Question 1

The set of items that serve as media of exchange clearly includes

Accepted Answer

A)   demand deposits.
B)   short-term bonds.
C)   credit cards.
D)   All of the above are correct.E) A) and C)
F) All of the above

Question 2

In a fractional-reserve banking system, a decrease in reserve requirements

Accepted Answer

A)   increases both the money multiplier and the money supply.
B)   decreases both the money multiplier and the money supply.
C)   increases the money multiplier, but decreases the money supply.
D)   decreases the money multiplier, but increases the money supply.E) A) and B)
F) A) and C)

Question 3

If traveler's checks were $1000 higher and saving deposits were $500 higher, M1 would be

Accepted Answer

A)   $500 higher and M2 would be $1,500 higher.
B)   $1,000 higher and M2 would be $1,500 higher.
C)   M2 and M1 would be $1,500 higher.
D)   $1,000 high and M2 would be $500 higher..E) A) and B)
F) A) and C)

Question 4

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150. If customers deposit $50 into the bank, what is the value of the money supply?

Accepted Answer

A)   $50
B)   $100
C)   $150
D)   $200E) None of the above
F) B) and C)

Question 5

Which of the following is included in M2 but not in M1?

Accepted Answer

A)   currency
B)   demand deposits
C)   savings deposits
D)   All of the above are included in both M1 and M2.E) None of the above
F) B) and C)

Question 6

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 D)
F) A) and D)

Question 7

Assume that when $100 of new reserves enter the banking system, the money supply ultimately increases by $625. Assume also that no banks hold excess reserves and that the entire money supply consists of bank deposits. If, at a point in time, reserves for all banks amount to $500, then at that same point in time, loans for all banks amount to $2,625.

Accepted Answer

A) True 
 B)False

Question 8

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. Assume that banks desire to continue holding the same ratio of excess reserves to deposits. What is the reserve requirement and the reserve ratio for Tazian Banks?

Accepted Answer

A)   5 percent, 8 percent
B)   4 percent, 8 percent
C)   4 percent, 5 percent
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 9

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) A) and C)
F) C) and D)

Question 10

The money supply increases when the Fed

Accepted Answer

A)   buys bonds. The increase will be larger, the smaller is the reserve ratio.
B)   buys bonds. The increase will be larger, the larger is the reserve ratio.
C)   sells bonds. The increase will be larger, the smaller is the reserve ratio.
D)   sells bonds. The increase will be larger, the larger is the reserve ratio.E) A) and D)
F) B) and C)

Question 11

The rate at which the Fed lends money to banks is

Accepted Answer

A)   the prime rate.
B)   fixed at 4%.
C)   the federal funds rate.
D)   the discount rate.E) None of the above
F) All of the above

Question 12

Which of the following groups is largely responsible for carrying out the Fed's tasks of regulating banks and ensuring the health of the financial system?

Accepted Answer

A)   FOMC
B)   the Board of Governors
C)   the New York Fed
D)   the regional Federal Reserve BanksE) A) and B)
F) A) and C)

Question 13

If the reserve ratio is 20 percent, how much money can be created from $100 of reserves? Show your work.

Accepted Answer

1/.20) <img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> $1...

Question 14

What is bank insolvancy?

Accepted Answer

Bank insolvancy is when bank c...

Question 15

What is the change in the money supply when the Fed purchases $700 worth of bonds and the required reserve ratio is 14 percent assuming banks hold no excess reserves?

Accepted Answer

The answer of What is the change in the money...

Question 16

Table 29-6.
 
-Refer to Table 29-6. From the table it follows that the Bank of Pleasantville operates in a

Accepted Answer

A)   fractional-reserve banking system, since its reserves are less than its deposits.
B)   fractional-reserve banking system, since its reserves are less than its loans.
C)   100-percent-reserve banking system, since its assets are equal to its liabilities.
D)   100­percent­reserve banking system if the Fed's reserve requirement is 10 percent; otherwise, it operates in a fractional-reserve banking system.E) A) and B)
F) A) and C)

Question 17

What does the Fed auction at the Term-Auction Facility?

Accepted Answer

A)   government bonds of a quantity it sets
B)   government bonds with the quantity determined at the auction
C)   loans of a quantity it sets
D)   loans with the quantity determined at the auctionE) B) and C)
F) A) and D)

Question 18

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) A) and B)
F) A) and C)

Question 19

A central bank's setting or altering)  of the money supply is known as

Accepted Answer

A)   open-market operation.
B)   interest rate policy.
C)   monetary policy.
D)   employment policy.E) A) and B)
F) B) and D)

Question 20

The Fed can influence unemployment in

Accepted Answer

A)   the short run and in the long run.
B)   the short run, but not in the long run.
C)   the long run, but not in the short run.
D)   neither the short nor the long run.E) All of the above
F) B) and C)

Exam 21: The Monetary System

Correct Answer
verified

Which of the following groups is largely responsible for carrying out the Fed's tasks of regulating banks and ensuring the health of the financial system?

Correct Answer
verified

If the reserve ratio is 20 percent, how much money can be created from $100 of reserves? Show your work.

Correct Answer
verified
1/.20) $1...
View Answer

The rate at which the Fed lends money to banks is

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If traveler's checks were $1000 higher and saving deposits were $500 higher, M1 would be

Correct Answer
verified

The set of items that serve as media of exchange clearly includes

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

The money supply increases when the Fed

Correct Answer
verified

What does the Fed auction at the Term-Auction Facility?

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

The Fed can influence unemployment in

Correct Answer
verified

Which of the following is included in M2 but not in M1?

Correct Answer
verified

A central bank's setting or altering) of the money supply is known as

Correct Answer
verified

In a fractional-reserve banking system, a decrease in reserve requirements

Correct Answer
verified

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150. If customers deposit $50 into the bank, what is the value of the money supply?

Correct Answer
verified

What is the change in the money supply when the Fed purchases $700 worth of bonds and the required reserve ratio is 14 percent assuming banks hold no excess reserves?

Correct Answer
verified

What is bank insolvancy?

Correct Answer
verified
Bank insolvancy is when bank c...
View Answer

Correct Answer
verified

Exam 21: The Monetary System

Correct AnswerverifiedShow Answer

Which of the following groups is largely responsible for carrying out the Fed's tasks of regulating banks and ensuring the health of the financial system?

Correct AnswerverifiedShow Answer

If the reserve ratio is 20 percent, how much money can be created from $100 of reserves? Show your work.

Correct Answerverified1/.20) $1...View AnswerShow Answer

The rate at which the Fed lends money to banks is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If traveler's checks were $1000 higher and saving deposits were $500 higher, M1 would be

Correct AnswerverifiedShow Answer

The set of items that serve as media of exchange clearly includes

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

The money supply increases when the Fed

Correct AnswerverifiedShow Answer

What does the Fed auction at the Term-Auction Facility?

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

The Fed can influence unemployment in

Correct AnswerverifiedShow Answer

Which of the following is included in M2 but not in M1?

Correct AnswerverifiedShow Answer

A central bank's setting or altering) of the money supply is known as

Correct AnswerverifiedShow Answer

In a fractional-reserve banking system, a decrease in reserve requirements

Correct AnswerverifiedShow Answer

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150. If customers deposit $50 into the bank, what is the value of the money supply?

Correct AnswerverifiedShow Answer

What is the change in the money supply when the Fed purchases $700 worth of bonds and the required reserve ratio is 14 percent assuming banks hold no excess reserves?

Correct AnswerverifiedShow Answer

What is bank insolvancy?

Correct AnswerverifiedBank insolvancy is when bank c...View AnswerShow Answer

Table 29-6. -Refer to Table 29-6. From the table it follows that the Bank of Pleasantville operates in a

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
1/.20) $1...
View Answer

Correct Answer
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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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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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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Correct Answer
verified
Bank insolvancy is when bank c...
View Answer

Correct Answer
verified