Question 1

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Accepted Answer

Commodity money has "intrinsic value," o...

Question 2

If people decide to hold more currency relative to deposits, the money supply

Accepted Answer

A)  falls. The larger the reserve ratio is, the more the money supply falls.
B)  falls. The larger the reserve ratio is, the less the money supply falls.
C)  rises. The larger the reserve ratio is, the more the money supply rises.
D)  rises. The larger the reserve ratio is, the less the money supply rises.E) C) and D)
F) A) and B)

Question 3

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)  neitehr a unit of account nor a medium of exchange.E) A) and C)
F) B) and C)

Question 4

Demand deposits are balances in bank accounts that depositors can access by writing a check or using a debit card.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following can the Fed do to change the money supply?

Accepted Answer

A)  change reserves or change the reserve ratio
B)  change reserves but not change the reserve ratio
C)  change the reserve ratio but not change the reserve ratio
D)  neither change reserves nor change the reserve ratioE) None of the above
F) A) and B)

Question 6

What makes the New York Federal Reserve regional bank so important?

Accepted Answer

The president of the New York Federal Re...

Question 7

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 8

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 9

Which tool of monetary policy does the Federal Reserve use most often?

Accepted Answer

A)  term auctions
B)  open-market operations
C)  changes in reserve requirements
D)  changes in the discount rateE) None of the above
F) B) and D)

Question 10

Which of the following best illustrates the medium of exchange function of money?

Accepted Answer

A)  You keep some money hidden in your shoe.
B)  You keep track of the value of your assets in terms of currency.
C)  You pay for your oil change using currency.
D)  None of the above is correct.E) A) and C)
F) B) and D)

Question 11

Consider five individuals with different occupations.   Mary  provides lepal advice  wants kaves shapened  Chark  prows tomatoes  wants Iepal advice  Nathan  styles hair  wants tomatoes  polly  hrews bee  wants kaves shapened  Paud  shapens kaives  wants bee \begin{array} { | l | l | l | } \hline 	ext { Mary } & 	ext { provides lepal advice } & 	ext { wants kaves shapened } \\hline 	ext { Chark } & 	ext { prows tomatoes } & 	ext { wants Iepal advice } \\hline 	ext { Nathan } & 	ext { styles hair } & 	ext { wants tomatoes } \\hline 	ext { polly } & 	ext { hrews bee } & 	ext { wants kaves shapened } \\hline 	ext { Paud } & 	ext { shapens kaives } & 	ext { wants bee } \\hline\end{array} Mary  Chark  Nathan  polly  Paud ​ provides lepal advice  prows tomatoes  styles hair  hrews bee  shapens kaives ​ wants kaves shapened  wants Iepal advice  wants tomatoes  wants kaves shapened  wants bee ​​  Which of the following pairs of individuals has a double coincidence of wants?

Accepted Answer

A)  Mary and Clark
B)  Clark and Nathan
C)  Nathan and Polly
D)  Polly and Paul E) B) and D)
F) A) and C)

Question 12

If the reserve ratio is 10 percent, banks do not hold excess reserves, people hold only deposits and no currency, then when the Fed sells $10 million worth of bonds to the public, bank reserves

Accepted Answer

A)  increase by $1 million and the money supply eventually increases by $10 million.
B)  increase by $10 million and the money supply eventually increases by $100 million.
C)  decrease by $1 million and the money supply eventually increases by $10 million.
D)  decrease by $10 million and the money supply eventually decreases by $100 million.E) A) and B)
F) A) and C)

Question 13

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

Accepted Answer

The Board of Governors runs the Federal ...

