Question 1

The Federal Deposit Insurance Corporation

Accepted Answer

A)   protects depositors in the event of bank failures.
B)   has become insolvent in recent years due to a large number of bank failures.
C)   is part of the Federal Reserve System.
D)   in practice has seldom been of much use.E) None of the above
F) B) and C)

Question 2

Which of the following is an asset of a bank and a liability for its customers?

Accepted Answer

A)   deposits of its customers and loans to it customers
B)   deposits of its customers but not loans to its customers
C)   loans of its customers but not the deposits of its customers
D)   neither the deposits of its customers nor the loans to its customersE) B) and D)
F) None of the above

Question 3

If the Fed buys bonds in the open market,the money supply decreases.

Accepted Answer

A) True 
 B)False

Question 4

Economists use the word "money" to refer to

Accepted Answer

A)   income generated by the production of goods and services.
B)   those assets regularly used to buy goods and services.
C)   fianncial assets such as stocks and bonds.
D)   any type of wealth.E) A) and B)
F) B) and C)

Question 5

Money is the most liquid asset available because

Accepted Answer

A)   it is a store of value.
B)   it is a medium of exchange.
C)   it is a unit of account.
D)   it has intrinsic value.E) C) and D)
F) B) and D)

Question 6

If the Fed decreases reserve requirements,the money supply will increase.

Accepted Answer

A) True 
 B)False

Question 7

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

Question 8

The banking system currently has $10 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 20 percent and at the same time buys $1 billion worth of bonds,then by how much does the money supply change?

Accepted Answer

A)   It falls by $45 billion.
B)   It falls by $52 billion.
C)   It falls by $55 billion.
D)   None of the above is correct.E) None of the above
F) B) and D)

Question 9

The legal tender requirement means that

Accepted Answer

A)   people are more likely to accept the dollar as a medium of exchange.
B)   the government must hold enough gold to redeem all currency.
C)   people may not make trades with anything else.
D)   All of the above are correct.E) A) and B)
F) All of the above

Question 10

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) All of the above
F) A) and B)

Question 11

All Fed purchases and sales of

Accepted Answer

A)   corporate stocks and bonds are conducted at the New York Fed's trading desk.
B)   government bonds are conducted at the New York Fed's trading desk.
C)   real estate and other real assets are conducted by the Federal Open Market Committee.
D)   All of the above are correct.E) C) and D)
F) B) and D)

Question 12

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

Accepted Answer

A)   falls.The larger the reserve ratio is,the more the money supply falls.
B)   falls.The larger the reserve ratio is,the less the money supply falls.
C)   rises.The larger the reserve ratio is,the more the money supply rises.
D)   rises.The larger the reserve ratio is,the less the money supply rises.E) All of the above
F) A) and C)

Question 13

In a system of 100-percent-reserve banking,the purpose of a bank is to

Accepted Answer

A)   make loans to households.
B)   influence the money supply.
C)   give depositors a safe place to keep their money.
D)   buy and sell gold.E) B) and C)
F) A) and D)

Question 14

If you deposit $100 of currency into a demand deposit at a bank,this action by itself

Accepted Answer

A)   does not change the money supply.
B)   increases the money supply.
C)   decreases the money supply.
D)   has an indeterminate effect on the money supply.E) A) and B)
F) None of the above

Question 15

The Federal Reserve

Accepted Answer

A)   was created in 1836.
B)   serves as a lender of last resort.
C)   was created to facilitate the federal government's collection of taxes as well as its expenditures.
D)   All of the above are correct.E) A) and B)
F) B) and C)

Question 16

Which of the following statements regarding the Federal Open Market Committee is correct?

Accepted Answer

A)   Only the five voting regional Fed presidents attend the meetings.
B)   All regional Fed presidents attend and vote at the meetings.
C)   All regional Fed presidents attend the meetings,but only five get to vote.
D)   Regional Fed presidents may neither attend nor vote the meetings.E) A) and B)
F) All of the above

Question 17

The money multiplier equals

Accepted Answer

A)   1/R,where R represents the quantity of reserves in the economy.
B)   1/R,where R represents the reserve ratio for all banks in the economy.
C)   1/(1+R) ,where R represents the quantity of reserves in the economy.
D)   1/(1+R) ,where R represents the reserve ratio for all banks in the economy.E) B) and C)
F) C) and D)

Question 18

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

Accepted Answer

A) True 
 B)False

Question 19

In Ugoland,the money supply is $8 million and reserves are $1 million.Assuming that people hold only deposits and no currency,and that banks hold no excess reserves,then the reserve requirement is

Accepted Answer

A)   14 percent.
B)   12.5 percent.
C)   8 percent.
D)   None of the above is correct.E) A) and D)
F) A) and B)

Question 20

Which of the following entities actually executes open-market operations?

Accepted Answer

A)   the Board of Governors
B)   the New York Federal Reserve Bank
C)   the Federal Open Market Committee
D)   the Open Market Committees of the regional Federal Reserve BanksE) A) and C)
F) A) and B)

Exam 21: The Monetary System

In Ugoland,the money supply is $8 million and reserves are $1 million.Assuming that people hold only deposits and no currency,and that banks hold no excess reserves,then the reserve requirement is

Correct Answer
verified

Economists use the word "money" to refer to

Correct Answer
verified

All Fed purchases and sales of

Correct Answer
verified

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

Correct Answer
verified

Which of the following is an asset of a bank and a liability for its customers?

Correct Answer
verified

The Federal Reserve

Correct Answer
verified

The Federal Deposit Insurance Corporation

Correct Answer
verified

In a system of 100-percent-reserve banking,the purpose of a bank is to

Correct Answer
verified

The Fed can influence unemployment in

Correct Answer
verified

If the Fed decreases reserve requirements,the money supply will increase.

Correct Answer
verified

Money is the most liquid asset available because

Correct Answer
verified

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

Correct Answer
verified

The money multiplier equals

Correct Answer
verified

Correct Answer
verified

Which of the following statements regarding the Federal Open Market Committee is correct?

Correct Answer
verified

The legal tender requirement means that

Correct Answer
verified

If the Fed buys bonds in the open market,the money supply decreases.

Correct Answer
verified

Which of the following entities actually executes open-market operations?

Correct Answer
verified

If you deposit $100 of currency into a demand deposit at a bank,this action by itself

Correct Answer
verified

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

Correct Answer
verified

Exam 21: The Monetary System

In Ugoland,the money supply is $8 million and reserves are $1 million.Assuming that people hold only deposits and no currency,and that banks hold no excess reserves,then the reserve requirement is

Correct AnswerverifiedShow Answer

Economists use the word "money" to refer to

Correct AnswerverifiedShow Answer

All Fed purchases and sales of

Correct AnswerverifiedShow Answer

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

Correct AnswerverifiedShow Answer

Which of the following is an asset of a bank and a liability for its customers?

Correct AnswerverifiedShow Answer

The Federal Reserve

Correct AnswerverifiedShow Answer

The Federal Deposit Insurance Corporation

Correct AnswerverifiedShow Answer

In a system of 100-percent-reserve banking,the purpose of a bank is to

Correct AnswerverifiedShow Answer

The Fed can influence unemployment in

Correct AnswerverifiedShow Answer

If the Fed decreases reserve requirements,the money supply will increase.

Correct AnswerverifiedShow Answer

Money is the most liquid asset available because

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The money multiplier equals

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements regarding the Federal Open Market Committee is correct?

Correct AnswerverifiedShow Answer

The legal tender requirement means that

Correct AnswerverifiedShow Answer

If the Fed buys bonds in the open market,the money supply decreases.

Correct AnswerverifiedShow Answer

Which of the following entities actually executes open-market operations?

Correct AnswerverifiedShow Answer

If you deposit $100 of currency into a demand deposit at a bank,this action by itself

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified