Question 1

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

Question 2

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

Accepted Answer

Leverage amplifies the impact from chang...

Question 3

Table 29-2.
The information in the table pertains to an imaginary economy. 
-Refer to Table 29-2. What is the M1 money supply?

Accepted Answer

A)   $705 billion
B)   $570 billion
C)   $505 billion
D)   $585 billionE) All of the above
F) A) and B)

Question 4

The money multiplier is when the reserve ratio is 12.5 percent.

Accepted Answer

The answer of The money multiplier is when the reserve...

Question 5

Assume that when $100 of new reserves enter the banking system, the money supply ultimately increases by $625. Assume also that no banks hold excess reserves and that the entire money supply consists of bank deposits. If, at a point in time, reserves for all banks amount to $500, then at that same point in time, loans for all banks amount to $2,625.

Accepted Answer

A) True 
 B)False

Question 6

When the Fed conducts open-market purchases,

Accepted Answer

A)   it buys Treasury securities, which increases the money supply.
B)   it buys Treasury securities, which decreases the money supply.
C)   it borrows money from member banks, which increases the money supply.
D)   it lends money to member banks, which decreases the money supply.E) None of the above
F) A) and B)

Question 7

Given the following information, what are the values of M1 and M2? Small time deposits $600 billion
Demand deposits and other checkable deposits $400 billion
Savings deposits $800 billion
Money market mutual funds $700 billion
Traveler's checks $30 billion
Large time deposits $400 billion
Currency $250 billion
Miscellaneous categories in M2 $20 billion

Accepted Answer

A)   M1 = $650 billion, M2 = $2,830 billion.
B)   M1 = $400 billion, M2 = $3,080 billion.
C)   M1 = $680 billion, M2 = $2,800 billion.
D)   M1 = $680 billion, M2 = $3,200 billion.E) A) and D)
F) C) and D)

Question 8

If the reserve requirement is 12 percent and banks desire to hold no excess reserves, when a bank receives a new deposit of $1,000,

Accepted Answer

A)   it must increase its required reserves by more than $150.
B)   its total reserves initially increase by $120.
C)   it will be able to make new loans up to a maximum of $880.
D)   None of the above is correct.E) A) and C)
F) A) and B)

Question 9

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) A) and D)

Question 10

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

Accepted Answer

A)   falls. The Fed could lessen the impact of this by buying Treasury bonds.
B)   falls. The Fed could lessen the impact of this by selling Treasury bonds.
C)   rises. The Fed could lessen the impact of this by buying Treasury bonds.
D)   rises. The Fed could lessen the impact of this by selling Treasury bonds.E) B) and D)
F) None of the above

Question 11

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

Question 12

The Fed bonds when it conducts an open-market purchase. This action the money supply.

Accepted Answer

The answer of The Fed bonds when it conducts an...

Question 13

An important function of the U.S. Federal Reserve is to

Accepted Answer

A)   set the debt ceiling.
B)   fund Congressional spending.
C)   control the supply of money.
D)   mint coins.E) B) and C)
F) A) and C)

Question 14

Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control.

Accepted Answer

First, the Fed does not control the amou...

Question 15

A debit card is more similar to a credit card than to a check.

Accepted Answer

A) True 
 B)False

Question 16

If the money multiplier decreased from 20 to 12.5, then

Accepted Answer

A)   the Fed increased the reserve ratio from 5 percent to 8 percent.
B)   the Fed increased the fed funds rate from 5 percent to 8 percent.
C)   the Fed decreased the reserve ratio from 8 percent to 5 percent.
D)   the Fed decreased the fed funds rate from 8 percent to 5 percent.E) A) and D)
F) A) and C)

Question 17

If the central bank in some country raised the reserve requirement, then the money multiplier for that country

Accepted Answer

A)   would increase.
B)   would not change.
C)   would decrease.
D)   could do any of the above.E) A) and B)
F) None of the above

Question 18

Assume that when $100 of new reserves enter the banking system, the money supply ultimately increases by $800. Assume also that no banks hold excess reserves and that the entire money supply consists of bank deposits. If, at a point in time, reserves for all banks amount to $750, then at that same point in time, loans for all banks amount to $6,000.

Accepted Answer

A) True 
 B)False

Question 19

The regional Federal Reserve Banks

Accepted Answer

A)   are not allowed to make loans to banks in their region.
B)   regulate banks in their regions.
C)   have more voting members on the FOMC than does the Board of Governors.
D)   are each headed by a member of the Board of Governors.E) A) and B)
F) None of the above

Question 20

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

Accepted Answer

Open-market purchases (buy gov...

Exam 29: The Monetary System

If the reserve requirement is 12 percent and banks desire to hold no excess reserves, when a bank receives a new deposit of $1,000,

Correct Answer
verified

When the Fed conducts open-market purchases,

Correct Answer
verified

The Fed bonds when it conducts an open-market purchase. This action the money supply.

Correct Answer
verified

A debit card is more similar to a credit card than to a check.

Correct Answer
verified

Correct Answer
verified

The money multiplier is when the reserve ratio is 12.5 percent.

Correct Answer
verified

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

Correct Answer
verified
Open-market purchases (buy gov...
View Answer

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

Correct Answer
verified

An important function of the U.S. Federal Reserve is to

Correct Answer
verified

When the Fed sells government bonds,

Correct Answer
verified

Correct Answer
verified

If the central bank in some country raised the reserve requirement, then the money multiplier for that country

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

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

The regional Federal Reserve Banks

Correct Answer
verified

The ease with which an asset can be

Correct Answer
verified

Table 29-2. The information in the table pertains to an imaginary economy. -Refer to Table 29-2. What is the M1 money supply?

Correct Answer
verified

Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control.

Correct Answer
verified
First, the Fed does not control the amou...
View Answer

If the money multiplier decreased from 20 to 12.5, then

Correct Answer
verified

Exam 29: The Monetary System

If the reserve requirement is 12 percent and banks desire to hold no excess reserves, when a bank receives a new deposit of $1,000,

Correct AnswerverifiedShow Answer

When the Fed conducts open-market purchases,

Correct AnswerverifiedShow Answer

The Fed bonds when it conducts an open-market purchase. This action the money supply.

Correct AnswerverifiedShow Answer

A debit card is more similar to a credit card than to a check.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The money multiplier is when the reserve ratio is 12.5 percent.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedOpen-market purchases (buy gov...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

An important function of the U.S. Federal Reserve is to

Correct AnswerverifiedShow Answer

When the Fed sells government bonds,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the central bank in some country raised the reserve requirement, then the money multiplier for that country

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

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

The regional Federal Reserve Banks

Correct AnswerverifiedShow Answer

The ease with which an asset can be

Correct AnswerverifiedShow Answer

Table 29-2. The information in the table pertains to an imaginary economy. -Refer to Table 29-2. What is the M1 money supply?

Correct AnswerverifiedShow Answer

Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control.

Correct AnswerverifiedFirst, the Fed does not control the amou...View AnswerShow Answer

If the money multiplier decreased from 20 to 12.5, then

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Open-market purchases (buy gov...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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
First, the Fed does not control the amou...
View Answer

Correct Answer
verified