Question 14

Demand deposits are a type of

Accepted Answer

A)  checking account.
B)  time deposit.
C)  money market mutual fund.
D)  savings deposit.E) All of the above
F) C) and D)

Question 15

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) B) and D)
F) C) and D)

Question 16

M1 equals currency plus demand deposits plus

Accepted Answer

A)  nothing else.
B)  other checkable deposits.
C)  traveler's checks plus other checkable deposits.
D)  traveler's checks plus other checkable deposits plus savings deposits.E) A) and B)
F) A) and C)

Question 17

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) B) and C)
F) C) and D)

Question 18

The members of the Federal Reserve's Board of Governors

Accepted Answer

A)  are elected to office by the public every fourteen years.
B)  are nominated by the U.S. Senate banking committee and confirmed by the U.S. house of representatives.
C)  are elected by bankers in each Federal Reserve Region.
D)  are appointed by the president of the U.S. and confirmed by the U.S. Senate.E) C) and D)
F) A) and B)

Question 19

Which of the following does the Federal Reserve not do?

Accepted Answer

A)  It controls the supply of money.
B)  It acts as a lender of last resort to banks.
C)  It makes loans to any qualified business that requests one.
D)  It tries to ensure the health of the banking system.E) A) and B)
F) All of the above

Question 20

The regional Federal Reserve Banks

Accepted Answer

A)  are not allowed to make loans to banks in their region.
B)  regulate banks in their regions.
C)  have more voting members on the FOMC than does the Board of Governors.
D)  are each headed by a member of the Board of Governors.E) A) and B)
F) A) and C)

Exam 16: The Monetary System

Which of the following can the Fed do to change the money supply?

Correct Answer
verified

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Correct Answer
verified
Commodity money has "intrinsic value," o...
View Answer

Which of the following best illustrates the medium of exchange function of money?

Correct Answer
verified

Demand deposits are balances in bank accounts that depositors can access by writing a check or using a debit card.

Correct Answer
verified

The members of the Federal Reserve's Board of Governors

Correct Answer
verified

Which tool of monetary policy does the Federal Reserve use most often?

Correct Answer
verified

Which of the following does the Federal Reserve not do?

Correct Answer
verified

When the Fed conducts open-market sales,

Correct Answer
verified

If people decide to hold more currency relative to deposits, the money supply

Correct Answer
verified

Demand deposits are a type of

Correct Answer
verified

If the reserve ratio is 10 percent, banks do not hold excess reserves, people hold only deposits and no currency, then when the Fed sells $10 million worth of bonds to the public, bank reserves

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

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

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

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

The regional Federal Reserve Banks

Correct Answer
verified

M1 equals currency plus demand deposits plus

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

Correct Answer
verified

What makes the New York Federal Reserve regional bank so important?

Correct Answer
verified
The president of the New York Federal Re...
View Answer

Exam 16: The Monetary System

Which of the following can the Fed do to change the money supply?

Correct AnswerverifiedShow Answer

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Correct AnswerverifiedCommodity money has "intrinsic value," o...View AnswerShow Answer

Which of the following best illustrates the medium of exchange function of money?

Correct AnswerverifiedShow Answer

Demand deposits are balances in bank accounts that depositors can access by writing a check or using a debit card.

Correct AnswerverifiedShow Answer

The members of the Federal Reserve's Board of Governors

Correct AnswerverifiedShow Answer

Which tool of monetary policy does the Federal Reserve use most often?

Correct AnswerverifiedShow Answer

Which of the following does the Federal Reserve not do?

Correct AnswerverifiedShow Answer

When the Fed conducts open-market sales,

Correct AnswerverifiedShow Answer

If people decide to hold more currency relative to deposits, the money supply

Correct AnswerverifiedShow Answer

Demand deposits are a type of

Correct AnswerverifiedShow Answer

If the reserve ratio is 10 percent, banks do not hold excess reserves, people hold only deposits and no currency, then when the Fed sells $10 million worth of bonds to the public, bank reserves

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

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

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

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

The regional Federal Reserve Banks

Correct AnswerverifiedShow Answer

M1 equals currency plus demand deposits plus

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

Correct AnswerverifiedShow Answer

What makes the New York Federal Reserve regional bank so important?

Correct AnswerverifiedThe president of the New York Federal Re...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified
Commodity money has "intrinsic value," o...
View Answer

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

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The president of the New York Federal Re...
View Answer