Question 1

A bank has $8,000 in deposits and $6,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is

Accepted Answer

A)   2.5 percent.
B)   33.3 percent.
C)   25 percent.
D)   75 percent.E) B) and D)
F) C) and D)

Question 2

During a bank run, depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits.

Accepted Answer

A)   Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply increase
B)   Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply decrease.
C)   The decision to hold relatively more currency would make the money supply increase. The decision to hold relatively more excess reserves would make the money supply decrease.
D)   The decision to hold relatively more currency would make the money supply increase. The decision to hold relatively more excess reserves would make the money supply decreaseE) None of the above
F) C) and D)

Question 3

If the money multiplier decreased from 20 to 12.5, then

Accepted Answer

A)   the Fed increased the reserve ratio from 5 percent to 8 percent.
B)   the Fed increased the fed funds rate from 5 percent to 8 percent.
C)   the Fed decreased the reserve ratio from 8 percent to 5 percent.
D)   the Fed decreased the fed funds rate from 8 percent to 5 percent.E) B) and D)
F) None of the above

Question 4

The prices of goods at a grocery store are listed in dollars. Which function of money does this illustrate?

Accepted Answer

The answer of The prices of goods at a grocery...

Question 5

Given the following information, what are the values of M1 and M2? Small time deposits $600 billion
Demand deposits and other checkable deposits $400 billion
Savings deposits $800 billion
Money market mutual funds $700 billion
Traveler's checks $30 billion
Large time deposits $400 billion
Currency $250 billion
Miscellaneous categories in M2 $20 billion

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) None of the above

Question 6

Derek decides to forego a major appliance purchase and save the money. He transfers $2,100 from his checking account to his money market mutual fund. As a result of this transfer,

Accepted Answer

A)   both M1 and M2 decrease by $2,100.
B)   M1 increases by $2,100 and M2 increases by $2,100.
C)   M1 decreases by $2,100 and M2 increases by $2,100.
D)   M1 decreases by $2,100 and M2 stays the same.E) C) and D)
F) B) and D)

Question 7

A bank has $30,000 in deposits and has $5,400 in reserves. What is its reserve ratio?

Accepted Answer

The answer of A bank has $30,000 in deposits and...

Question 8

M1 includes savings deposits.

Accepted Answer

A) True 
 B)False

Question 9

The money multiplier is when the reserve ratio is 12.5 percent.

Accepted Answer

The answer of The money multiplier is when the reserve...

Question 10

If a bank uses $500 of excess reserves to make a new loan when the reserve ratio is 8 percent, this action by itself initially makes the money supply

Accepted Answer

A)   and wealth increase by $500.
B)   and wealth decrease by $500.
C)   increase by $500 while wealth does not change.
D)   decrease by $500 while wealth decreases by $500.E) None of the above
F) B) and C)

Question 11

When the federal funds rate is below the target rate, the Fed will bonds.
This action will the money supply.

Accepted Answer

The answer of When the federal funds rate is below...

Question 12

A bank loans Kellie's Print Shop $350,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is

Accepted Answer

A)   an asset for the bank and a liability for Kellie's Print Shop. The loan increases the money supply.
B)   an asset for the bank and a liability for Kellie's Print Shop. The loan does not increase the money supply.
C)   a liability for the bank and an asset for Kellie's Print Shop. The loan increases the money supply.
D)   a liability for the bank and an asset for Kellie's Print Shop. The loan does not increase the money supply.E) C) and D)
F) All of the above

Question 13

The Fed can increase the money supply by conducting open-market

Accepted Answer

A)   sales or by raising the discount rate.
B)   sales or by lowering the discount rate.
C)   purchases or by raising the discount rate.
D)   purchases or by lowering the discount rate.E) A) and B)
F) B) and C)

Question 14

A bank has $500,000 in deposits and $475,000 in loans. It has loaned out all it can. It has a reserve ratio of

Accepted Answer

A)   2.5 percent.
B)   5 percent.
C)   9.5 percent.
D)   25 percent.E) C) and D)
F) B) and C)

Question 15

Which of the following is not included in either M1 or M2?

Accepted Answer

A)   money market deposit accounts
B)   large time deposit
C)   demand deposits
D)   money market mutual fundsE) All of the above
F) A) and C)

Question 16

List the two main functions performed by the Fed?

Accepted Answer

The Fed performs two main func...

Question 17

Credit cards are a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is not correct?

Accepted Answer

A)   The president of the New York Federal Reserve bank is the only Federal Reserve Regional Bank President who gets to vote at every meeting of the Federal Open Market Committee.
B)   The Fed's policy decisions influence the economy's rate of inflation in the short run and the economy's employment and production in the long run.
C)   The Fed's primary monetary policy tool is open­market operations.
D)   All of the above are correct.E) A) and D)
F) All of the above

Question 19

If the reserve ratio is 8 percent, then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

Accepted Answer

A)   $48,000.
B)   $75,000.
C)   $55,200.
D)   $10,800.E) B) and C)
F) A) and D)

Question 20

Which of the following items is included in M2?

Accepted Answer

A)   credit cards
B)   money market mutual funds
C)   corporate bonds
D)   large time depositsE) A) and B)
F) C) and D)

Exam 16: The Monetary System

List the two main functions performed by the Fed?

Correct Answer
verified
The Fed performs two main func...
View Answer

Which of the following is not correct?

Correct Answer
verified

Which of the following items is included in M2?

Correct Answer
verified

If the reserve ratio is 8 percent, then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

Correct Answer
verified

M1 includes savings deposits.

Correct Answer
verified

If the money multiplier decreased from 20 to 12.5, then

Correct Answer
verified

When the federal funds rate is below the target rate, the Fed will bonds. This action will the money supply.

Correct Answer
verified

A bank loans Kellie's Print Shop $350,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is

Correct Answer
verified

Derek decides to forego a major appliance purchase and save the money. He transfers $2,100 from his checking account to his money market mutual fund. As a result of this transfer,

Correct Answer
verified

A bank has $500,000 in deposits and $475,000 in loans. It has loaned out all it can. It has a reserve ratio of

Correct Answer
verified

The prices of goods at a grocery store are listed in dollars. Which function of money does this illustrate?

Correct Answer
verified

The money multiplier is when the reserve ratio is 12.5 percent.

Correct Answer
verified

A bank has $8,000 in deposits and $6,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is

Correct Answer
verified

During a bank run, depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits.

Correct Answer
verified

Credit cards are a medium of exchange.

Correct Answer
verified

If a bank uses $500 of excess reserves to make a new loan when the reserve ratio is 8 percent, this action by itself initially makes the money supply

Correct Answer
verified

Which of the following is not included in either M1 or M2?

Correct Answer
verified

The Fed can increase the money supply by conducting open-market

Correct Answer
verified

Correct Answer
verified

A bank has $30,000 in deposits and has $5,400 in reserves. What is its reserve ratio?

Correct Answer
verified

Exam 16: The Monetary System

List the two main functions performed by the Fed?

Correct AnswerverifiedThe Fed performs two main func...View AnswerShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

Which of the following items is included in M2?

Correct AnswerverifiedShow Answer

If the reserve ratio is 8 percent, then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

Correct AnswerverifiedShow Answer

M1 includes savings deposits.

Correct AnswerverifiedShow Answer

If the money multiplier decreased from 20 to 12.5, then

Correct AnswerverifiedShow Answer

When the federal funds rate is below the target rate, the Fed will bonds. This action will the money supply.

Correct AnswerverifiedShow Answer

A bank loans Kellie's Print Shop $350,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is

Correct AnswerverifiedShow Answer

Derek decides to forego a major appliance purchase and save the money. He transfers $2,100 from his checking account to his money market mutual fund. As a result of this transfer,

Correct AnswerverifiedShow Answer

A bank has $500,000 in deposits and $475,000 in loans. It has loaned out all it can. It has a reserve ratio of

Correct AnswerverifiedShow Answer

The prices of goods at a grocery store are listed in dollars. Which function of money does this illustrate?

Correct AnswerverifiedShow Answer

The money multiplier is when the reserve ratio is 12.5 percent.

Correct AnswerverifiedShow Answer

A bank has $8,000 in deposits and $6,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is

Correct AnswerverifiedShow Answer

During a bank run, depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits.

Correct AnswerverifiedShow Answer

Credit cards are a medium of exchange.

Correct AnswerverifiedShow Answer

If a bank uses $500 of excess reserves to make a new loan when the reserve ratio is 8 percent, this action by itself initially makes the money supply

Correct AnswerverifiedShow Answer

Which of the following is not included in either M1 or M2?

Correct AnswerverifiedShow Answer

The Fed can increase the money supply by conducting open-market

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A bank has $30,000 in deposits and has $5,400 in reserves. What is its reserve ratio?

Correct AnswerverifiedShow Answer

Correct Answer
verified
The Fed performs two main func...
View Answer

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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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