Question 1

If the reserve ratio increased from 10 percent to 20 percent, the money multiplier would

Accepted Answer

A)  rise from 10 to 20.
B)  rise from 5 to 10.
C)  fall from 10 to 5.
D)  not change.E) B) and D)
F) B) and C)

Question 2

Just after the terrorist attack on September 11, 2001, the Fed stood ready to lend financial institutions funds. When the Fed did this, it was acting in its role of lender of last resort.

Accepted Answer

A) True 
 B)False

Question 3

When we say that trade is roundabout we mean that

Accepted Answer

A)  people sometimes trade goods for goods.
B)  trades require a double coincidence of wants.
C)  currency is accepted primarily to make further trades.
D)  people must spend time searching for the products they wish to purchase.E) B) and D)
F) All of the above

Question 4

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 5

​In a system of 100-percent-reserve banking, changes in the money supply depend on the decisions of the Fed as well as the behavior of depositors and bankers.

Accepted Answer

A) True 
 B)False

Question 6

The Federal Reserve can alter the size of the money supply by changing reserves or changing reserve requirements.

Accepted Answer

A) True 
 B)False

Question 7

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

Question 8

Given the following information, what are the values of M1 and M2?

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) All of the above
F) B) and C)

Question 9

If the reserve ratio is 5 percent, then $1,000 of additional reserves can create up to

Accepted Answer

A)  $5,500 of new money.
B)  $5,000 of new money.
C)  $4,000 of new money.
D)  None of the above is correct.E) None of the above
F) B) and C)

Question 10

If the reserve requirement is 10 percent, which of the following pairs of changes would both allow a bank to lend out an additional $10,000?

Accepted Answer

A)  the Fed buys a $10,000 bond from the bank or someone deposits $10,000 in the bank
B)  the Fed buys a $10,000 bond from the bank or the Fed lends the bank $10,000
C)  the Fed sells a $10,000 bond to the bank or someone deposits $10,000 in the bank
D)  the Fed sells a $10,000 bond to the bank or the Fed lends the bank $10,000E) A) and B)
F) A) and C)

Question 11

Table 29-5. 
-Refer to Table 29-5. If the bank is holding $4,000 in excess reserves, then the reserve requirement with which it must comply is

Accepted Answer

A)  17 percent.
B)  12 percent.
C)  13 percent.
D)  14 percent.E) A) and B)
F) None of the above

Question 12

The Federal Reserve primarily uses open-market operations to change the money supply.

Accepted Answer

A) True 
 B)False

Question 13

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) All of the above
F) A) and D)

Question 14

Which of the following functions of money is also a common function of most other financial assets?

Accepted Answer

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

Question 15

The interest rate the Fed charges on loans it makes to banks is called

Accepted Answer

A)  the prime rate.
B)  the federal funds rate.
C)  the discount rate.
D)  the LIBOR.E) A) and C)
F) B) and C)

Question 16

When the Fed buys 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 C)
F) B) and D)

Question 17

Treasury Bonds are

Accepted Answer

A)  liquid, but not a store of value.
B)  a store of value, but not liquid.
C)  both liquid and a store of value.
D)  neither liquid nor a store of value.E) A) and D)
F) A) and C)

Question 18

Table 29-9
Metropolis National Bank is currently holding 2% of its deposits as excess reserves. 
-Refer to Table 29-9. Metropolis National Bank is currently holding 2% of deposits as excess reserves. Assume that no banks in the economy want to hold excess reserves and that people only hold deposits and no currency. How much does the money supply ultimately increase when Metropolis National Bank lends out its excess reserves?

