Question 1

Suppose banks desire to hold no excess reserves and that the Fed has set a reserve requirement of 6 percent. If you deposit $8,000 into First Raven Bank,

Accepted Answer

A)  First Raven's required reserves increase by $480.
B)  First Raven will be able to lend out $7,520.
C)  First Raven's assets and liabilities both will increase by $8,000.
D)  All of the above are correct.E) A) and B)
F) All of the above

Question 2

Small time deposits are included in

Accepted Answer

A)  M1 but not M2.
B)  M2 but not M1.
C)  M1 and M2.
D)  neither M1 nor M2.E) A) and D)
F) A) and B)

Question 3

Credit cards are a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 4

What is the Term Auction Facility?

Accepted Answer

The Term Auction Facility is the market ...

Question 5

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

Accepted Answer

A)  M1 = $3,150 billion, M2 = $6,200 billion.
B)  M1 = $1,350 billion, M2 = $5,600 billion.
C)  M1 = $1,400 billion, M2 = $6,200 billion.
D)  M1 = $1,300 billion, M2 = $5,600 billion.E) A) and B)
F) A) and C)

Question 6

One plausible explanation for the large amount of U.S. currency outstanding is that many dollars are held abroad.

Accepted Answer

A) True 
 B)False

Question 7

On a bank's T-account, which are part of the banks liabilities?

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 C)
F) A) and D)

Question 8

Table 29-7. 
-Refer to Table 29-7. If the Bank of Springfield has lent out all the money it can given its level of deposits, then what is the reserve requirement?

Accepted Answer

A)  8.1 percent
B)  11.0 percent
C)  12.4 percent
D)  89.0 percentE) None of the above
F) A) and C)

Question 9

Which of the following can the Fed do to change the money supply?

Accepted Answer

A)  change reserves or change the reserve ratio
B)  change reserves but not change the reserve ratio
C)  change the reserve ratio but not change the reserve ratio
D)  neither change reserves nor change the reserve ratioE) A) and B)
F) A) and C)

Question 10

Assume that when $100 of new reserves enter the banking system, the money supply ultimately increases by $800. Assume also that no banks hold excess reserves and that the entire money supply consists of bank deposits. If, at a point in time, reserves for all banks amount to $750, then at that same point in time, loans for all banks amount to $6,000.

Accepted Answer

A) True 
 B)False

Question 11

The primary tool used by the Federal Reserve to change the money supply is _____.

Accepted Answer

open-marke...

Question 12

To increase the money supply, the Fed could

Accepted Answer

A)  sell government bonds.
B)  auction more loans to banks.
C)  increase the reserve requirement.
D)  None of the above is correct.E) B) and C)
F) A) and C)

Question 13

A problem that the Fed faces when it attempts to control the money supply is that

Accepted Answer

A)  the 100-percent-reserve banking system in the U.S. makes it difficult for the Fed to carry out its monetary policy.
B)  the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools.
C)  the Fed does not have a tool that it can use to change the money supply by either a small amount or a large amount.
D)  the Fed does not control the amount of money that households choose to hold as deposits in banks.E) C) and D)
F) None of the above

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

Question 15

The discount rate is the interest rate that

Accepted Answer

A)  banks charge one another for loans.
B)  banks charge the Fed for loans.
C)  the Fed charges banks for loans.
D)  the Fed charges Congress for loans.E) None of the above
F) A) and B)

Question 16

The Federal Reserve was created

Accepted Answer

A)  in 1913 by Congress
B)  as a result of the Great Depression
C)  according to the standards enforced by NATO
D)  by President KennedyE) B) and D)
F) A) and B)

Question 17

Are credit cards and debit cards money? What's the difference between credit and debit cards?

Accepted Answer

Neither credit cards nor debit cards are...

