Question 1

The Federal Deposit Insurance Corporation

Accepted Answer

A)  protects depositors in the event of bank failures.
B)  has become insolvent in recent years due to a large number of bank failures.
C)  is part of the Federal Reserve System.
D)  in practice has seldom been of much use.E) A) and C)
F) B) and C)

Question 2

Table 29-6. 
-Refer to Table 29-6. From the table it follows that the Bank of Pleasantville operates in a

Accepted Answer

A)  fractional-reserve banking system, since its reserves are less than its deposits.
B)  fractional-reserve banking system, since its reserves are less than its loans.
C)  100-percent-reserve banking system, since its assets are equal to its liabilities.
D)  100-percent-reserve banking system if the Fed's reserve requirement is 10 percent; otherwise, it operates in a fractional-reserve banking system.E) B) and D)
F) B) and C)

Question 3

Scenario 29-1.
The monetary policy of Namdian is determined by the Namdian Central Bank. The local currency is the dia. Namdian banks collectively hold 100 million dias of required reserves, 25 million dias of excess reserves, 250 million dias of Namdian Treasury Bonds, and their customers hold 1,000 million dias of deposits. Namdians prefer to use only demand deposits and so the money supply consists of demand deposits.
-Refer to Scenario 29-1. Suppose the Central Bank of Namdia loaned the banks of Namdia 5 million dias. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply of Namdia change?

Accepted Answer

A)  60 million dias
B)  50 million dias
C)  40 million dias
D)  None of the above is correct.E) A) and C)
F) A) and D)

Question 4

Reserves increase if the Federal Reserve

Accepted Answer

A)  raises the discount rate or auctions more credit.
B)  raises the discount rate but not if it auctions more credit.
C)  lowers the discount rate or auctions more credit.
D)  lowers the discount rate but not if it auctions more credit.E) C) and D)
F) B) and C)

Question 5

If the reserve ratio is 6 percent, then $9,000 of additional reserves can create up to

Accepted Answer

A)  $159,000 of new money.
B)  $54,000 of new money.
C)  $150,000 of new money.
D)  $141,000 of new money.E) C) and D)
F) B) and D)

Question 6

​Under a fractional-reserve banking system, the money supply cannot change without any action from the Federal Reserve.

Accepted Answer

A) True 
 B)False

Question 7

Describe the role of the Federal Deposit Insurance Corporation (FDIC).

Accepted Answer

The FDIC is the primary mechanism by whi...

Question 8

Lisa deposits $750 with her bank. The T-account for her bank account is now:
​ 
​
What is the change in the money supply?

Accepted Answer

A)  ​No change, and Lisa's bank is an example of 100-percent-reserve banking
B)  ​No change, and Lisa's bank is an example of fractional-reserve banking
C)  $750, and Lisa's bank is an example of 100-percent-reserve banking
D)  $750, and Lisa's bank is an example of fractional-reserve bankingE) B) and D)
F) A) and C)

Question 9

Prisoners sometimes determine a single good to be used as money. This good becomes

Accepted Answer

A)  a medium of exchange and a unit of account.
B)  a medium of exchange, but not a unit of account.
C)  a unit of account, but not a medium of exchange.
D)  neither a unit of account nor a medium of exchange.E) A) and B)
F) C) and D)

Question 10

Which of the following is not a central bank?

Accepted Answer

A)  The Bank of England
B)  The Bank of Japan
C)  The Bank of America
D)  The Federal ReserveE) B) and D)
F) A) and C)

Question 11

A bank loans Greg's Ice Cream $250,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is

Accepted Answer

A)  a liability for the bank and an asset for Greg's Ice Cream. The loan increases the money supply.
B)  a liability for the bank and an asset for Greg's Ice Cream. The loan does not increase the money supply.
C)  an asset for the bank and a liability for Greg's Ice Cream. The loan increases the money supply.
D)  an asset for the bank and a liability for Greg's Ice Cream. The loan does not increase the money supply.E) A) and B)
F) A) and C)

Question 12

The agency responsible for regulating the money supply in the United States is

Accepted Answer

A)  the Comptroller of the Currency.
B)  the U.S. Treasury.
C)  the Federal Reserve.
D)  the U.S. Bank.E) B) and C)
F) A) and B)

Question 13

Which of the following statements is correct? In the special case of the 100-percent reserve banking the money multiplier is

Accepted Answer

A)  0 and banks create money.
B)  0 and banks do not create money.
C)  1 and banks create money
D)  1 and banks do not create money.E) C) and D)
F) A) and D)

Question 14

Banks can hold deposits at the Federal Reserve. Balances in these accounts can be used by banks to meet their reserve requirements, but the Fed pays no interest on these deposits.

Accepted Answer

A) True 
 B)False

Question 15

Reserves decrease if the Federal Reserve

Accepted Answer

A)  raises the discount rate or auctions more credit.
B)  raises the discount rate but not if it auctions more credit.
C)  lowers the discount rate or auctions more credit.
D)  lowers the discount rate but not if it auctions more credit.E) None of the above
F) B) and C)

Question 16

In a fractional-reserve banking system, a bank

Accepted Answer

A)  does not make loans.
B)  does not accept deposits.
C)  keeps only a fraction of its deposits in reserve.
D)  None of the above is correct.E) B) and D)
F) None of the above

Question 17

How does the Fed Open Market Committee increase the money supply?