Accepted Answer

A)  $100,000
B)  $110,000
C)  $120,000
D)  None of the above are correct.E) B) and C)
F) All of the above

Question 19

Table 29-6. 
-Refer to Table 29-6. The Bank of Pleasantville's reserve ratio is

Accepted Answer

A)  6.4 percent.
B)  16.7 percent.
C)  6.0 percent.
D)  15.7 percent.E) All of the above
F) B) and C)

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 29: The Monetary System

The interest rate the Fed charges on loans it makes to banks is called

Correct Answer
verified

Table 29-5. -Refer to Table 29-5. If the bank is holding $4,000 in excess reserves, then the reserve requirement with which it must comply is

Correct Answer
verified

The Federal Reserve primarily uses open-market operations to change the money supply.

Correct Answer
verified

Table 29-6. -Refer to Table 29-6. The Bank of Pleasantville's reserve ratio is

Correct Answer
verified

In a system of 100-percent-reserve banking, changes in the money supply depend on the decisions of the Fed as well as the behavior of depositors and bankers.

Correct Answer
verified

Which of the following functions of money is also a common function of most other financial assets?

Correct Answer
verified

Correct Answer
verified

When the Fed buys government bonds,

Correct Answer
verified

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

Correct Answer
verified

Treasury Bonds are

Correct Answer
verified

If the reserve ratio is 5 percent, then $1,000 of additional reserves can create up to

Correct Answer
verified

If the reserve ratio increased from 10 percent to 20 percent, the money multiplier would

Correct Answer
verified

If the reserve requirement is 10 percent, which of the following pairs of changes would both allow a bank to lend out an additional $10,000?

Correct Answer
verified

When the Fed sells government bonds,

Correct Answer
verified

When we say that trade is roundabout we mean that

Correct Answer
verified

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 Answer
verified
Currency is not a perfect store of value...
View Answer

Given the following information, what are the values of M1 and M2?

Correct Answer
verified

The Federal Reserve

Correct Answer
verified

The Federal Reserve can alter the size of the money supply by changing reserves or changing reserve requirements.

Correct Answer
verified

Just after the terrorist attack on September 11, 2001, the Fed stood ready to lend financial institutions funds. When the Fed did this, it was acting in its role of lender of last resort.

Correct Answer
verified

Exam 29: The Monetary System

The interest rate the Fed charges on loans it makes to banks is called

Correct AnswerverifiedShow Answer

Table 29-5. -Refer to Table 29-5. If the bank is holding $4,000 in excess reserves, then the reserve requirement with which it must comply is

Correct AnswerverifiedShow Answer

The Federal Reserve primarily uses open-market operations to change the money supply.

Correct AnswerverifiedShow Answer

Table 29-6. -Refer to Table 29-6. The Bank of Pleasantville's reserve ratio is

Correct AnswerverifiedShow Answer

​In a system of 100-percent-reserve banking, changes in the money supply depend on the decisions of the Fed as well as the behavior of depositors and bankers.

Correct AnswerverifiedShow Answer

Which of the following functions of money is also a common function of most other financial assets?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the Fed buys government bonds,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Treasury Bonds are

Correct AnswerverifiedShow Answer

If the reserve ratio is 5 percent, then $1,000 of additional reserves can create up to

Correct AnswerverifiedShow Answer

If the reserve ratio increased from 10 percent to 20 percent, the money multiplier would

Correct AnswerverifiedShow Answer

If the reserve requirement is 10 percent, which of the following pairs of changes would both allow a bank to lend out an additional $10,000?

Correct AnswerverifiedShow Answer

When the Fed sells government bonds,

Correct AnswerverifiedShow Answer

When we say that trade is roundabout we mean that

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

Given the following information, what are the values of M1 and M2?

Correct AnswerverifiedShow Answer

The Federal Reserve

Correct AnswerverifiedShow Answer

The Federal Reserve can alter the size of the money supply by changing reserves or changing reserve requirements.

Correct AnswerverifiedShow Answer

Just after the terrorist attack on September 11, 2001, the Fed stood ready to lend financial institutions funds. When the Fed did this, it was acting in its role of lender of last resort.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

In a system of 100-percent-reserve banking, changes in the money supply depend on the decisions of the Fed as well as the behavior of depositors and bankers.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Currency is not a perfect store of value...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified