Question 1

Money

Accepted Answer

A)   is more efficient than barter.
B)   makes trades easier.
C)   allows greater specialization.
D)   All of the above are correct.E) None of the above
F) B) and D)

Question 2

To decrease the money supply, the Fed could

Accepted Answer

A)   sell government bonds.
B)   increase the discount rate.
C)   increase the reserve requirement.
D)   All of the above are correct.E) A) and C)
F) B) and C)

Question 3

Which of the following is a liability of a bank and an asset of its customers?

Accepted Answer

A)   deposits of its customers and loans to its customers
B)   deposits of its customers but not loans to its customers
C)   loans of its customers but not the deposits of its customers
D)   neither the deposits of its customers nor the loans to its customersE) A) and B)
F) All of the above

Question 4

If people decide to hold more currency relative to deposits, the money supply

Accepted Answer

A)   falls. The larger the reserve ratio is, the more the money supply falls.
B)   falls. The larger the reserve ratio is, the less the money supply falls.
C)   rises. The larger the reserve ratio is, the more the money supply rises.
D)   rises. The larger the reserve ratio is, the less the money supply rises.E) None of the above
F) A) and B)

Question 5

When we measure and record economic value, we use money as the

Accepted Answer

A)   liquid asset.
B)   medium of exchange.
C)   unit of account.
D)   store of value.E) All of the above
F) A) and B)

Question 6

Describe how the use of leverage affects the impact of bank investments.

Accepted Answer

Leverage amplifies the impact from chang...

Question 7

The money supply decreases if

Accepted Answer

A)   households decide to hold relatively more currency and relatively fewer deposits and banks decide to hold relatively more excess reserves and make fewer loans.
B)   households decide to hold relatively more currency and relatively fewer deposits and banks decide to hold relatively fewer excess reserves and make more loans.
C)   households decide to hold relatively less currency and relatively more deposits and banks decide to hold relatively more excess reserves and make fewer loans.
D)   households decide to hold relatively less currency and relatively more deposits and banks decide to hold relatively less excess reserves and make more loans.E) None of the above
F) All of the above

Question 8

In December 1999 people feared that there might be computer problems at banks as the century changed. Consequently, people wanted to hold relatively more in currency and relatively less in deposits. In anticipation banks raised their reserve ratios to have enough cash on hand to meet depositors' demands. These actions by the public

Accepted Answer

A)   would increase the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds.
B)   would increase the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds.
C)   would reduce the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds.
D)   would reduce the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds.E) A) and B)
F) All of the above

Question 9

When there is a reserve requirement, banks

Accepted Answer

A)   must hold exactly the required quantity of reserves.
B)   may hold more than, but not less than, the required quantity of reserves.
C)   may hold less than, but not more than, the required quantity of reserves.
D)   must seek the Fed's permission whenever they wish to expand or contract their loans to customers.E) All of the above
F) B) and C)

Question 10

Prisoners sometimes determine a single good to be used as money. This good becomes

Accepted Answer

A)   a medium of exchange and a unit of account.
B)   a medium of exchange, but not a unit of account.
C)   a unit of account, but not a medium of exchange.
D)   neither a unit of account nor a medium of exchange.E) All of the above
F) None of the above

Question 11

A bank operates with reserves of $100, loans of $300 and securities of $100. The bank's only liability is deposits of $400 since it has zero debt. Calculate the bank's leverage ratio.

Accepted Answer

Since Assets - Liabilities equals Bank C...

Question 12

List two reasons why the Fed cannot control the exact size of the money supply.

Accepted Answer

1) The Fed cannot control how much money...

Question 13

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) A) and D)
F) A) and C)

Question 14

The leverage ratio is calculated as

Accepted Answer

A)   assets minus liabilities.
B)   assets divided by bank capital
C)   the reciprocal of the required reserve ratio
D)   the required reserve ratio multiplied by bank capital.E) A) and C)
F) B) and D)

Question 15

Which of the following is not included in M1?

Accepted Answer

A)   currency
B)   demand deposits
C)   traveler's checks
D)   credit cardsE) B) and D)
F) A) and B)

Question 16

If the reserve ratio is 10 percent, $1,400 of additional reserves can create up to

Accepted Answer

A)   $140 of new money.
B)   $14,000 of new money.
C)   $140,000 of new money.
D)   None of the above is correct.E) B) and D)
F) C) and D)

Question 17

Other things the same if reserve requirements are decreased, the reserve ratio

Accepted Answer

A)   decreases, the money multiplier increases, and the money supply decreases.
B)   increases, the money multiplier increases, and the money supply increases.
C)   decreases, the money multiplier increases, and the money supply increases.
D)   increases, the money multiplier increases, and the money supply decreases.E) A) and B)
F) None of the above

Question 18

Why do Federal Reserve Board of Governors have long 14 year) terms?

Accepted Answer

Long terms allow Fed Board of ...

Question 19

The Fed decreases reserves if it conducts open market

Accepted Answer

A)   purchases or auctions term credit.
B)   purchases but not if it auctions term credit
C)   sales or auctions term credit
D)   sales but not if it auctions term creditE) A) and C)
F) All of the above

Question 20

The interest rate charged by the Fed to member banks is called the .

Accepted Answer

The answer of The interest rate charged by the Fed...

Exam 11: The Monetary System

Other things the same if reserve requirements are decreased, the reserve ratio

Correct Answer
verified

Prisoners sometimes determine a single good to be used as money. This good becomes

Correct Answer
verified

The Fed decreases reserves if it conducts open market

Correct Answer
verified

Money

Correct Answer
verified

Correct Answer
verified

If the reserve ratio is 10 percent, $1,400 of additional reserves can create up to

Correct Answer
verified

Which of the following is a liability of a bank and an asset of its customers?

Correct Answer
verified

A bank operates with reserves of $100, loans of $300 and securities of $100. The bank's only liability is deposits of $400 since it has zero debt. Calculate the bank's leverage ratio.

Correct Answer
verified
Since Assets - Liabilities equals Bank C...
View Answer

Which of the following is not included in M1?

Correct Answer
verified

Describe how the use of leverage affects the impact of bank investments.

Correct Answer
verified
Leverage amplifies the impact from chang...
View Answer

When we measure and record economic value, we use money as the

Correct Answer
verified

The money supply decreases if

Correct Answer
verified

To decrease the money supply, the Fed could

Correct Answer
verified

List two reasons why the Fed cannot control the exact size of the money supply.

Correct Answer
verified
1) The Fed cannot control how much money...
View Answer

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

Correct Answer
verified

Why do Federal Reserve Board of Governors have long 14 year) terms?

Correct Answer
verified
Long terms allow Fed Board of ...
View Answer

The interest rate charged by the Fed to member banks is called the .

Correct Answer
verified

When there is a reserve requirement, banks

Correct Answer
verified

If people decide to hold more currency relative to deposits, the money supply

Correct Answer
verified

The leverage ratio is calculated as

Correct Answer
verified

Exam 11: The Monetary System

Other things the same if reserve requirements are decreased, the reserve ratio

Correct AnswerverifiedShow Answer

Prisoners sometimes determine a single good to be used as money. This good becomes

Correct AnswerverifiedShow Answer

The Fed decreases reserves if it conducts open market

Correct AnswerverifiedShow Answer

Money

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the reserve ratio is 10 percent, $1,400 of additional reserves can create up to

Correct AnswerverifiedShow Answer

Which of the following is a liability of a bank and an asset of its customers?

Correct AnswerverifiedShow Answer

A bank operates with reserves of $100, loans of $300 and securities of $100. The bank's only liability is deposits of $400 since it has zero debt. Calculate the bank's leverage ratio.

Correct AnswerverifiedSince Assets - Liabilities equals Bank C...View AnswerShow Answer

Which of the following is not included in M1?

Correct AnswerverifiedShow Answer

Describe how the use of leverage affects the impact of bank investments.

Correct AnswerverifiedLeverage amplifies the impact from chang...View AnswerShow Answer

When we measure and record economic value, we use money as the

Correct AnswerverifiedShow Answer

The money supply decreases if

Correct AnswerverifiedShow Answer

To decrease the money supply, the Fed could

Correct AnswerverifiedShow Answer

List two reasons why the Fed cannot control the exact size of the money supply.

Correct Answerverified1) The Fed cannot control how much money...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Why do Federal Reserve Board of Governors have long 14 year) terms?

Correct AnswerverifiedLong terms allow Fed Board of ...View AnswerShow Answer

The interest rate charged by the Fed to member banks is called the .

Correct AnswerverifiedShow Answer

When there is a reserve requirement, banks

Correct AnswerverifiedShow Answer

If people decide to hold more currency relative to deposits, the money supply

Correct AnswerverifiedShow Answer

The leverage ratio is calculated as

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Since Assets - Liabilities equals Bank C...
View Answer

Correct Answer
verified

Correct Answer
verified
Leverage amplifies the impact from chang...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
1) The Fed cannot control how much money...
View Answer

Correct Answer
verified

Correct Answer
verified
Long terms allow Fed Board of ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified