Question 1

Suppose a country the total holdings of banks were as follows:
required reserves = $45 million
excess reserves = $15 million
deposits = $750 million
loans = $600 million
Treasury bonds = $90 million
Show that the balance sheet balances if these are the only assets and liabilities.
Assuming that people hold no currency,what happens to each of these values if the central bank changes the reserve requirement ratio to 3%,banks still want to hold the same percentage of excess reserves,and banks don't change their holdings of Treasury bonds? How much does the money supply change by?

Accepted Answer

The only liability is deposits which equ...

Question 2

In a fractional reserve banking system with no excess reserves and no currency holdings,if the central bank buys $100 million of bonds,

Accepted Answer

A)  reserves and the money supply increase by less than $100 million.
B)  reserves increase by $100 million and the money supply increases by $100 million.
C)  reserves increase by $100 million and the money supply increases by more than $100 million.
D)  both reserves and the money supply increase by more than $100 million.E) B) and C)
F) All of the above

Question 3

In the months of November and December,people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays.As a result,other things the same the money supply increases.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following has a four-year term?

Accepted Answer

A)  the members of the Board of Governors
B)  the Chair of the Board of Governors
C)  the members of the FOMC
D)  All of the above are correct.E) C) and D)
F) B) and D)

Question 5

Suppose a bank has a 10 percent reserve requirement,$4,000 in deposits,and has loaned out all it can given the reserve requirement.

Accepted Answer

A)  It has $40 in reserves and $3,960 in loans.
B)  It has $400 in reserves and $3,600 in loans.
C)  It has $444 in reserves and $3,556 in loans.
D)  None of the above is correct.E) None of the above
F) B) and C)

Question 6

Banks could not change the size of the money supply if they were required to hold all deposits in reserve.

Accepted Answer

A) True 
 B)False

Question 7

Tazian Banking Statistics
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 currency is on deposit at the bank.
-Refer to Tazian Banking Statistics.Suppose that the Bank of Tazi purchased 50 million Tazes of Tazian Treasury Bonds from the banks.Suppose also that both the required reserve ratio and the percentage of deposits held as excess reserves stay the same.By how much does the money supply change?

Accepted Answer

A)  625 million Tazes
B)  1,000 million Tazes
C)  1,250 million Tazes
D)  None of the above is correct.E) B) and D)
F) B) and C)

Question 8

The reserve requirement ratio is 10%.Which of the following pair of changes would both allow a bank to lend out an additional $10,000?

Accepted Answer

A)  the Fed buys a $10,000 bond from the bank or someone deposits $10,000 in the bank
B)  the Fed buys a $10,000 bond from the bank or the Fed lends the bank $10,000
C)  the Fed sells a $10,000 bond to the bank or someone deposits $10,000 in the bank
D)  the Fed sells a $10,000 bond to the bank or the Fed lends the bank $10,000E) B) and D)
F) A) and B)

Question 9

Suppose that banks desire to hold no excess reserves the reserve ratio is 5 percent and a bank receives a new deposit of $1,000.This bank

Accepted Answer

A)  will increase its required reserves by $50.
B)  will initially see its total reserves increase by $1,000.
C)  will be able to make a new loan of $950.
D)  All of the above are correct.E) B) and D)
F) B) and C)

Question 10

Which of the following lists two things that both increase the money supply?

Accepted Answer

A)  lower the discount rate, raise the reserve requirement ratio
B)  lower the discount rate, lower the reserve requirement ratio
C)  raise the discount rate, raise the reserve requirement ratio
D)  raise the discount rate, lower the reserve requirement ratioE) None of the above
F) All of the above

Question 11

Credit cards are not a medium of exchange and so are not important for analyzing the monetary system.

Accepted Answer

A) True 
 B)False

Question 12

Suppose that the reserve ratio is 5 percent and that a bank has $1,000 in deposits.Its reserves are

Accepted Answer

A)  $5.
B)  $50.
C)  $95.
D)  $950.E) C) and D)
F) A) and C)

Question 13

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 14

Other things the same,if reserve requirements are increased,the reserve ratio

Accepted Answer

A)  increases, the money multiplier increases, and the money supply increases.
B)  increases, the money multiplier decreases, and the money supply decreases.
C)  decreases, the money multiplier increases, and the money supply increases.
D)  decreases, the money multiplier decreases, and the money supply increases.E) A) and B)
F) None of the above

Question 15

Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control.

Accepted Answer

First,the Fed does not control the amoun...

Question 16

What part of the Fed meets to discuss changes in the economy and determine monetary policy?

