Question 1

The existence of money makes trade easier. How is it that money can also increase the standard of living?

Accepted Answer

The existence of money means the economy...

Question 2

When the Soviet Union began breaking up in the late 1980s, cigarettes began replacing the ruble as the medium of exchange even though the ruble was legal tender. The cigarettes provide an example of commodity money.

Accepted Answer

A) True 
 B)False

Question 3

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) All of the above
F) C) and D)

Question 4

In a system of 100-percent-reserve banking,

Accepted Answer

A)  banks do not accept deposits.
B)  banks do not influence the supply of money.
C)  loans are the only asset item for banks.
D)  All of the above are correct.E) All of the above
F) A) and B)

Question 5

In 1991, the Federal Reserve lowered the reserve requirement from 12 percent to 10 percent. Other things the same this should have

Accepted Answer

A)  increased both the money multiplier and the money supply.
B)  decreased both the money multiplier and the money supply.
C)  increased the money multiplier and decreased the money supply.
D)  decreased the money multiplier and increased the money supply.E) All of the above
F) C) and D)

Question 6

Bank runs

Accepted Answer

A)  will affect neither the money supply nor the money multiplier.
B)  increase the money supply.
C)  can be neither prevented nor mitigated by the Federal Reserve.
D)  are a problem because banks only hold a fraction of deposits as reserves.E) B) and C)
F) A) and D)

Question 7

A bank has a 20 percent reserve requirement, $8,000 in loans, and has loaned out all it can given the reserve requirement.

Accepted Answer

A)  It has $6,400 in deposits.
B)  It has $10,000 in deposits.
C)  It has $9,600 in deposits.
D)  It has $1,600 in deposits.E) C) and D)
F) B) and D)

Question 8

Table 29-5. 
-Refer to Table 29-5. If the bank faces a reserve requirement of 20 percent, then it

Accepted Answer

A)  has $10,000 of excess reserves.
B)  needs $10,000 more reserves to meet its reserve requirements.
C)  needs $20,000 more reserves to meet its reserve requirements.
D)  just meets its reserve requirement.E) A) and C)
F) All of the above

Question 9

If the reserve ratio is 4 percent, then the money multiplier is

Accepted Answer

A)  24.
B)  25.
C)  26.
D)  4.E) C) and D)
F) A) and D)

Question 10

Economists equate money with

Accepted Answer

A)  individual wealth.
B)  income regularly earned.
C)  assets people use regularly to buy goods and services.
D)  individual saving.E) A) and B)
F) A) and C)

Question 11

What does it mean for the Fed to be the "lender of last resort?"

Accepted Answer

When banks can not borrow in the market ...

Question 12

Scenario 29-2.
The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the taz. Aggregate banking statistics show that collectively the banks of Tazi hold 300 million tazes of required reserves, 75 million tazes of excess reserves, have issued 7,500 million tazes of deposits, and hold 225 million tazes of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank.
-Refer to Scenario 29-2. Suppose that the Bank of Tazi changes the reserve requirement to 3 percent. Assuming that the banks still want to hold the same percentage of excess reserves what is the value of the money supply after banks adjust to the change in the reserve requirement?

Accepted Answer

A)  9,375 million tazes
B)  10,000 million tazes
C)  12,500 million tazes
D)  None of the above is correct to the nearest million tazes.E) All of the above
F) B) and D)

Question 13

When the Fed decreases the discount rate, banks will

Accepted Answer

A)  borrow more from the Fed and lend more to the public. The money supply increases.
B)  borrow more from the Fed and lend less to the public. The money supply decreases.
C)  borrow less from the Fed and lend more to the public. The money supply increases.
D)  borrow less from the Fed and lend less to the public. The money supply decreases.E) A) and B)
F) B) and D)

Question 14

Compare the Board of Governors and the Federal Open Market Committee.

Accepted Answer

The Board of Governors runs the Federal ...

Question 15

The use of money allows trade to be roundabout.

Accepted Answer

A) True 
 B)False

Question 16

The banking system currently has $50 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the Fed raises the reserve requirement to 12.5 percent and at the same time sells $10 billion worth of bonds, then by how much does the money supply change?

Accepted Answer

A)  It falls by $20 billion.
B)  It falls by $110 billion.
C)  It falls by $180 billion.
D)  None of the above is correct.E) C) and D)
F) A) and B)

Question 17

The "yardstick" people use to post prices and record debts is called

Accepted Answer

A)  a medium of exchange.
B)  a unit of account.
C)  a store of value.
D)  liquidity.E) C) and D)
F) A) and D)

Question 18

The New York Federal Reserve Bank

Accepted Answer

A)  president always gets to vote at the FOMC meetings.
B)  conducts open market transactions.
C)  is one of 12 regional Federal Reserve Banks.
D)  All of the above are correct.E) A) and D)
F) A) and C)

Question 19

Bank regulators impose capital requirements in order to

Accepted Answer

A)  increase the amount of leverage in the economy.
B)  provide an incentive for banks to hold risky assets.
C)  ensure banks can pay off depositors.
D)  increase the probability of a credit crunch.E) A) and C)
F) B) and C)

Question 20

When the Fed conducts open-market sales,

Accepted Answer

A)  it sells Treasury securities, which increases the money supply.
B)  it sells Treasury securities, which decreases the money supply.
C)  it auctions term loans, which increases the money supply.
D)  it auctions term loans, which decreases the money supply.E) A) and B)
F) A) and C)

Exam 29: The Monetary System

The use of money allows trade to be roundabout.

Correct Answer
verified

When the Fed decreases the discount rate, banks will

Correct Answer
verified

Correct Answer
verified

Economists equate money with

Correct Answer
verified

The existence of money makes trade easier. How is it that money can also increase the standard of living?

Correct Answer
verified
The existence of money means the economy...
View Answer

The New York Federal Reserve Bank

Correct Answer
verified

Under a fractional-reserve banking system, banks

Correct Answer
verified

What does it mean for the Fed to be the "lender of last resort?"

Correct Answer
verified
When banks can not borrow in the market ...
View Answer

In 1991, the Federal Reserve lowered the reserve requirement from 12 percent to 10 percent. Other things the same this should have

Correct Answer
verified

Bank regulators impose capital requirements in order to

Correct Answer
verified

Table 29-5. -Refer to Table 29-5. If the bank faces a reserve requirement of 20 percent, then it

Correct Answer
verified

In a system of 100-percent-reserve banking,

Correct Answer
verified

A bank has a 20 percent reserve requirement, $8,000 in loans, and has loaned out all it can given the reserve requirement.

Correct Answer
verified

If the reserve ratio is 4 percent, then the money multiplier is

Correct Answer
verified

When the Fed conducts open-market sales,

Correct Answer
verified

When the Soviet Union began breaking up in the late 1980s, cigarettes began replacing the ruble as the medium of exchange even though the ruble was legal tender. The cigarettes provide an example of commodity money.

Correct Answer
verified

Bank runs

Correct Answer
verified

Compare the Board of Governors and the Federal Open Market Committee.

Correct Answer
verified
The Board of Governors runs the Federal ...
View Answer

The "yardstick" people use to post prices and record debts is called

Correct Answer
verified

Correct Answer
verified

Exam 29: The Monetary System

The use of money allows trade to be roundabout.

Correct AnswerverifiedShow Answer

When the Fed decreases the discount rate, banks will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Economists equate money with

Correct AnswerverifiedShow Answer

The existence of money makes trade easier. How is it that money can also increase the standard of living?

Correct AnswerverifiedThe existence of money means the economy...View AnswerShow Answer

The New York Federal Reserve Bank

Correct AnswerverifiedShow Answer

Under a fractional-reserve banking system, banks

Correct AnswerverifiedShow Answer

What does it mean for the Fed to be the "lender of last resort?"

Correct AnswerverifiedWhen banks can not borrow in the market ...View AnswerShow Answer

In 1991, the Federal Reserve lowered the reserve requirement from 12 percent to 10 percent. Other things the same this should have

Correct AnswerverifiedShow Answer

Bank regulators impose capital requirements in order to

Correct AnswerverifiedShow Answer

Table 29-5. -Refer to Table 29-5. If the bank faces a reserve requirement of 20 percent, then it

Correct AnswerverifiedShow Answer

In a system of 100-percent-reserve banking,

Correct AnswerverifiedShow Answer

A bank has a 20 percent reserve requirement, $8,000 in loans, and has loaned out all it can given the reserve requirement.

Correct AnswerverifiedShow Answer

If the reserve ratio is 4 percent, then the money multiplier is

Correct AnswerverifiedShow Answer

When the Fed conducts open-market sales,

Correct AnswerverifiedShow Answer

When the Soviet Union began breaking up in the late 1980s, cigarettes began replacing the ruble as the medium of exchange even though the ruble was legal tender. The cigarettes provide an example of commodity money.

Correct AnswerverifiedShow Answer

Bank runs

Correct AnswerverifiedShow Answer

Compare the Board of Governors and the Federal Open Market Committee.

Correct AnswerverifiedThe Board of Governors runs the Federal ...View AnswerShow Answer

The "yardstick" people use to post prices and record debts is called

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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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The existence of money means the economy...
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Correct Answer
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Correct Answer
verified

Correct Answer
verified
When banks can not borrow in the market ...
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The Board of Governors runs the Federal ...
View Answer

Correct Answer
verified

Correct Answer
verified