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Exam 16: The Monetary System

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Question 191

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If the reserve ratio is 10 percent, $1,000 of additional reserves can create up to

A) $100 of new money.
B) $1,000 of new money.
C) $10,000 of new money.
D) None of the above is correct.

E) None of the above
F) All of the above

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Question 192

Multiple Choice

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

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

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

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Question 193

Multiple Choice

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Which of the following statements is correct?

Given the following information, what are the values of M1 and M2? Small time deposits $1,300 billion Demand deposits and other checkable deposits $600 billion Savings deposits $1,500 billion Money market mutual funds $1,200 billion Traveler's checks $50 billion Large time deposits $1,200 billion Currency $200 billion Miscellaneous categories in M2 $50 billion

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 holding 2% of its deposits as excess reserves. Assume that no banks in the economy want to maintain holdings of excess reserves and that people only hold deposits and no currency. The Fed makes open market purchases of $10,000. The person who sold bonds to the Fed deposits all the funds in Metropolis National Bank. If the bank now loans out all its excess reserves, by how much will the money supply increase?

The series of bank failures in 1907 occurred despite the creation of the Federal Reserve many years earlier.

Which of the following institutions is a central bank?

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

If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the Fed sells $65 million worth of bonds to the public, bank reserves

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

If the Fed increases the reserve ratio from 4 percent to 10 percent, then the money multiplier

The federal funds rate is the interest rate

At any given time, the voting members of the Federal Open Market Committee include

Which of the following items is included in M2?

Consider five high school students working on homework in study hall. $\begin{array} { | l | l | l } \hline \text { Rosie } & \text { hes meth homewak } & \text { wants scieneehomenark } \\\hline \text { Bob } & \text { hes English homewark } & \text { wants historyhomewark } \\\hline \text { piper } & \text { hes meth homewo } & \text { wants scieneehomewark } \\\hline \text { Dewey } & \text { hes scieneehomewak } & \text { wants English homewark } \\\hline \text { Molly } & \text { hes scieneehmewak } & \text { wants meth homewark } \\\hline\end{array}$ Which of the following pairs of students has a double coincidence of wants?

Which of the following increase when the Fed makes open market purchases?

What is meant by the term "lender of last resort?" In what circumstances might the Fed be a lender of last resort?

Economists use the word "money" to refer to

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

When we measure and record economic value, we use money as the