Question 1

Which of the following both increase the money supply?

Accepted Answer

A)   an increase in the discount rate and an increase in the interest rate on reserves
B)   an increase in the discount rate and a decrease in the interest rate on reserves
C)   a decrease in the discount rate and an increase in the interest rate on reserves
D)   a decrease in the discount rate and a decrease in the interest rate on reservesE) A) and B)
F) B) and D)

Question 2

Suppose a bank is operating with a leverage ratio of 20. What is the maximum decrease in the market value of assets before the bank becomes insolvent?

Accepted Answer

A leverage ratio of 20 implies each perc...

Question 3

Which of the following is not included in M1?

Accepted Answer

A)   a $5 bill in your wallet
B)   $100 in your checking account
C)   $500 in your savings account
D)   All of the above are included in M1.E) C) and D)
F) B) and D)

Question 4

The is the interest rate at which banks make overnight loans to other banks.

Accepted Answer

The answer of The is the interest rate at which...

Question 5

An open-market sale

Accepted Answer

A)   increases the number of dollars and the number of bonds in the hands of the public.
B)   increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public.
C)   decreases the number of dollars and the number of bonds in the hands of the public.
D)   decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public.E) B) and C)
F) None of the above

Question 6

What is bank insolvancy?

Accepted Answer

Bank insolvancy is when bank c...

Question 7

At any meeting of the Federal Open Market Committee, that committee's voting members consist of

Accepted Answer

A)   5 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors.
B)   5 Federal Reserve Regional Bank Presidents and 5 members of the Board of Governors.
C)   12 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors.
D)   12 Federal Reserve Regional Bank Presidents and 5 members of the Board of Governors.E) C) and D)
F) A) and C)

Question 8

John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account to purchase $2,500 worth of traveler's checks. As a result of these changes,

Accepted Answer

A)   M1 increases by $2,500 and M2 decrease by $2,500.
B)   M1 increases by $2,500 and M2 stays the same.
C)   M1 and M2 stay the same.
D)   M1 decreases by $2,500 and M2 increases by $2,500.E) A) and B)
F) A) and C)

Question 9

What is the Term Auction Facility?

Accepted Answer

The Term Auction Facility is the market ...

Question 10

Describe the role of the Federal Deposit Insurance Corporation FDIC).

Accepted Answer

The FDIC is the primary mechanism by whi...

Question 11

If the reserve ratio is 5 percent, then $600 of additional reserves can create up to

Accepted Answer

A)   $30 of new money.
B)   $3,000 of new money.
C)   $12,000 of new money.
D)   None of the above is correct.E) C) and D)
F) B) and D)

Question 12

The amount of currency per person in the United States is about

Accepted Answer

A)   $110.
B)   $300.
C)   $2,450.
D)   $4,490.E) B) and C)
F) All of the above

Question 13

A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve. Its deposits amount to

Accepted Answer

A)   $114.
B)   $2,166.
C)   $2,400.
D)   $45,600.E) None of the above
F) B) and C)

Question 14

In many circumstances, prisoners are not allowed to possess cash. Does this mean there is no money in prison? Explain.

Accepted Answer

No.
Any good that provides the three fun...

Question 15

The Federal Reserve was created

Accepted Answer

A)   in 1913 by Congress
B)   as a result of the Great Depression
C)   according to the standards enforced by NATO
D)   by President KennedyE) All of the above
F) None of the above

Question 16

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

Accepted Answer

The president of the New York Federal Re...

Question 17

You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money?

Accepted Answer

A)   medium of exchange
B)   unit of account
C)   store of value
D)   liquidityE) A) and B)
F) A) and C)

Question 18

A bank has a 10 percent reserve requirement, $36,000 in loans, and has loaned out all it can given the reserve requirement.

Accepted Answer

A)   It has $3,600 in deposits.
B)   It has $32,400 in deposits.
C)   It has $39,600 in deposits.
D)   It has $40,000 in deposits.E) None of the above
F) All of the above

Question 19

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

Question 20

When the Fed sells government bonds,

Accepted Answer

A)   the money supply increases and the federal funds rate increases.
B)   the money supply increases and the federal funds rate decreases.
C)   the money supply decreases and the federal funds rate increases.
D)   the money supply decreases and the federal funds rate decreases.E) B) and D)
F) B) and C)

Exam 16: The Monetary System

The is the interest rate at which banks make overnight loans to other banks.

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When the Fed sells government bonds,

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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

The Federal Reserve was created

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If the reserve ratio is 5 percent, then $600 of additional reserves can create up to

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John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account to purchase $2,500 worth of traveler's checks. As a result of these changes,

Correct AnswerverifiedShow Answer

The amount of currency per person in the United States is about

Correct AnswerverifiedShow Answer

Credit cards

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What is bank insolvancy?

Correct AnswerverifiedBank insolvancy is when bank c...View AnswerShow Answer

In many circumstances, prisoners are not allowed to possess cash. Does this mean there is no money in prison? Explain.

Correct AnswerverifiedNo.Any good that provides the three fun...View AnswerShow Answer

A bank has a 10 percent reserve requirement, $36,000 in loans, and has loaned out all it can given the reserve requirement.

Correct AnswerverifiedShow Answer

At any meeting of the Federal Open Market Committee, that committee's voting members consist of

Correct AnswerverifiedShow Answer

Describe the role of the Federal Deposit Insurance Corporation FDIC).

Correct AnswerverifiedThe FDIC is the primary mechanism by whi...View AnswerShow Answer

Suppose a bank is operating with a leverage ratio of 20. What is the maximum decrease in the market value of assets before the bank becomes insolvent?

Correct AnswerverifiedA leverage ratio of 20 implies each perc...View AnswerShow Answer

An open-market sale

Correct AnswerverifiedShow Answer

You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money?

Correct AnswerverifiedShow Answer

Which of the following is not included in M1?

Correct AnswerverifiedShow Answer

A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve. Its deposits amount to

Correct AnswerverifiedShow Answer

Which of the following both increase the money supply?

Correct AnswerverifiedShow Answer

What is the Term Auction Facility?

Correct AnswerverifiedThe Term Auction Facility is the market ...View AnswerShow Answer

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The president of the New York Federal Re...
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Bank insolvancy is when bank c...
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No.
Any good that provides the three fun...
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Correct Answer
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Correct Answer
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Correct Answer
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The FDIC is the primary mechanism by whi...
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Correct Answer
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A leverage ratio of 20 implies each perc...
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The Term Auction Facility is the market ...
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