Question 1

In an economy that relies upon barter,

Accepted Answer

A)   trade does not require a double coincidence of wants.
B)   scarce resources are allocated just as easily as they are in economies that do not rely upon barter.
C)   there is no item in the economy that is widely accepted in exchange for goods and services.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 2

The manager of the bank where you work tells you that the bank has $300 million in deposits and $255 million dollars in loans. If the reserve requirement is 8.5 percent, how much is the bank holding in excess reserves?

Accepted Answer

A)   $15 million
B)   $19.5 million
C)   $25.5 million
D)   $0 millionE) B) and C)
F) A) and B)

Question 3

If the federal funds rate were below 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 C)
F) C) and D)

Question 4

An increase in the money supply might indicate that the Fed had

Accepted Answer

A)   purchased bonds to increase banks reserves.
B)   purchased bonds to decrease banks reserves.
C)   sold bonds to increase banks reserves.
D)   sold bonds to decrease banks reserves.E) None of the above
F) B) and C)

Question 5

If the public decides to hold more currency and fewer deposits in banks, bank reserves

Accepted Answer

A)   decrease and the money supply eventually decreases.
B)   decrease but the money supply does not change.
C)   increase and the money supply eventually increases.
D)   increase but the money supply does not change.E) B) and C)
F) A) and C)

Question 6

Consider four survivors on an island.  Which of the following pairs of survivors has a double-coincidence of wants?

Accepted Answer

A)   Ron with Alice, and Ron with Lee
B)   Alice with Lee
C)   Ron with Raymond
D)   None of the above are correct.E) C) and D)
F) A) and B)

Question 7

Which of the following is a function of money?

Accepted Answer

A)   a unit of account
B)   a store of value
C)   medium of exchange
D)   All of the above are correct.E) A) and B)
F) C) and D)

Question 8

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 purchases 25 million dias of Namdian Treasury Bonds from banks. 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)   200 million dias
B)   150 million dias
C)   100 million dias
D)   None of the above is correct.E) B) and D)
F) All of the above

Question 9

A bank's assets equal its liabilities under

Accepted Answer

A)   both 100-percent-reserve banking and fractional-reserve banking.
B)   100-percent-reserve banking but not under fractional-reserve banking.
C)   fractional-reserve banking but not under 100-percent-reserve banking.
D)   neither 100-percent-reserve banking nor fractional-reserve banking.E) A) and D)
F) None of the above

Question 10

Which of the following is correct?

Accepted Answer

A)   The Fed can control the money supply precisely.
B)   The amount of money in the economy does not depend on the behavior of depositors.
C)   The amount of money in the economy depends in part on the behavior of banks.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 11

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 12

Table 29-1.
The information in the table pertains to an imaginary economy.
 
-Refer to Table 29-1. What is the value of M1 in billions of dollars?

Accepted Answer

A)   $1,915 billion
B)   $1,900 billion
C)   $2,665 billion
D)   $2,825 billionE) B) and C)
F) B) and D)

Question 13

Savings 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) None of the above
F) A) and B)

Question 14

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) A) and C)

Question 15

You use U.S. currency to pay the owner of a restaurant for a delicious meal. The currency

Accepted Answer

A)   has no intrinsic value. The exchange is an example of barter.
B)   has no intrinsic value. The exchange is not an example of barter
C)   has intrinsic value. The exchange is not an example of barter.
D)   has intrinsic value. The exchange is not an example of barterE) None of the above
F) B) and C)

Question 16

The measure of the money stock called M1 includes

Accepted Answer

A)   wealth held by people in their checking accounts.
B)   wealth held by people in their savings accounts.
C)   wealth held by people in money market mutual funds.
D)   everything that is included in M2 plus some additional items.E) All of the above
F) B) and C)

Question 17

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

Accepted Answer

The discount rate represents the cost of...

Question 18

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

Accepted Answer

A) True 
 B)False

Question 19

In the months of November and December, people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays. As a result, other things the same, the money supply increases.

Accepted Answer

A) True 
 B)False

Question 20

Under a fractional-reserve banking system, banks

Accepted Answer

A)   hold more reserves than deposits.
B)   generally lend out a majority of the funds deposited.
C)   cause the money supply to fall by lending out reserves.
D)   All of the above are correct.E) B) and C)
F) C) and D)

Exam 16: The Monetary System

In the months of November and December, people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays. As a result, other things the same, the money supply increases.

Correct Answer
verified

A bank's assets equal its liabilities under

Correct Answer
verified

Consider four survivors on an island. Which of the following pairs of survivors has a double-coincidence of wants?

Correct Answer
verified

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

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

If the public decides to hold more currency and fewer deposits in banks, bank reserves

Correct Answer
verified

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

Correct Answer
verified
The discount rate represents the cost of...
View Answer

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

Correct Answer
verified

Table 29-1. The information in the table pertains to an imaginary economy. -Refer to Table 29-1. What is the value of M1 in billions of dollars?

Correct Answer
verified

You use U.S. currency to pay the owner of a restaurant for a delicious meal. The currency

Correct Answer
verified

The manager of the bank where you work tells you that the bank has $300 million in deposits and $255 million dollars in loans. If the reserve requirement is 8.5 percent, how much is the bank holding in excess reserves?

Correct Answer
verified

Savings deposits are included in

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

Correct Answer
verified

An increase in the money supply might indicate that the Fed had

Correct Answer
verified

Which of the following is a function of money?

Correct Answer
verified

Under a fractional-reserve banking system, banks

Correct Answer
verified

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

Correct Answer
verified

The measure of the money stock called M1 includes

Correct Answer
verified

In an economy that relies upon barter,

Correct Answer
verified

Exam 16: The Monetary System

In the months of November and December, people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays. As a result, other things the same, the money supply increases.

Correct AnswerverifiedShow Answer

A bank's assets equal its liabilities under

Correct AnswerverifiedShow Answer

Consider four survivors on an island. Which of the following pairs of survivors has a double-coincidence of wants?

Correct AnswerverifiedShow Answer

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

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

If the public decides to hold more currency and fewer deposits in banks, bank reserves

Correct AnswerverifiedShow Answer

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

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

Correct AnswerverifiedShow Answer

Table 29-1. The information in the table pertains to an imaginary economy. -Refer to Table 29-1. What is the value of M1 in billions of dollars?

Correct AnswerverifiedShow Answer

You use U.S. currency to pay the owner of a restaurant for a delicious meal. The currency

Correct AnswerverifiedShow Answer

The manager of the bank where you work tells you that the bank has $300 million in deposits and $255 million dollars in loans. If the reserve requirement is 8.5 percent, how much is the bank holding in excess reserves?

Correct AnswerverifiedShow Answer

Savings deposits are included in

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An increase in the money supply might indicate that the Fed had

Correct AnswerverifiedShow Answer

Which of the following is a function of money?

Correct AnswerverifiedShow Answer

Under a fractional-reserve banking system, banks

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The measure of the money stock called M1 includes

Correct AnswerverifiedShow Answer

In an economy that relies upon barter,

Correct AnswerverifiedShow Answer

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The discount rate represents the cost of...
View Answer

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