Question 1

Credit card limits are included in

Accepted Answer

A)   M1 but not M2.
B)   M2 but not M1.
C)   M1 and M2.
D)   neither M1 nor M2.E) B) and D)
F) A) and D)

Question 2

If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 15 percent receives a deposit of $600, it has a

Accepted Answer

A)   $600 increase in excess reserves and no increase in required reserves.
B)   $600 increase in required reserves and no increase in excess reserves.
C)   $510 increase in excess reserves and a $90 increase in required reserves.
D)   $90 increase in excess reserves and a $510 increase in required reserves.E) A) and B)
F) A) and C)

Question 3

What is meant by the term "lender of last resort?" In what circumstances might the Fed be a lender of last resort?

Accepted Answer

A "lender of last resort" is a lender to...

Question 4

Which of the three functions of money are commonly met by each of the following assets in the U.S. economy?
a. paper dollar
b. precious metals
c. collectibles such as baseball cards, stamps, and antiques

Accepted Answer

a. medium of exchang...

Question 5

Gary's wealth is $1 million. Economists would say that Gary has $1 million worth of money.

Accepted Answer

A) True 
 B)False

Question 6

All U.S. paper dollars read "This note is legal tender for all debts, public and private." This statement represents which characteristic of US currency?

Accepted Answer

A)   The U.S. operates under the gold standard.
B)   U.S. paper money is commodity money.
C)   U.S. paper money is fiat money.
D)   U.S. paper money is a convenient store of wealth.E) A) and B)
F) A) and C)

Question 7

Which type of money has intrinsic value?

Accepted Answer

A)   commodity money
B)   fiat money
C)   both commodity money and fiat money
D)   neither commodity money nor fiat moneyE) B) and D)
F) All of the above

Question 8

Treasury Bonds are

Accepted Answer

A)   both a store of value and a medium of exchange.
B)   a store of value, but not a medium of exchange
C)   a medium of exchange, but not a store of value.
D)   neither a store of value nor a medium of exchange.E) A) and B)
F) A) and C)

Question 9

If $300 of new reserves generates $800 of new money in the economy, then the reserve ratio is

Accepted Answer

A)   2.7 percent.
B)   12.5 percent.
C)   37.5 percent.
D)   40 percent.E) All of the above
F) None of the above

Question 10

Suppose banks decide to hold fewer 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) None of the above
F) A) and D)

Question 11

Table 29-6.
 
-Refer to Table 29-6. If the Fed's reserve requirement is 5 percent, then what quantity of excess reserves does the Bank of Pleasantville now hold?

Accepted Answer

A)   $500
B)   $250
C)   $2,000
D)   $3,600E) B) and C)
F) A) and D)

Question 12

Which of the following is included in both M1 and M2?

Accepted Answer

A)   currency
B)   demand deposits
C)   other checkable deposits
D)   All of the above are correct.E) A) and D)
F) A) and C)

Question 13

If the money multiplier is 3 and the Fed wants to increase the money supply by $900,000, it could

Accepted Answer

A)   buy $300,000 worth of bonds.
B)   buy $225,000 worth of bonds.
C)   sell $300,000 worth of bonds.
D)   sell $225,000 worth of bonds.E) C) and D)
F) A) and D)

Question 14

In recent years the Federal Open Market Committee has focused on a target for

Accepted Answer

A)   M1 growth.
B)   the federal funds rate.
C)   the number of Treasury Securities issued by the federal government.
D)   total reserves of banks.E) B) and D)
F) C) and D)

Question 15

To decrease the money supply, the Fed can

Accepted Answer

A)   buy government bonds or increase the discount rate.
B)   buy government bonds or decrease the discount rate.
C)   sell government bonds or increase the discount rate.
D)   sell government bonds or decrease the discount rate.E) B) and D)
F) A) and B)

Question 16

Which of the following statements is correct? In the special case of the 100-percent reserve banking the money multiplier is

Accepted Answer

A)   0 and banks create money.
B)   0 and banks do not create money.
C)   1 and banks create money
D)   1 and banks do not create money.E) A) and B)
F) A) and C)

Question 17

When the Fed conducts open-market purchases,

Accepted Answer

A)   it buys Treasury securities, which increases the money supply.
B)   it buys Treasury securities, which decreases the money supply.
C)   it borrows money from member banks, which increases the money supply.
D)   it lends money to member banks, which decreases the money supply.E) C) and D)
F) B) and D)

Exam 16: The Monetary System

Table 29-6. -Refer to Table 29-6. If the Fed's reserve requirement is 5 percent, then what quantity of excess reserves does the Bank of Pleasantville now hold?

Correct Answer
verified

When the Fed conducts open-market purchases,

Correct Answer
verified

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

Correct Answer
verified

To decrease the money supply, the Fed can

Correct Answer
verified

What is meant by the term "lender of last resort?" In what circumstances might the Fed be a lender of last resort?

Correct Answer
verified
A "lender of last resort" is a lender to...
View Answer

All U.S. paper dollars read "This note is legal tender for all debts, public and private." This statement represents which characteristic of US currency?

Correct Answer
verified

In recent years the Federal Open Market Committee has focused on a target for

Correct Answer
verified

If the money multiplier is 3 and the Fed wants to increase the money supply by $900,000, it could

Correct Answer
verified

Which of the following is included in both M1 and M2?

Correct Answer
verified

Which type of money has intrinsic value?

Correct Answer
verified

Which of the three functions of money are commonly met by each of the following assets in the U.S. economy? a. paper dollar b. precious metals c. collectibles such as baseball cards, stamps, and antiques

Correct Answer
verified
a. medium of exchang...
View Answer

If $300 of new reserves generates $800 of new money in the economy, then the reserve ratio is

Correct Answer
verified

Gary's wealth is $1 million. Economists would say that Gary has $1 million worth of money.

Correct Answer
verified

Treasury Bonds are

Correct Answer
verified

Which of the following statements is correct? In the special case of the 100-percent reserve banking the money multiplier is

Correct Answer
verified

Credit card limits are included in

Correct Answer
verified

If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 15 percent receives a deposit of $600, it has a

Correct Answer
verified

Exam 16: The Monetary System

Table 29-6. -Refer to Table 29-6. If the Fed's reserve requirement is 5 percent, then what quantity of excess reserves does the Bank of Pleasantville now hold?

Correct AnswerverifiedShow Answer

When the Fed conducts open-market purchases,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

To decrease the money supply, the Fed can

Correct AnswerverifiedShow Answer

What is meant by the term "lender of last resort?" In what circumstances might the Fed be a lender of last resort?

Correct AnswerverifiedA "lender of last resort" is a lender to...View AnswerShow Answer

All U.S. paper dollars read "This note is legal tender for all debts, public and private." This statement represents which characteristic of US currency?

Correct AnswerverifiedShow Answer

In recent years the Federal Open Market Committee has focused on a target for

Correct AnswerverifiedShow Answer

If the money multiplier is 3 and the Fed wants to increase the money supply by $900,000, it could

Correct AnswerverifiedShow Answer

Which of the following is included in both M1 and M2?

Correct AnswerverifiedShow Answer

Which type of money has intrinsic value?

Correct AnswerverifiedShow Answer

Which of the three functions of money are commonly met by each of the following assets in the U.S. economy? a. paper dollar b. precious metals c. collectibles such as baseball cards, stamps, and antiques

Correct Answerverifieda. medium of exchang...View AnswerShow Answer

If $300 of new reserves generates $800 of new money in the economy, then the reserve ratio is

Correct AnswerverifiedShow Answer

Gary's wealth is $1 million. Economists would say that Gary has $1 million worth of money.

Correct AnswerverifiedShow Answer

Treasury Bonds are

Correct AnswerverifiedShow Answer

Which of the following statements is correct? In the special case of the 100-percent reserve banking the money multiplier is

Correct AnswerverifiedShow Answer

Credit card limits are included in

Correct AnswerverifiedShow Answer

If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 15 percent receives a deposit of $600, it has a

Correct AnswerverifiedShow Answer

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A "lender of last resort" is a lender to...
View Answer

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a. medium of exchang...
View Answer

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