Question 18

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

Question 19

If the reserve ratio is 100-percent, then a new deposit of $1000 into a bank account

Accepted Answer

A)  eventually increases the money supply by $1000.
B)  leaves the size of the money supply unchanged.
C)  eventually decreases the size of the money supply by $1000.
D)  eventually increases the money supply by $2000.E) A) and B)
F) B) and C)

Question 20

Banks are able to create money only when

Accepted Answer

A)  interest rates are above 2%.
B)  the Fed sells U.S. government bonds.
C)  the reserve ratio is 100%.
D)  only a fraction of deposits are held in reserve.E) None of the above
F) B) and D)

Exam 29: The Monetary System

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

Correct Answer
verified

Banks are able to create money only when

Correct Answer
verified

Are credit cards and debit cards money? What's the difference between credit and debit cards?

Correct Answer
verified
Neither credit cards nor debit cards are...
View Answer

On a bank's T-account, which are part of the banks liabilities?

Correct Answer
verified

What is the Term Auction Facility?

Correct Answer
verified
The Term Auction Facility is the market ...
View Answer

The primary tool used by the Federal Reserve to change the money supply is _____.

Correct Answer
verified
open-marke...
View Answer

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

Correct Answer
verified

The Federal Reserve was created

Correct Answer
verified

The discount rate is the interest rate that

Correct Answer
verified

A problem that the Fed faces when it attempts to control the money supply is that

Correct Answer
verified

Correct Answer
verified

Suppose banks desire to hold no excess reserves and that the Fed has set a reserve requirement of 6 percent. If you deposit $8,000 into First Raven Bank,

Correct Answer
verified

If the reserve ratio is 100-percent, then a new deposit of $1000 into a bank account

Correct Answer
verified

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

Correct Answer
verified

Table 29-7. -Refer to Table 29-7. If the Bank of Springfield has lent out all the money it can given its level of deposits, then what is the reserve requirement?

Correct Answer
verified

To increase the money supply, the Fed could

Correct Answer
verified

Small time deposits are included in

Correct Answer
verified

Which of the following can the Fed do to change the money supply?

Correct Answer
verified

One plausible explanation for the large amount of U.S. currency outstanding is that many dollars are held abroad.

Correct Answer
verified

Credit cards are a medium of exchange.

Correct Answer
verified

Exam 29: The Monetary System

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

Correct AnswerverifiedShow Answer

Banks are able to create money only when

Correct AnswerverifiedShow Answer

Are credit cards and debit cards money? What's the difference between credit and debit cards?

Correct AnswerverifiedNeither credit cards nor debit cards are...View AnswerShow Answer

On a bank's T-account, which are part of the banks liabilities?

Correct AnswerverifiedShow Answer

What is the Term Auction Facility?

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

The primary tool used by the Federal Reserve to change the money supply is _____.

Correct Answerverifiedopen-marke...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

The Federal Reserve was created

Correct AnswerverifiedShow Answer

The discount rate is the interest rate that

Correct AnswerverifiedShow Answer

A problem that the Fed faces when it attempts to control the money supply is that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose banks desire to hold no excess reserves and that the Fed has set a reserve requirement of 6 percent. If you deposit $8,000 into First Raven Bank,

Correct AnswerverifiedShow Answer

If the reserve ratio is 100-percent, then a new deposit of $1000 into a bank account

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Table 29-7. -Refer to Table 29-7. If the Bank of Springfield has lent out all the money it can given its level of deposits, then what is the reserve requirement?

Correct AnswerverifiedShow Answer

To increase the money supply, the Fed could

Correct AnswerverifiedShow Answer

Small time deposits are included in

Correct AnswerverifiedShow Answer

Which of the following can the Fed do to change the money supply?

Correct AnswerverifiedShow Answer

One plausible explanation for the large amount of U.S. currency outstanding is that many dollars are held abroad.

Correct AnswerverifiedShow Answer

Credit cards are a medium of exchange.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Neither credit cards nor debit cards are...
View Answer

Correct Answer
verified

Correct Answer
verified
The Term Auction Facility is the market ...
View Answer

Correct Answer
verified
open-marke...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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Correct Answer
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Correct Answer
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