Question 1

You use U.S. currency to pay the owner of a restaurant for a delicious meal. The currency

Accepted Answer

A)   has no intrinsic value. The exchange is an example of barter.
B)   has no intrinsic value. The exchange is not an example of barter.
C)   has intrinsic value. The exchange is not an example of barter.
D)   has intrinsic value. The exchange is not an example of barter.E) B) and C)
F) A) and B)

Question 2

In a fractional-reserve banking system, a decrease in reserve requirements

Accepted Answer

A)   increases both the money multiplier and the money supply.
B)   decreases both the money multiplier and the money supply.
C)   increases the money multiplier, but decreases the money supply.
D)   decreases the money multiplier, but increases the money supply.E) A) and D)
F) A) and C)

Question 3

Because of the multiple tools at its disposal, the Fed can control the money supply very precisely.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is included in both M1 and M2?

Accepted Answer

A)   currency
B)   demand deposits
C)   other checkable deposits
D)   All of the above are correct.E) All of the above
F) A) and B)

Question 5

On a bank's T­account, which are part of the bank's assets?

Accepted Answer

A)   both deposits made by its customers and reserves
B)   deposits made by its customers but not reserves
C)   reserves but not deposits made by its customers
D)   neither deposits made by its customers nor reservesE) A) and B)
F) B) and C)

Question 6

Money market mutual funds are included in

Accepted Answer

A)   M1 but not M2.
B)   M1 and M2.
C)   M2 but not M1.
D)   neither M1 nor M2.E) All of the above
F) B) and D)

Question 7

One of the features of money is its store of value. However, most people do not hold their wealth as currency. Given that currency is the most liquid type of asset, why don't people hold all their wealth as currency?

Accepted Answer

Currency is not a perfect store of value...

Question 8

If the reserve ratio is 8 percent, then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

Accepted Answer

A)   $48,000.
B)   $75,000.
C)   $55,200.
D)   $10,800.E) A) and B)
F) All of the above

Question 9

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 10

Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A bank has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have to lend out if it decides to hold only required reserves?

Accepted Answer

A)   $27,000
B)   $27,190
C)   $26,190
D)   $9,000E) C) and D)
F) B) and C)

Question 11

Commodity money is

Accepted Answer

A)   backed by gold.
B)   the principal type of money in use today.
C)   money with intrinsic value.
D)   receipts created in international trade that are used as a medium of exchange.E) B) and C)
F) None of the above

Question 12

Suppose banks decide to hold fewer excess reserves relative to deposits. Other things the same, this action will cause the

Accepted Answer

A)   money supply to fall. To reduce the impact of this the Fed could sell Treasury bonds.
B)   money supply to fall. To reduce the impact of this the Fed could buy Treasury bonds.
C)   money supply to rise. To reduce the impact of this the Fed could sell Treasury bonds.
D)   money supply to rise. To reduce the impact of this the Fed could buy Treasury bonds.E) None of the above
F) C) and D)

Question 13

In the special case of the 100 percent-reserve banking, the money multiplier is

Accepted Answer

A)   1 and banks create money.
B)   1 and banks do not create money.
C)   2 and banks create money
D)   2 and banks do not create money.E) All of the above
F) B) and C)

Question 14

Which of the following statements regarding the Federal Open Market Committee is correct?

Accepted Answer

A)   Only the five voting regional Fed presidents attend the meetings.
B)   All regional Fed presidents attend and vote at the meetings.
C)   All regional Fed presidents attend the meetings, but only five get to vote.
D)   Regional Fed presidents may neither attend nor vote the meetings.E) A) and B)
F) None of the above

Question 15

The money supply of Granov is $10,000 in a 100-percent-reserve banking system. If the Central Bank of Granov decreases the reserve requirement ratio to 10 percent, the money supply could increase by no more than $9,000.

Accepted Answer

A) True 
 B)False

Question 16

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 17

In measuring the stock of money in the U.S., M1 includes

Accepted Answer

A)   traveler's checks.
B)   savings deposits.
C)   credit cards
D)   none of the above.E) B) and D)
F) C) and D)

Question 18

If the federal funds rate were below the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Accepted Answer

A)   buying bonds. This buying would reduce reserves.
B)   buying bonds. This buying would increase reserves.
C)   selling bonds. This selling would reduce reserves.
D)   selling bonds. This selling would increase reserves.E) B) and D)
F) B) and C)

Question 19

Which of the following lists is included in what economists call "money"?

Accepted Answer

A)   cash
B)   cash and stocks and bonds
C)   cash and stocks and bonds and real estate
D)   cash and stocks and bonds and real estate and all other assetsE) None of the above
F) B) and C)

Question 20

What does the "double coincidence of wants" refer to?

Accepted Answer

"Double coincidence of wants" refers to ...

Exam 29: The Monetary System

What does the "double coincidence of wants" refer to?

Correct Answerverified"Double coincidence of wants" refers to ...View AnswerShow Answer

If the federal funds rate were below the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Correct AnswerverifiedShow Answer

Which of the following lists is included in what economists call "money"?

Correct AnswerverifiedShow Answer

One of the features of money is its store of value. However, most people do not hold their wealth as currency. Given that currency is the most liquid type of asset, why don't people hold all their wealth as currency?

Correct AnswerverifiedCurrency is not a perfect store of value...View AnswerShow Answer

In the special case of the 100 percent-reserve banking, the money multiplier is

Correct AnswerverifiedShow Answer

If the reserve ratio is 8 percent, then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

Correct AnswerverifiedShow Answer

The money supply of Granov is $10,000 in a 100-percent-reserve banking system. If the Central Bank of Granov decreases the reserve requirement ratio to 10 percent, the money supply could increase by no more than $9,000.

Correct AnswerverifiedShow Answer

Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A bank has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have to lend out if it decides to hold only required reserves?

Correct AnswerverifiedShow Answer

Commodity money is

Correct AnswerverifiedShow Answer

You use U.S. currency to pay the owner of a restaurant for a delicious meal. The currency

Correct AnswerverifiedShow 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

Which of the following is included in both M1 and M2?

Correct AnswerverifiedShow Answer

Which of the following statements regarding the Federal Open Market Committee is correct?

Correct AnswerverifiedShow Answer

Because of the multiple tools at its disposal, the Fed can control the money supply very precisely.

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

On a bank's T­account, which are part of the bank's assets?

Correct AnswerverifiedShow Answer

In a fractional-reserve banking system, a decrease in reserve requirements

Correct AnswerverifiedShow Answer

In measuring the stock of money in the U.S., M1 includes

Correct AnswerverifiedShow Answer

Money market mutual funds are included in

Correct AnswerverifiedShow Answer

Suppose banks decide to hold fewer excess reserves relative to deposits. Other things the same, this action will cause the

Correct AnswerverifiedShow Answer

Correct Answer
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"Double coincidence of wants" refers to ...
View Answer

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Currency is not a perfect store of value...
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No.
Any good that provides the three fun...
View Answer

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

On a bank's Taccount, which are part of the bank's assets?

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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