Question 1

Any item that people can use to transfer purchasing power from the present to the future is called

Accepted Answer

A)  a medium of exchange.
B)  a unit of account.
C)  a store of value.
D)  None of the above is correct.E) All of the above
F) A) and B)

Question 2

Suppose a bank is operating with a leverage ratio of 10. A 6 percent increase in the value of assets

Accepted Answer

A)  will reduce liabilities by 6 percent.
B)  will result in a 60 percent increase in owner's equity.
C)  will result in a 60 percent decrease in owner's equity.
D)  will reduce liabilities by 10 percent.E) B) and C)
F) A) and D)

Question 3

According to the article "Why Gold?', silver may be used as money. One problem with using silver as money is that

Accepted Answer

A)  silver is too abundant.
B)  silver tarnishes over time.
C)  it is not a precious metal.
D)  it has a high melting point.E) B) and D)
F) A) and B)

Question 4

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

Accepted Answer

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

Question 5

The banking system currently has $200 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 4 percent. If the Fed raises the reserve requirement to 10 percent and at the same time buys $50 billion worth of bonds, then by how much does the money supply change?

Accepted Answer

A)  It rises by $600 billion.
B)  It rises by $125 billion.
C)  It falls by $2,500 billion.
D)  None of the above is correct.E) C) and D)
F) A) and B)

Question 6

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

Accepted Answer

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

Question 7

Consider five individuals with different occupations.  If this economy has money

Accepted Answer

A)  Allen will buy from Betty
B)  Betty will buy from Calvin
C)  Eric will buy from Allen
D)  None of the above are correct.E) A) and C)
F) All of the above

Question 8

When the Fed makes open-market sales bank

Accepted Answer

A)  withdrawals and lending increase.
B)  withdrawals increase and lending decreases.
C)  deposits and lending increase.
D)  deposits increase and lending decreases.E) B) and C)
F) All of the above

Question 9

What does the Fed auction at the Term-Auction Facility?

Accepted Answer

A)  government bonds of a quantity it sets
B)  government bonds with the quantity determined at the auction
C)  loans of a quantity it sets
D)  loans with the quantity determined at the auctionE) A) and C)
F) A) and D)

Question 10

The manager of the bank where you work tells you that the bank has $300 million in deposits and $255 million dollars in loans. If the reserve requirement is 8.5 percent, how much is the bank holding in excess reserves?

Accepted Answer

A)  $15 million
B)  $19.5 million
C)  $25.5 million
D)  $0 millionE) None of the above
F) B) and D)

Question 11

Which of the following is an asset of a bank and a liability for 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 to its customers but not the deposits of its customers
D)  neither the deposits of its customers nor the loans to its customersE) None of the above
F) B) and C)

Question 12

The Fed began paying interest on reserves in October 2008. Holding all else constant, what effect would this have on the money supply?

Accepted Answer

This would...

Question 13

If the reserve ratio is 12.5 percent, then $5,600 of money can be generated by

Accepted Answer

A)  $64 of new reserves.
B)  $448 of new reserves.
C)  $700 of new reserves.
D)  $800 of new reserves.E) None of the above
F) All of the above

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

Question 15

What is the difference between money and wealth?

Accepted Answer

Money is defined as the set of...

Question 16

The Fed can influence unemployment in

Accepted Answer

A)  the short run and in the long run.
B)  the short run, but not in the long run.
C)  the long run, but not in the short run.
D)  neither the short nor the long run.E) A) and B)
F) B) and C)

Question 17

M2 is both larger and less liquid than M1.

Accepted Answer

A) True 
 B)False

Question 18

If $300 of new reserves generates $800 of new money in the economy, then the reserve ratio is

Accepted Answer

A)  2.7 percent.
B)  12.5 percent.
C)  37.5 percent.
D)  40 percent.E) A) and C)
F) A) and B)

Question 19

​When prices rise,

Accepted Answer

A)  real estate is a better unit of account than money.
B)  money is a worse medium of exchange than real estate.
C)  ​money is a better store of value than real estate.
D)  ​real estate is a better store of value than money.E) A) and B)
F) C) and D)

Question 20

Which of the following is not included in M1?

Accepted Answer

A)  currency
B)  demand deposits
C)  traveler's checks
D)  credit cardsE) C) and D)
F) None of the above

Exam 29: The Monetary System

Which of the following is not included in M1?

Correct Answer
verified

If $300 of new reserves generates $800 of new money in the economy, then the reserve ratio is

Correct Answer
verified

If the reserve ratio is 12.5 percent, then $5,600 of money can be generated by

Correct Answer
verified

When the Fed makes open-market sales bank

Correct Answer
verified

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

Correct Answer
verified

The Fed can influence unemployment in

Correct Answer
verified

Correct Answer
verified

According to the article "Why Gold?', silver may be used as money. One problem with using silver as money is that

Correct Answer
verified

Suppose a bank is operating with a leverage ratio of 10. A 6 percent increase in the value of assets

Correct Answer
verified

When prices rise,

Correct Answer
verified

The Fed began paying interest on reserves in October 2008. Holding all else constant, what effect would this have on the money supply?

Correct Answer
verified
This would...
View Answer

Correct Answer
verified

The manager of the bank where you work tells you that the bank has $300 million in deposits and $255 million dollars in loans. If the reserve requirement is 8.5 percent, how much is the bank holding in excess reserves?

Correct Answer
verified

Consider five individuals with different occupations. If this economy has money

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

What is the difference between money and wealth?

Correct Answer
verified
Money is defined as the set of...
View Answer

What does the Fed auction at the Term-Auction Facility?

Correct Answer
verified

M2 is both larger and less liquid than M1.

Correct Answer
verified

Any item that people can use to transfer purchasing power from the present to the future is called

Correct Answer
verified

Exam 29: The Monetary System

Which of the following is not included in M1?

Correct AnswerverifiedShow Answer

If $300 of new reserves generates $800 of new money in the economy, then the reserve ratio is

Correct AnswerverifiedShow Answer

If the reserve ratio is 12.5 percent, then $5,600 of money can be generated by

Correct AnswerverifiedShow Answer

When the Fed makes open-market sales bank

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Fed can influence unemployment in

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

According to the article "Why Gold?', silver may be used as money. One problem with using silver as money is that

Correct AnswerverifiedShow Answer

Suppose a bank is operating with a leverage ratio of 10. A 6 percent increase in the value of assets

Correct AnswerverifiedShow Answer

​When prices rise,

Correct AnswerverifiedShow Answer

The Fed began paying interest on reserves in October 2008. Holding all else constant, what effect would this have on the money supply?

Correct AnswerverifiedThis would...View AnswerShow Answer

Correct AnswerverifiedShow Answer

The manager of the bank where you work tells you that the bank has $300 million in deposits and $255 million dollars in loans. If the reserve requirement is 8.5 percent, how much is the bank holding in excess reserves?

Correct AnswerverifiedShow Answer

Consider five individuals with different occupations. If this economy has money

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What is the difference between money and wealth?

Correct AnswerverifiedMoney is defined as the set of...View AnswerShow Answer

What does the Fed auction at the Term-Auction Facility?

Correct AnswerverifiedShow Answer

M2 is both larger and less liquid than M1.

Correct AnswerverifiedShow Answer

Any item that people can use to transfer purchasing power from the present to the future is called

Correct AnswerverifiedShow 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

Correct Answer
verified

When prices rise,

Correct Answer
verified

Correct Answer
verified
This would...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Money is defined as the set of...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified