Question 1

If the reserve ratio is 12.5 percent, then $2,000 of additional reserves can create up to

Accepted Answer

A)   $8,000 of new money.
B)   $16,000 of new money.
C)   $32,000 of new money.
D)   None of the above is correct.E) A) and C)
F) A) and B)

Question 2

One surprising thing about the U.S. money stock is that

Accepted Answer

A)   banks hold so much currency relative to the public.
B)   the public holds so much currency relative to banks.
C)   there is so little currency per person.
D)   there is so much currency per person.E) A) and D)
F) C) and D)

Question 3

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) A) and B)
F) None of the above

Question 4

Fiat money

Accepted Answer

A)   is worthless.
B)   has no intrinsic value.
C)   may be used as a medium of exchange, but is not legal tender.
D)   refers to highly liquid assets that do not serve as a medium of exchange.E) B) and D)
F) A) and C)

Question 5

Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the

Accepted Answer

A)   money supply to fall. To reduce the impact of this the Fed could sell Treasury bonds.
B)   money supply to fall. To reduce the impact of this the Fed could buy Treasury bonds.
C)   money supply to rise. To reduce the impact of this the Fed could sell Treasury bonds.
D)   money supply to rise. To reduce the impact of this the Fed could buy Treasury bonds.E) B) and D)
F) A) and B)

Question 6

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) None of the above
F) C) and D)

Question 7

When the Fed conducts open-market purchases,

Accepted Answer

A)   banks buy Treasury securities from Fed, which increases the money supply.
B)   banks buy Treasury securities from the Fed, which decreases the money supply.
C)   it buys Treasury securities, which increases the money supply.
D)   it buys Treasury securities, which decreases the money supply.E) C) and D)
F) A) and B)

Question 8

Are credit cards and debit cards money? What's the difference between credit and debit cards?

Accepted Answer

Neither credit cards nor debit cards are...

Question 9

Which of the following is both a store of value and regularly used as a medium of exchange?

Accepted Answer

A)   cash and stocks
B)   cash but not stocks
C)   stocks but not cash
D)   neither cash nor stocksE) A) and B)
F) B) and C)

Question 10

Which of the following is not correct?

Accepted Answer

A)   The regional Federal Reserve Banks play a role in regulating banks and ensuring the health of the banking system.
B)   The President of the New York Federal Reserve Regional Bank always gets to vote on the decisions made by the Federal Open Market Committee.
C)   U.S. monetary policy is made by the Federal Open Market Committee.
D)   The Federal Open Market Committee meets every 12 weeks.E) A) and B)
F) None of the above

Question 11

The reserve requirement is 4 percent, banks hold no excess reserves and people hold no currency. If the Fed sells $10,000 worth of bonds, what happens to the money supply?

Accepted Answer

A)   it increases by $250,000
B)   it increases by $200,000
C)   it decreases by $200,000
D)   it decreases by $250,000E) B) and D)
F) B) and C)

Question 12

Consider the following traders who meet.  Which, if any, pairs of traders has a double coincidence of wants?

Accepted Answer

A)   Bill with Mike
B)   Time with Amy
C)   Bill with Mike, and Tim with Amy
D)   Bill with Tim, and Mike with AmyE) A) and C)
F) B) and C)

Question 13

The Fed can reduce the federal funds rate by

Accepted Answer

A)   decreasing the money supply. To decrease the money supply it could sell bonds.
B)   decreasing the money supply. To decrease the money supply it could buy bonds.
C)   increasing the money supply. To increase the money supply it could sell bonds.
D)   increasing the money supply. To increase the money supply it could buy bonds.E) None of the above
F) A) and D)

Question 14

If the reserve ratio is 20 percent, then $100 of new reserves can generate

Accepted Answer

A)   $60 of new money in the economy.
B)   $250 of new money in the economy.
C)   $500 of new money in the economy.
D)   $2,000 of new money in the economy.E) A) and B)
F) B) and C)

Question 15

If the reserve ratio is 10 percent, $1,400 of additional reserves can create up to

Accepted Answer

A)   $140 of new money.
B)   $14,000 of new money.
C)   $140,000 of new money.
D)   None of the above is correct.E) C) and D)
F) None of the above

Question 16

The series of bank failures in 1907 occurred despite the creation of the Federal Reserve many years earlier.

Accepted Answer

A) True 
 B)False

Question 17

Table 29-2.
The information in the table pertains to an imaginary economy.
 
-Refer to Table 29-2. What is the M2 money supply?

Accepted Answer

A)   $1,300 billion
B)   $580 billion
C)   $880 billion
D)   $1,000 billionE) A) and B)
F) A) and C)

Question 18

If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the Fed sells $25.5 million worth of bonds to the public, bank reserves

Accepted Answer

A)   increase by $25.5 million and the money supply eventually increases by $382.5 million.
B)   increase by $25.5 million and the money supply eventually increases by $170 million.
C)   decrease by $25.5 million and the money supply eventually decreases by $382.5 million.
D)   decrease by $25.5 million and the money supply eventually decreases by $170 million.E) C) and D)
F) A) and B)

Question 19

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

Question 20

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...

Exam 16: The Monetary System

The Fed can reduce the federal funds rate by

Correct Answer
verified

If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the Fed sells $25.5 million worth of bonds to the public, bank reserves

Correct Answer
verified

Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the

Correct Answer
verified

Which of the following is both a store of value and regularly used as a medium of exchange?

Correct Answer
verified

If the reserve ratio is 12.5 percent, then $2,000 of additional reserves can create up to

Correct Answer
verified

The series of bank failures in 1907 occurred despite the creation of the Federal Reserve many years earlier.

Correct Answer
verified

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

Correct Answer
verified

One surprising thing about the U.S. money stock is that

Correct Answer
verified

Which of the following is not correct?

Correct Answer
verified

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

Correct Answer
verified

Are credit cards and debit cards money? What's the difference between credit and debit cards?

Correct Answer
verified
Neither credit cards nor debit cards are...
View Answer

When the Fed conducts open-market purchases,

Correct Answer
verified

Table 29-2. The information in the table pertains to an imaginary economy. -Refer to Table 29-2. What is the M2 money supply?

Correct Answer
verified

If the reserve ratio is 20 percent, then $100 of new reserves can generate

Correct Answer
verified

If the reserve ratio is 10 percent, $1,400 of additional reserves can create up to

Correct Answer
verified

The reserve requirement is 4 percent, banks hold no excess reserves and people hold no currency. If the Fed sells $10,000 worth of bonds, what happens to the money supply?

Correct Answer
verified

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

Consider the following traders who meet. Which, if any, pairs of traders has a double coincidence of wants?

Correct Answer
verified

Fiat money

Correct Answer
verified

Exam 16: The Monetary System

The Fed can reduce the federal funds rate by

Correct AnswerverifiedShow Answer

If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the Fed sells $25.5 million worth of bonds to the public, bank reserves

Correct AnswerverifiedShow Answer

Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the

Correct AnswerverifiedShow Answer

Which of the following is both a store of value and regularly used as a medium of exchange?

Correct AnswerverifiedShow Answer

If the reserve ratio is 12.5 percent, then $2,000 of additional reserves can create up to

Correct AnswerverifiedShow Answer

The series of bank failures in 1907 occurred despite the creation of the Federal Reserve many years earlier.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

One surprising thing about the U.S. money stock is that

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Are credit cards and debit cards money? What's the difference between credit and debit cards?

Correct AnswerverifiedNeither credit cards nor debit cards are...View AnswerShow Answer

When the Fed conducts open-market purchases,

Correct AnswerverifiedShow Answer

Table 29-2. The information in the table pertains to an imaginary economy. -Refer to Table 29-2. What is the M2 money supply?

Correct AnswerverifiedShow Answer

If the reserve ratio is 20 percent, then $100 of new reserves can generate

Correct AnswerverifiedShow Answer

If the reserve ratio is 10 percent, $1,400 of additional reserves can create up to

Correct AnswerverifiedShow Answer

The reserve requirement is 4 percent, banks hold no excess reserves and people hold no currency. If the Fed sells $10,000 worth of bonds, what happens to the money supply?

Correct AnswerverifiedShow 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

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

Consider the following traders who meet. Which, if any, pairs of traders has a double coincidence of wants?

Correct AnswerverifiedShow Answer

Fiat money

Correct AnswerverifiedShow Answer

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Neither credit cards nor debit cards are...
View 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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