Accepted Answer

A)  the Board of Governors
B)  the FOMC
C)  the regional Federal Reserve Bank presidents
D)  the Central Bank Policy Commission.E) A) and B)
F) All of the above

Question 17

If the Fed makes open market purchases of bonds,

Accepted Answer

A)  the money supply increases by more than the amount of bonds purchased.
B)  the money supply increases by less than the amount of bonds purchased.
C)  the money supply decreases by more than the amount of bonds purchased.
D)  the money supply decreases by less than the amount of bonds purchased.E) B) and C)
F) A) and D)

Question 18

The New York Federal Reserve Bank

Accepted Answer

A)  president always gets to vote at the FOMC meetings.
B)  conducts open market transactions.
C)  is located in the traditional financial center of the United States.
D)  All of the above are correct.E) A) and D)
F) B) and C)

Question 19

An increase in the money supply might indicate that the Fed had

Accepted Answer

A)  purchased bonds in an attempt to increase the federal funds rate.
B)  purchased bonds in an attempt to reduce the federal funds rate.
C)  sold bonds in an attempt to increase the federal funds rate.
D)  sold bonds in an attempt to reduce the federal funds rate.E) A) and B)
F) All of the above

Question 20

In a fractional reserve banking system,an increase 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 C)
F) None of the above

Exam 29: The Monetary System

Banks could not change the size of the money supply if they were required to hold all deposits in reserve.

Correct Answer
verified

What part of the Fed meets to discuss changes in the economy and determine monetary policy?

Correct Answer
verified

In the months of November and December,people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays.As a result,other things the same the money supply increases.

Correct Answer
verified

In a fractional reserve banking system,an increase in reserve requirements

Correct Answer
verified

Credit cards are not a medium of exchange and so are not important for analyzing the monetary system.

Correct Answer
verified

Other things the same,if reserve requirements are increased,the reserve ratio

Correct Answer
verified

Suppose that the reserve ratio is 5 percent and that a bank has $1,000 in deposits.Its reserves are

Correct Answer
verified

Suppose that banks desire to hold no excess reserves the reserve ratio is 5 percent and a bank receives a new deposit of $1,000.This bank

Correct Answer
verified

If the Fed makes open market purchases of bonds,

Correct Answer
verified

In a fractional reserve banking system with no excess reserves and no currency holdings,if the central bank buys $100 million of bonds,

Correct Answer
verified

Suppose a bank has a 10 percent reserve requirement,$4,000 in deposits,and has loaned out all it can given the reserve requirement.

Correct Answer
verified

The New York Federal Reserve Bank

Correct Answer
verified

Which of the following has a four-year term?

Correct Answer
verified

Correct Answer
verified

Which of the following lists two things that both increase the money supply?

Correct Answer
verified

Correct Answer
verified
The only liability is deposits which equ...
View Answer

Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control.

Correct Answer
verified
First,the Fed does not control the amoun...
View Answer

An increase in the money supply might indicate that the Fed had

Correct Answer
verified

The reserve requirement ratio is 10%.Which of the following pair of changes would both allow a bank to lend out an additional $10,000?

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

Exam 29: The Monetary System

Banks could not change the size of the money supply if they were required to hold all deposits in reserve.

Correct AnswerverifiedShow Answer

What part of the Fed meets to discuss changes in the economy and determine monetary policy?

Correct AnswerverifiedShow Answer

In the months of November and December,people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays.As a result,other things the same the money supply increases.

Correct AnswerverifiedShow Answer

In a fractional reserve banking system,an increase in reserve requirements

Correct AnswerverifiedShow Answer

Credit cards are not a medium of exchange and so are not important for analyzing the monetary system.

Correct AnswerverifiedShow Answer

Other things the same,if reserve requirements are increased,the reserve ratio

Correct AnswerverifiedShow Answer

Suppose that the reserve ratio is 5 percent and that a bank has $1,000 in deposits.Its reserves are

Correct AnswerverifiedShow Answer

Suppose that banks desire to hold no excess reserves the reserve ratio is 5 percent and a bank receives a new deposit of $1,000.This bank

Correct AnswerverifiedShow Answer

If the Fed makes open market purchases of bonds,

Correct AnswerverifiedShow Answer

In a fractional reserve banking system with no excess reserves and no currency holdings,if the central bank buys $100 million of bonds,

Correct AnswerverifiedShow Answer

Suppose a bank has a 10 percent reserve requirement,$4,000 in deposits,and has loaned out all it can given the reserve requirement.

Correct AnswerverifiedShow Answer

The New York Federal Reserve Bank

Correct AnswerverifiedShow Answer

Which of the following has a four-year term?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following lists two things that both increase the money supply?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe only liability is deposits which equ...View AnswerShow Answer

Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control.

Correct AnswerverifiedFirst,the Fed does not control the amoun...View AnswerShow Answer

An increase in the money supply might indicate that the Fed had

Correct AnswerverifiedShow Answer

The reserve requirement ratio is 10%.Which of the following pair of changes would both allow a bank to lend out an additional $10,000?

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

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
The only liability is deposits which equ...
View Answer

Correct Answer
verified
First,the Fed does not control the amoun...
View Answer

Correct Answer
verified

Correct Answer
verified

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