Question 1

M1 includes

Accepted Answer

A)   currency.
B)   demand deposits.
C)   traveler's checks.
D)   All of the above are correct.E) All of the above
F) A) and B)

Question 2

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

Question 3

If the Federal Reserve increases the interest rate on bank deposits at the Fed,banks will want to hold

Accepted Answer

A)   fewer reserves,so the reserve ratio will fall.
B)   fewer reserves,so the reserve ratio will rise.
C)   more reserves,so the reserve ratio will fall.
D)   more reserves,so the reserve ratio will rise.E) B) and C)
F) All of the above

Question 4

The federal funds rate is the interest rate

Accepted Answer

A)   the Federal Reserves charges for loans it makes to the federal government.
B)   the Federal Reserve charges banks for short-term loans.
C)   banks charge each other for short-term loans of reserves.
D)   on newly issued one-year Treasury bonds.E) B) and C)
F) A) and D)

Question 5

Which two of the Ten Principles of Economics imply that the Fed can profoundly affect the economy?

Accepted Answer

The answer of Which two of the Ten Principles of...

Question 6

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

Question 7

Any item that people can use to transfer purchasing power from the present to the future is called

Accepted Answer

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

Question 8

The reserve requirement is 10%.Lucy deposits $200 into a bank.By how much do excess reserves change?

Accepted Answer

A)   $200
B)   $180
C)   $20
D)   $10E) A) and D)
F) None of the above

Question 9

If an economy used gold as money,its money would be

Accepted Answer

A)   commodity money,but not fiat money.
B)   fiat money,but not commodity money.
C)   both fiat and commodity money.
D)   functioning as a store of value and as a unit of account,but not as a medium of exchange.E) A) and C)
F) B) and C)

Question 10

Federal Reserve governors are given long terms to insulate them from politics.

Accepted Answer

A) True 
 B)False

Question 11

Marc puts prices on surfboards and skateboards at his sporting goods store.He is using money as a unit of account.

Accepted Answer

A) True 
 B)False

Question 12

In the 19th century,when crop failures often led to bank runs,banks would make relatively fewer loans and hold relatively more excess reserves.By itself,these actions by the banks should have

Accepted Answer

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

Question 13

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 14

There is a

Accepted Answer

A)   short-run tradeoff between inflation and unemployment.
B)   short-run tradeoff between an increase in the money supply and inflation.
C)   long-run tradeoff between inflation and unemployment.
D)   long-run tradeoff between an increase in the money supply and inflation.E) C) and D)
F) All of the above

Question 15

If an economy uses silver as money,then that economy's money

Accepted Answer

A)   serves as a store of value but not as a medium of exchange.
B)   serves as a medium of exchange but not as a unit of account.
C)   is commodity money.
D)   has no intrinsic value.E) B) and C)
F) All of the above

Question 16

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 C)
F) B) and C)

Question 17

Table 21-5.
 
-Refer to Table 21-5.The Bank of Pleasantville's reserve ratio is

Accepted Answer

A)   1 percent.
B)   5 percent.
C)   10 percent.
D)   20 percent.E) A) and C)
F) A) and B)

Question 18

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

Question 19

The use of money allows trade to be roundabout.

Accepted Answer

A) True 
 B)False

Question 20

A bank loans Greg's Ice Cream $250,000 to remodel a building near campus to use as a new store.On their respective balance sheets,this loan is

Accepted Answer

A)   a liability for the bank and an asset for Greg's Ice Cream.The loan increases the money supply.
B)   a liability for the bank and an asset for Greg's Ice Cream.The loan does not increase the money supply.
C)   an asset for the bank and a liability for Greg's Ice Cream.The loan increases the money supply.
D)   an asset for the bank and a liability for Greg's Ice Cream.The loan does not increase the money supply.E) C) and D)
F) A) and D)

Exam 21: The Monetary System

Correct Answer
verified

The use of money allows trade to be roundabout.

Correct Answer
verified

If an economy used gold as money,its money would be

Correct Answer
verified

If the Federal Reserve increases the interest rate on bank deposits at the Fed,banks will want to hold

Correct Answer
verified

M1 includes

Correct Answer
verified

Table 21-5. -Refer to Table 21-5.The Bank of Pleasantville's reserve ratio is

Correct Answer
verified

The reserve requirement is 10%.Lucy deposits $200 into a bank.By how much do excess reserves change?

Correct Answer
verified

Marc puts prices on surfboards and skateboards at his sporting goods store.He is using money as a unit of account.

Correct Answer
verified

The measure of the money stock called M1 includes

Correct Answer
verified

If an economy uses silver as money,then that economy's money

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

Any item that people can use to transfer purchasing power from the present to the future is called

Correct Answer
verified

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

Correct Answer
verified

In the 19th century,when crop failures often led to bank runs,banks would make relatively fewer loans and hold relatively more excess reserves.By itself,these actions by the banks should have

Correct Answer
verified

Federal Reserve governors are given long terms to insulate them from politics.

Correct Answer
verified

There is a

Correct Answer
verified

A bank loans Greg's Ice Cream $250,000 to remodel a building near campus to use as a new store.On their respective balance sheets,this loan is

Correct Answer
verified

Which two of the Ten Principles of Economics imply that the Fed can profoundly affect the economy?

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

The federal funds rate is the interest rate

Correct Answer
verified

Exam 21: The Monetary System

Correct AnswerverifiedShow Answer

The use of money allows trade to be roundabout.

Correct AnswerverifiedShow Answer

If an economy used gold as money,its money would be

Correct AnswerverifiedShow Answer

If the Federal Reserve increases the interest rate on bank deposits at the Fed,banks will want to hold

Correct AnswerverifiedShow Answer

M1 includes

Correct AnswerverifiedShow Answer

Table 21-5. -Refer to Table 21-5.The Bank of Pleasantville's reserve ratio is

Correct AnswerverifiedShow Answer

The reserve requirement is 10%.Lucy deposits $200 into a bank.By how much do excess reserves change?

Correct AnswerverifiedShow Answer

Marc puts prices on surfboards and skateboards at his sporting goods store.He is using money as a unit of account.

Correct AnswerverifiedShow Answer

The measure of the money stock called M1 includes

Correct AnswerverifiedShow Answer

If an economy uses silver as money,then that economy's money

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

Any item that people can use to transfer purchasing power from the present to the future is called

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the 19th century,when crop failures often led to bank runs,banks would make relatively fewer loans and hold relatively more excess reserves.By itself,these actions by the banks should have

Correct AnswerverifiedShow Answer

Federal Reserve governors are given long terms to insulate them from politics.

Correct AnswerverifiedShow Answer

There is a

Correct AnswerverifiedShow Answer

A bank loans Greg's Ice Cream $250,000 to remodel a building near campus to use as a new store.On their respective balance sheets,this loan is

Correct AnswerverifiedShow Answer

Which two of the Ten Principles of Economics imply that the Fed can profoundly affect the economy?

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

The federal funds rate is the interest rate

Correct AnswerverifiedShow Answer

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