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Table 29-8 Table 29-8 -Refer to Table 29-8. The required reserve ratio is 12 percent and First National Bank sells $120 of its short-term securities to the Federal Reserve. This action will A) increase First National's reserves by $120. Its excess reserves are $240. B) decrease First National's reserves by $120. Its excess reserves are $0. C) increase First National's loans by $120. Its reserves decrease by $120. D) decrease First National's loans by $120. Its reserves increase by $120. -Refer to Table 29-8. The required reserve ratio is 12 percent and First National Bank sells $120 of its short-term securities to the Federal Reserve. This action will


A) increase First National's reserves by $120. Its excess reserves are $240.
B) decrease First National's reserves by $120. Its excess reserves are $0.
C) increase First National's loans by $120. Its reserves decrease by $120.
D) decrease First National's loans by $120. Its reserves increase by $120.

E) B) and C)
F) C) and D)

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Marc puts prices on surfboards and skateboards at his sporting goods store. He is using money as a unit of account.

A) True
B) False

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The discount rate is


A) the interest rate the Fed charges banks.
B) one divided by the difference between one and the reserve ratio.
C) the interest rate banks receive on reserve deposits with the Fed.
D) the interest rate that banks charge on overnight loans to other banks.

E) C) and D)
F) B) and C)

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Name three actions the Fed can take to increase the money supply.

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Open-market purchases buy gove...

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Which list ranks assets from most to least liquid?


A) currency, demand deposits, money market mutual funds
B) currency, money market mutual funds, demand deposits
C) money market mutual funds, demand deposits, currency
D) demand deposits, money market mutual funds, currency

E) None of the above
F) A) and D)

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Credit cards


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) B) and D)
F) A) and B)

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The discount rate is


A) the rate at which public banks lend to other public banks.
B) the rate at which the Fed lends to banks.
C) the percentage difference between the face value of a Treasury bond and what the Fed pays for it.
D) the percentage of deposits banks hold as excess reserves.

E) None of the above
F) A) and D)

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Dollar bills, rare paintings, and emerald necklaces are all


A) media of exchange.
B) units of account.
C) stores of value.
D) All of the above are correct.

E) None of the above
F) A) and B)

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Suppose that in a country people gain more confidence in the banking system and so hold relatively less currency and more deposits. As a result, bank reserves will


A) decrease and the money supply will eventually decrease.
B) decrease and the money supply will eventually increase.
C) increase and the money supply will eventually decrease.
D) increase and the money supply will eventually increase.

E) All of the above
F) A) and C)

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Table 29-9 Metropolis National Bank is currently holding 2% of its deposits as excess reserves. Table 29-9 Metropolis National Bank is currently holding 2% of its deposits as excess reserves. -Refer to Table 29-9. Metropolis National Bank is currently holding 2% of deposits as excess reserves. Assuming that all banks have the same required reserve ratio, and then none want to hold excess reserves what is the value of the money multiplier? A) 8.25 B) 10 C) 12 D) 20 -Refer to Table 29-9. Metropolis National Bank is currently holding 2% of deposits as excess reserves. Assuming that all banks have the same required reserve ratio, and then none want to hold excess reserves what is the value of the money multiplier?


A) 8.25
B) 10
C) 12
D) 20

E) None of the above
F) B) and C)

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Which of the following is correct concerning the FOMC?


A) the members of the Board of Governors have the majority of the votes
B) the New York Federal Reserve Bank District President is always a voting member
C) all Federal Reserve Bank presidents attend the meetings
D) All of the above are correct.

E) A) and C)
F) B) and C)

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Table 29-6. Table 29-6. -Refer to Table 29-6. Assume the Fed's reserve requirement is 5 percent and all banks besides the Bank of Pleasantville are exactly in compliance with the 5 percent requirement. Further assume that people hold only deposits and no currency. Starting from the situation as depicted by the T-account, if the Bank of Pleasantville decides to make new loans so as to end up with no excess reserves, then by how much does the money supply eventually increase? A) $10,833.33. B) $13,000. C) $8,333.33. D) $10,000. -Refer to Table 29-6. Assume the Fed's reserve requirement is 5 percent and all banks besides the Bank of Pleasantville are exactly in compliance with the 5 percent requirement. Further assume that people hold only deposits and no currency. Starting from the situation as depicted by the T-account, if the Bank of Pleasantville decides to make new loans so as to end up with no excess reserves, then by how much does the money supply eventually increase?


A) $10,833.33.
B) $13,000.
C) $8,333.33.
D) $10,000.

E) None of the above
F) C) and D)

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Which of the following increase when the Fed makes open market purchases?


A) currency and reserves
B) currency but not reserves
C) reserves but not currency
D) neither currency nor reserves

E) None of the above
F) All of the above

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Table 29-5. Table 29-5. -Refer to Table 29-5. If the bank faces a reserve requirement of 20 percent, then it A) has $10,000 of excess reserves. B) needs $10,000 more reserves to meet its reserve requirements. C) needs $20,000 more reserves to meet its reserve requirements. D) just meets its reserve requirement. -Refer to Table 29-5. If the bank faces a reserve requirement of 20 percent, then it


A) has $10,000 of excess reserves.
B) needs $10,000 more reserves to meet its reserve requirements.
C) needs $20,000 more reserves to meet its reserve requirements.
D) just meets its reserve requirement.

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

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Table 29-6. Table 29-6. -Refer to Table 29-6. 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? A) 6 B) 16.7 C) 15.6 D) 6.4 -Refer to Table 29-6. 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?


A) 6
B) 16.7
C) 15.6
D) 6.4

E) B) and C)
F) All of the above

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The agency responsible for regulating the money supply in the United States is


A) the Comptroller of the Currency.
B) the U.S. Treasury.
C) the Federal Reserve.
D) the U.S. Bank.

E) B) and D)
F) B) and C)

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If an economy uses silver as money, then that economy's money


A) serves as a store of value but not as a medium of exchange.
B) serves as a medium of exchange but not as a unit of account.
C) is commodity money.
D) has no intrinsic value.

E) None of the above
F) B) and D)

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Federal Reserve governors are given long terms to insulate them from politics.

A) True
B) False

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M1 includes


A) currency.
B) demand deposits.
C) traveler's checks.
D) All of the above are correct.

E) None of the above
F) C) and D)

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Table 29-3. An economy starts with $50,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $45,750. The T-account of the bank is shown below. Table 29-3. An economy starts with $50,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $45,750. The T-account of the bank is shown below. -Refer to Table 29-3. If all banks in the economy have the same reserve ratio as this bank, then an increase in reserves of $150 for this bank has the potential to increase deposits for all banks by A) $287.25. B) $1,614.71. C) $1,764.71. D) $2,000 or more. -Refer to Table 29-3. If all banks in the economy have the same reserve ratio as this bank, then an increase in reserves of $150 for this bank has the potential to increase deposits for all banks by


A) $287.25.
B) $1,614.71.
C) $1,764.71.
D) $2,000 or more.

E) A) and C)
F) B) and D)

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