Question 1

Consider five individuals with different occupations.

Which of the following pairs of individuals has a double coincidence of wants?

Accepted Answer

A)   Mary and Clark
B)   Clark and Nathan
C)   Nathan and Polly
D)   Polly and PaulE) B) and C)
F) All of the above

Question 2

Credit cards are a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 3

If R represents the reserve ratio for all banks in the economy,then the money multiplier is

Accepted Answer

A)   1/(1-R) .
B)   1/R.
C)   1/(1+R) .
D)   (1+R) /R.E) B) and C)
F) None of the above

Question 4

The Federal Reserve does all except which of the following?

Accepted Answer

A)   It controls the supply of money.
B)   It acts as a lender of last resort to banks.
C)   It makes loans to large business firms.
D)   It tries to ensure the health of the banking system.E) A) and B)
F) A) and C)

Question 5

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 $65 million of bonds to the public,bank reserves

Accepted Answer

A)   increase by $65 million and the money supply eventually increases by $266.67 million.
B)   increase by $65 million and the money supply eventually increases by $433.33 million.
C)   decrease by $65 million and the money supply eventually decreases by $266.67 million.
D)   decrease by $65 million and the money supply eventually decreases by $433.33 million.E) All of the above
F) None of the above

Question 6

Imagine that the federal funds rate was below the level the Federal Reserve had targeted.To move the rate back towards it's target the Federal Reserve could

Accepted Answer

A)   buy bonds.This buying would reduce reserves.
B)   buy bonds.This buying would increase reserves.
C)   sell bonds.This selling would reduce reserves.
D)   sell bonds.This selling would increase reserves.E) A) and C)
F) C) and D)

Question 7

In the nation of Feutschland,the money supply is $80,000 and reserves are $18,000.Assuming that people hold only deposits and no currency,and that banks hold no excess reserves,then the reserve requirement is

Accepted Answer

A)   29 percent.
B)   22.5 percent.
C)   16 percent.
D)   None of the above is correct.E) A) and B)
F) B) and D)

Question 8

During the Great Depression in the early 1930s,

Accepted Answer

A)   bank runs closed many banks.
B)   the money supply rose sharply.
C)   the Fed decreased reserve requirements.
D)   both a and b are correct.E) A) and B)
F) A) and C)

Question 9

A debit card is more similar to a credit card than to a check.

Accepted Answer

A) True 
 B)False

Question 10

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

Question 11

When the Federal Reserve decreases the discount rate,the quantity of reserves increases and the money supply increases.

Accepted Answer

A) True 
 B)False

Question 12

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

Question 13

If people decide to hold less currency relative to deposits,the money supply

Accepted Answer

A)   falls.The Fed could lessen the impact of this by buying Treasury bonds.
B)   falls.The Fed could lessen the impact of this by selling Treasury bonds.
C)   rises.The Fed could lessen the impact of this by buying Treasury bonds.
D)   rises.The Fed could lessen the impact of this by selling Treasury bonds.E) A) and B)
F) A) and C)

Question 14

Joe wants to trade eggs for sausage.Lashonda wants to trade sausage for eggs.Joe and Lashonda have a double-coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 15

The agency responsible for regulating the money supply in the United States is

Accepted Answer

A)   the Comptroller of the Currency.
B)   the U.S.Treasury.
C)   the Federal Reserve.
D)   the U.S.Bank.E) None of the above
F) C) and D)

Question 16

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

Question 17

If the reserve ratio for all banks 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) B) and D)
F) B) and C)

Question 18

A bank's assets include

Accepted Answer

A)   both its reserves and the deposits of its customers.
B)   neither its reserves nor the deposits of its customers.
C)   its reserves,but not the deposits of its customers.
D)   the deposits of its customers,but not its reserves.E) C) and D)
F) A) and C)

Question 19

The Fed can increase the price level by conducting open-market

Accepted Answer

A)   sales and raising the discount rate.
B)   sales and lowering the discount rate.
C)   purchases and raising the discount rate.
D)   purchases and lowering the discount rate.E) B) and C)
F) A) and D)

Question 20

An 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) B) and D)
F) All of the above

Exam 29: The Monetary System

A bank's assets include

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 $65 million of bonds to the public,bank reserves

Correct AnswerverifiedShow Answer

If people decide to hold less currency relative to deposits,the money supply

Correct AnswerverifiedShow Answer

In the nation of Feutschland,the money supply is $80,000 and reserves are $18,000.Assuming that people hold only deposits and no currency,and that banks hold no excess reserves,then the reserve requirement is

Correct AnswerverifiedShow Answer

To decrease the money supply,the Fed can

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

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

Correct AnswerverifiedShow Answer

Joe wants to trade eggs for sausage.Lashonda wants to trade sausage for eggs.Joe and Lashonda have a double-coincidence of wants.

Correct AnswerverifiedShow Answer

Imagine that the federal funds rate was below the level the Federal Reserve had targeted.To move the rate back towards it's target the Federal Reserve could

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A debit card is more similar to a credit card than to a check.

Correct AnswerverifiedShow Answer

When the Federal Reserve decreases the discount rate,the quantity of reserves increases and the money supply increases.

Correct AnswerverifiedShow Answer

The Federal Reserve does all except which of the following?

Correct AnswerverifiedShow Answer

During the Great Depression in the early 1930s,

Correct AnswerverifiedShow Answer

The agency responsible for regulating the money supply in the United States is

Correct AnswerverifiedShow Answer

If R represents the reserve ratio for all banks in the economy,then the money multiplier is

Correct AnswerverifiedShow Answer

Credit cards are a medium of exchange.

Correct AnswerverifiedShow Answer

Consider five individuals with different occupations. Which of the following pairs of individuals has a double coincidence of wants?

Correct AnswerverifiedShow Answer

The Fed can increase the price level by conducting open-market

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

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