Accepted Answer

The answer of How does the Fed Open Market Committee...

Question 18

In the special case of the 100 percent-reserve banking, the money multiplier is

Accepted Answer

A)  1 and banks create money.
B)  1 and banks do not create money.
C)  2 and banks create money
D)  2 and banks do not create money.E) B) and D)
F) All of the above

Question 19

If the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Accepted Answer

A)  buying bonds. This buying would reduce reserves.
B)  buying bonds. This buying would increase reserves.
C)  selling bonds. This selling would reduce reserves.
D)  selling bonds. This selling would increase reserves.E) B) and D)
F) A) and C)

Question 20

When conducting an open-market purchase, the Fed

Accepted Answer

A)  buys government bonds, and in so doing increases the money supply.
B)  buys government bonds, and in so doing decreases the money supply.
C)  sells government bonds, and in so doing increases the money supply.
D)  sells government bonds, and in so doing decreases the money supply.E) A) and B)
F) A) and C)

Exam 29: The Monetary System

Correct Answer
verified

Reserves increase if the Federal Reserve

Correct Answer
verified

In the special case of the 100 percent-reserve banking, the money multiplier is

Correct Answer
verified

Under a fractional-reserve banking system, the money supply cannot change without any action from the Federal Reserve.

Correct Answer
verified

In a fractional-reserve banking system, a bank

Correct Answer
verified

Reserves decrease if the Federal Reserve

Correct Answer
verified

Describe the role of the Federal Deposit Insurance Corporation (FDIC).

Correct Answer
verified
The FDIC is the primary mechanism by whi...
View Answer

Correct Answer
verified

If the reserve ratio is 6 percent, then $9,000 of additional reserves can create up to

Correct Answer
verified

A bank loans Greg's Ice Cream $250,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is

Correct Answer
verified

Prisoners sometimes determine a single good to be used as money. This good becomes

Correct Answer
verified

The Federal Deposit Insurance Corporation

Correct Answer
verified

If the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Correct Answer
verified

How does the Fed Open Market Committee increase the money supply?

Correct Answer
verified

Which of the following is not a central bank?

Correct Answer
verified

Banks can hold deposits at the Federal Reserve. Balances in these accounts can be used by banks to meet their reserve requirements, but the Fed pays no interest on these deposits.

Correct Answer
verified

Correct Answer
verified

Which of the following statements is correct? In the special case of the 100-percent reserve banking the money multiplier is

Correct Answer
verified

The agency responsible for regulating the money supply in the United States is

Correct Answer
verified

When conducting an open-market purchase, the Fed

Correct Answer
verified

Exam 29: The Monetary System

Lisa deposits $750 with her bank. The T-account for her bank account is now: ​ ​ What is the change in the money supply?

Correct AnswerverifiedShow Answer

Reserves increase if the Federal Reserve

Correct AnswerverifiedShow Answer

In the special case of the 100 percent-reserve banking, the money multiplier is

Correct AnswerverifiedShow Answer

​Under a fractional-reserve banking system, the money supply cannot change without any action from the Federal Reserve.

Correct AnswerverifiedShow Answer

In a fractional-reserve banking system, a bank

Correct AnswerverifiedShow Answer

Reserves decrease if the Federal Reserve

Correct AnswerverifiedShow Answer

Describe the role of the Federal Deposit Insurance Corporation (FDIC).

Correct AnswerverifiedThe FDIC is the primary mechanism by whi...View AnswerShow Answer

Correct AnswerverifiedShow Answer

If the reserve ratio is 6 percent, then $9,000 of additional reserves can create up to

Correct AnswerverifiedShow Answer

A bank loans Greg's Ice Cream $250,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is

Correct AnswerverifiedShow Answer

Prisoners sometimes determine a single good to be used as money. This good becomes

Correct AnswerverifiedShow Answer

The Federal Deposit Insurance Corporation

Correct AnswerverifiedShow Answer

If the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Correct AnswerverifiedShow Answer

How does the Fed Open Market Committee increase the money supply?

Correct AnswerverifiedShow Answer

Which of the following is not a central bank?

Correct AnswerverifiedShow Answer

Banks can hold deposits at the Federal Reserve. Balances in these accounts can be used by banks to meet their reserve requirements, but the Fed pays no interest on these deposits.

Correct AnswerverifiedShow Answer

Table 29-6. -Refer to Table 29-6. From the table it follows that the Bank of Pleasantville operates in a

Correct AnswerverifiedShow Answer

Which of the following statements is correct? In the special case of the 100-percent reserve banking the money multiplier is

Correct AnswerverifiedShow Answer

The agency responsible for regulating the money supply in the United States is

Correct AnswerverifiedShow Answer

When conducting an open-market purchase, the Fed

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Under a fractional-reserve banking system, the money supply cannot change without any action from the Federal Reserve.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The FDIC is the primary mechanism by whi...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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