply decrease.E) B) and C)
F) B) and D)

Question 14

What does the Fed auction at the Term-Auction Facility?

Accepted Answer

A)   government bonds of a quantity it sets
B)   government bonds with the quantity determined at the auction
C)   loans of a quantity it sets
D)   loans with the quantity determined at the auctionE) C) and D)
F) None of the above

Question 15

As the reserve ratio increases,the money multiplier

Accepted Answer

A)   increases.
B)   does not change.
C)   decreases.
D)   could do any of the above.E) A) and D)
F) A) and C)

Question 16

If the reserve requirement is 10 percent,which of the following pairs of changes would both allow a bank to lend out an additional $10,000?

Accepted Answer

A)   the Fed buys a $10,000 bond from the bank or someone deposits $10,000 in the bank
B)   the Fed buys a $10,000 bond from the bank or the Fed lends the bank $10,000
C)   the Fed sells a $10,000 bond to the bank or someone deposits $10,000 in the bank
D)   the Fed sells a $10,000 bond to the bank or the Fed lends the bank $10,000E) B) and D)
F) B) and C)

Question 17

The set of items that serve as media of exchange clearly includes

Accepted Answer

A)   demand deposits.
B)   short-term bonds.
C)   credit cards.
D)   All of the above are correct.E) A) and B)
F) A) and D)

Question 18

Which of the following statements is correct?

Accepted Answer

A)   All items that are included in M1 are included also in M2.
B)   All items that are included in M2 are included also in M1.
C)   Credit cards are included in both M1 and M2.
D)   Savings deposits are included in both M1 and M2.E) A) and D)
F) None of the above

Question 19

Consider five individuals with different occupations.  In a barter system which of the following pairs has a double coincidence of wants?

Accepted Answer

A)   Allen and Eric
B)   Diedre and Calvin
C)   Both A and B are correct.
D)   None of the above are correct.E) All of the above
F) A) and B)

Question 20

The "yardstick" people use to post prices and record debts is called

Accepted Answer

A)   a medium of exchange.
B)   a unit of account.
C)   a store of value.
D)   liquidity.E) B) and D)
F) C) and D)

Exam 21: The Monetary System

What does the Fed auction at the Term-Auction Facility?

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The ease with which an asset can be

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If the reserve requirement is 10 percent,which of the following pairs of changes would both allow a bank to lend out an additional $10,000?

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The Fed's policy decisions have an important influence on

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Credit cards are

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If the reserve ratio is 4 percent,then $81,250 of new money can be generated by

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If the reserve ratio is 12.5 percent,then $1,000 of additional reserves can create up to

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As the reserve ratio increases,the money multiplier

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The set of items that serve as media of exchange clearly includes

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Table 21-4. -Refer to Table 21-4.Suppose the bank faces a reserve requirement of 10 percent.Starting from the situation as depicted by the T-account,a customer deposits an additional $50,000 into his account at the bank.If the bank takes no other action it will

Correct AnswerverifiedShow Answer

Consider five individuals with different occupations. In a barter system which of the following pairs has a double coincidence of wants?

Correct AnswerverifiedShow Answer

The "yardstick" people use to post prices and record debts is called

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Which of the following is included in M1 and M2?

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Which tool of monetary policy does the Federal Reserve use most often?

Correct AnswerverifiedShow Answer

During a bank run,depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits.

Correct AnswerverifiedShow Answer

To increase the money supply,the Fed can

Correct AnswerverifiedShow Answer

Derek decides to forego a major appliance purchase and save the money.He transfers $2,100 from his checking account to his savings account.As a result of this transfer by itself

Correct AnswerverifiedShow Answer

If banks hold any amount of their deposits in reserve,then they do not have the ability to influence the money supply.

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

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What makes the New York Federal Reserve regional bank so important?

Correct AnswerverifiedThe president of the New York Federal Re...View AnswerShow Answer

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The president of the New York Federal Re...
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