Question 1

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) None of the above

Question 2

Which list ranks assets from most to least liquid?

Accepted Answer

A)   currency,fine art,stocks
B)   currency,stocks,fine art
C)   fine art,currency,stocks
D)   fine art,stocks,currencyE) A) and D)
F) B) and C)

Question 3

Bank runs

Accepted Answer

A)   will affect neither the money supply nor the money multiplier.
B)   are only a problem for insolvent banks.
C)   can be neither prevented nor mitigated by the Federal Reserve.
D)   are a problem because banks only hold a fraction of deposits as reserves.E) A) and D)
F) A) and C)

Question 4

Currency includes

Accepted Answer

A)   paper bills and coins.
B)   demand deposits.
C)   credit cards.
D)   Both (a) and (b) are correct.E) A) and B)
F) A) and C)

Question 5

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Accepted Answer

A) True 
 B)False

Question 6

In the United States,currency holdings per person average about

Accepted Answer

A)   $125;one explanation for this relatively small average is that many people use credit and debit cards to make transactions.
B)   $125;one explanation for this relatively small average is that U.S.citizens hold a lot of foreign currency.
C)   $3,700;one explanation for this relatively large amount is that criminals probably prefer currency as a medium of exchange.
D)   $3,700;one explanation for this relatively large average is that U.S.citizens hold a lot of foreign currency.E) All of the above
F) A) and B)

Question 7

Bottles of very fine wine are less liquid than demand deposits.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following best illustrates the medium of exchange function of money?

Accepted Answer

A)   You keep some money hidden in your shoe.
B)   You keep track of the value of your assets in terms of currency.
C)   You pay for your oil change using currency.
D)   None of the above is correct.E) None of the above
F) C) and D)

Question 9

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

Question 10

If the reserve ratio is 8 percent,banks do not hold excess reserves,and people do not hold currency,then when the Fed purchases $20 million of government bonds,bank reserves

Accepted Answer

A)   increase by $20 million and the money supply eventually increases by $250 million.
B)   decrease by $20 million and the money supply eventually increases by $250 million.
C)   increase by $20 million and the money supply eventually decreases by $250 million.
D)   decrease by $20 million and the money supply eventually decreases by $250 million.E) B) and D)
F) B) and C)

Question 11

Table 16-7
Metropolis National Bank is currently holding 2% of its deposits as excess reserves.
 
-Refer to Scenario 16-1.Assuming the only other item Namdian banks have on their balance sheets is loans,what is the value of existing loans made by Namdian banks?

Accepted Answer

A)   625 million dias
B)   875 million dias
C)   1,125 million dias
D)   None of the above is correct.E) B) and C)
F) A) and B)

Question 12

The Federal Reserve

Accepted Answer

A)   was created in 1836.
B)   serves as a lender of last resort.
C)   was created to facilitate the federal government's collection of taxes as well as its expenditures.
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 13

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 14

During wars the public tends to hold relatively more currency and relatively fewer deposits.This decision makes reserves

Accepted Answer

A)   and the money supply increase.
B)   and the money supply decrease.
C)   increase,but leaves the money supply unchanged.
D)   decrease,but leaves the money supply unchanged.E) A) and C)
F) B) and D)

Question 15

Table 16-7
Metropolis National Bank is currently holding 2% of its deposits as excess reserves.
 
-Refer to Balance Sheet of Metropolis National Bank.Metropolis National Bank is currently holding 2% of deposits as excess reserves.What is the reserve requirement?

Accepted Answer

A)   12 percent
B)   10 percent
C)   8 percent
D)   6 percentE) All of the above
F) A) and B)

Question 16

Trace the effects on the money supply when the Fed decreases the discount rate.

Accepted Answer

The discount rate represents the cost of...

Question 17

Which of the following does the U.S.president appoint and the U.S.Senate confirm?

Accepted Answer

A)   members of the Board of Governors and regional Federal Reserve Bank Presidents.
B)   members of the Board of Governors but not the regional Federal Reserve Bank Presidents.
C)   the regional Federal Reserve Bank Presidents,but not members of the Board of Governors.
D)   neither members of the Board of Governors nor regional Federal Reserve Bank Presidents.E) A) and C)
F) C) and D)

Question 18

Suppose banks decide to hold more 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 lower the discount rate.
B)   money supply to fall.To reduce the impact of this the Fed could raise the discount rate.
C)   money supply to rise.To reduce the impact of this the Fed could lower the discount rate.
D)   money supply to rise.To reduce the impact of this the Fed could raise the discount rate.E) A) and D)
F) None of the above

Question 19

Compare the Board of Governors and the Federal Open Market Committee.

Accepted Answer

The Board of Governors runs the Federal ...

Question 20

Table 16-4.
 
-Refer to Table 16-4.If the bank faces a reserve requirement of 20 percent,then it

Accepted Answer

A)   has $10,000 of excess reserves.
B)   needs $10,000 more reserves to meet its reserve requirements.
C)   needs $5,000 more reserves to meet its reserve requirements.
D)   just meets its reserve requirement.E) None of the above
F) B) and C)

Exam 29: The Monetary System

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Correct AnswerverifiedShow Answer

Table 16-7 Metropolis National Bank is currently holding 2% of its deposits as excess reserves. -Refer to Scenario 16-1.Assuming the only other item Namdian banks have on their balance sheets is loans,what is the value of existing loans made by Namdian banks?

Correct AnswerverifiedShow Answer

Which of the following best illustrates the medium of exchange function of money?

Correct AnswerverifiedShow Answer

Compare the Board of Governors and the Federal Open Market Committee.

Correct AnswerverifiedThe Board of Governors runs the Federal ...View AnswerShow Answer

Which of the following does the U.S.president appoint and the U.S.Senate confirm?

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Table 16-7 Metropolis National Bank is currently holding 2% of its deposits as excess reserves. -Refer to Balance Sheet of Metropolis National Bank.Metropolis National Bank is currently holding 2% of deposits as excess reserves.What is the reserve requirement?

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When the Fed makes open-market sales bank

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Trace the effects on the money supply when the Fed decreases the discount rate.

Correct AnswerverifiedThe discount rate represents the cost of...View AnswerShow Answer

Bank runs

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If the reserve ratio is 8 percent,banks do not hold excess reserves,and people do not hold currency,then when the Fed purchases $20 million of government bonds,bank reserves

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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

The regional Federal Reserve Banks

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During wars the public tends to hold relatively more currency and relatively fewer deposits.This decision makes reserves

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Table 16-4. -Refer to Table 16-4.If the bank faces a reserve requirement of 20 percent,then it

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Currency includes

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

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Which list ranks assets from most to least liquid?

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The Federal Reserve

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Bottles of very fine wine are less liquid than demand deposits.

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In the United States,currency holdings per person average about

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The Board of Governors runs the Federal ...
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The discount rate represents the cost of...
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No.
Any good that provides the three fun...
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