Question 1

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

Question 2

Which of the following is not included in either M1 or M2?

Accepted Answer

A)   U.S. Treasury bills
B)   small time deposits
C)   demand deposits
D)   money market mutual fundsE) B) and C)
F) B) and D)

Question 3

If the reserve ratio is 7.5 percent, the money multiplier is

Accepted Answer

A)   7.5.
B)   10.3.
C)   13.3.
D)   11.3.E) A) and B)
F) None of the above

Question 4

An increase in the money supply might indicate that the Fed had

Accepted Answer

A)   purchased bonds to increase banks reserves.
B)   purchased bonds to decrease banks reserves.
C)   sold bonds to increase banks reserves.
D)   sold bonds to decrease banks reserves.E) C) and D)
F) A) and D)

Question 5

Currently, bank runs are a major problem for the U.S. banking system and the Fed.

Accepted Answer

A) True 
 B)False

Question 6

Which group within the Federal Reserve System meets to discuss changes in the economy and determine monetary policy?

Accepted Answer

A)   the Board of Governors
B)   the FOMC
C)   the regional Federal Reserve Bank presidents
D)   the Central Bank Policy CommissionE) A) and B)
F) B) and C)

Question 7

Table 29-5.
 
-Refer to Table 29-5. If the bank faces a reserve requirement of 6 percent, then the bank

Accepted Answer

A)   is in a position to make a new loan of $12,000.
B)   is in a position to make a new loan of $18,000.
C)   has excess reserves of $12,000.
D)   None of the above is correct.E) None of the above
F) A) and B)

Question 8

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 9

The measure of the money stock called M1 includes

Accepted Answer

A)   wealth held by people in their checking accounts.
B)   wealth held by people in their savings accounts.
C)   wealth held by people in money market mutual funds.
D)   everything that is included in M2 plus some additional items.E) A) and B)
F) B) and D)

Question 10

If R represents the reserve ratio for all banks in the economy, then the money multiplier is

Accepted Answer

A)   1/1-R) .
B)   1/R.
C)   1/1+R) .
D)   1+R) /R.E) A) and B)
F) B) and C)

Question 11

Commodity money cannot be used as a unit of account.

Accepted Answer

A) True 
 B)False

Question 12

Who was reappointed Chair of the Board of Governors in 2009 by President Barrack Obama?

Accepted Answer

A)   Ben Bernanke
B)   Christina Romer
C)   Timothy Geithner
D)   Bernie MadoffE) B) and D)
F) None of the above

Question 13

Table 29-5.
 
-Refer to Table 29-5. If the bank faces a reserve requirement of 8 percent, then the bank

Accepted Answer

A)   is in a position to make a new loan of $14,000.
B)   has fewer reserves than are required.
C)   has excess reserves of $16,400.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 14

According to economists, "money" means the same thing as "wealth".

Accepted Answer

A) True 
 B)False

Question 15

Table 29-6.
 
-Refer to Table 29-6. Assume there is a reserve requirement and the Bank of Pleasantville is exactly in compliance with that requirement. Assume the same is true for all other banks. Lastly, assume people hold only deposits and no currency. What is the money multiplier?

Accepted Answer

A)   6
B)   16.7
C)   15.6
D)   6.4E) B) and D)
F) None of the above

Question 16

A bank's reserve ratio is 10 percent and the bank has $5,000 in deposits. Its reserves amount to

Accepted Answer

A)   $50.
B)   $500.
C)   $4,500.
D)   $4,950.E) All of the above
F) C) and D)

Question 17

If the public decides to hold less currency and more deposits in banks, bank reserves

Accepted Answer

A)   decrease and the money supply eventually decreases.
B)   decrease but the money supply does not change.
C)   increase and the money supply eventually increases.
D)   increase but the money supply does not change.E) B) and C)
F) C) and D)

Question 18

The Fed increases the reserve requirement, but it wants to offset the effects on the money supply. Which of the following should it do?

Accepted Answer

A)   sell bonds to increase reserves
B)   sell bonds to decrease reserves
C)   buy bonds to increase reserves
D)   buy bonds to decrease reservesE) B) and C)
F) A) and C)

Question 19

What is the Term Auction Facility?

Accepted Answer

The Term Auction Facility is the market ...

Question 20

Reserve requirements are regulations concerning

Accepted Answer

A)   the amount banks are allowed to borrow from the Fed.
B)   the amount of reserves banks must hold against deposits.
C)   reserves banks must hold based on the number and type of loans they make.
D)   the interest rate at which banks can borrow from the Fed.E) A) and C)
F) A) and B)

Exam 21: The Monetary System

If the reserve ratio is 7.5 percent, the money multiplier is

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A bank's reserve ratio is 10 percent and the bank has $5,000 in deposits. Its reserves amount to

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If the public decides to hold less currency and more deposits in banks, bank reserves

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The measure of the money stock called M1 includes

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Table 29-5. -Refer to Table 29-5. If the bank faces a reserve requirement of 8 percent, then the bank

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Table 29-5. -Refer to Table 29-5. If the bank faces a reserve requirement of 6 percent, then the bank

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

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Table 29-6. -Refer to Table 29-6. Assume there is a reserve requirement and the Bank of Pleasantville is exactly in compliance with that requirement. Assume the same is true for all other banks. Lastly, assume people hold only deposits and no currency. What is the money multiplier?

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Which group within the Federal Reserve System meets to discuss changes in the economy and determine monetary policy?

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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

According to economists, "money" means the same thing as "wealth".

Correct AnswerverifiedShow Answer

Who was reappointed Chair of the Board of Governors in 2009 by President Barrack Obama?

Correct AnswerverifiedShow Answer

Commodity money cannot be used as a unit of account.

Correct AnswerverifiedShow Answer

The Fed increases the reserve requirement, but it wants to offset the effects on the money supply. Which of the following should it do?

Correct AnswerverifiedShow Answer

If R represents the reserve ratio for all banks in the economy, then the money multiplier is

Correct AnswerverifiedShow Answer

Which of the following is not included in either M1 or M2?

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An increase in the money supply might indicate that the Fed had

Correct AnswerverifiedShow Answer

Reserve requirements are regulations concerning

Correct AnswerverifiedShow Answer

Currently, bank runs are a major problem for the U.S. banking system and the Fed.

Correct AnswerverifiedShow Answer

What is the Term Auction Facility?

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

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

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This would...
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The Term Auction Facility is the market ...
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