Question 1

An open-market purchase

Accepted Answer

A)   increases the number of dollars and the number of bonds in the hands of the public.
B)   increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public.
C)   decreases the number of dollars and the number of bonds in the hands of the public.
D)   decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public.E) B) and D)
F) B) and C)

Question 2

If the reserve ratio is 12.5 percent, then $1,000 of additional reserves can create up to

Accepted Answer

A)   $7,000 of new money.
B)   $8,000 of new money.
C)   $11,500 of new money.
D)   $12,500 of new money.E) None of the above
F) C) and D)

Question 3

Table 29-6.
 
-Refer to Table 29-6. The Bank of Pleasantville's reserve ratio is

Accepted Answer

A)   6.4 percent.
B)   16.7 percent.
C)   6.0 percent.
D)   15.7 percent.E) A) and C)
F) B) and D)

Question 4

Dollar bills, rare paintings, and emerald necklaces are all

Accepted Answer

A)   media of exchange.
B)   units of account.
C)   stores of value.
D)   All of the above are correct.E) All of the above
F) A) and B)

Question 5

Which of the following lists is included in what economists call "money"?

Accepted Answer

A)   cash
B)   cash and stocks and bonds
C)   cash and stocks and bonds and real estate
D)   cash and stocks and bonds and real estate and all other assetsE) A) and B)
F) A) and C)

Question 6

The money supply decreases if

Accepted Answer

A)   households decide to hold relatively more currency and relatively fewer deposits and banks decide to hold relatively more excess reserves and make fewer loans.
B)   households decide to hold relatively more currency and relatively fewer deposits and banks decide to hold relatively fewer excess reserves and make more loans.
C)   households decide to hold relatively less currency and relatively more deposits and banks decide to hold relatively more excess reserves and make fewer loans.
D)   households decide to hold relatively less currency and relatively more deposits and banks decide to hold relatively less excess reserves and make more loans.E) A) and C)
F) All of the above

Question 7

During wars the public tends to hold relatively more currency and relatively fewer deposits. This decision makes reserves

Accepted Answer

A)   and the money supply increase.
B)   and the money supply decrease.
C)   increase, but leaves the money supply unchanged.
D)   decrease, but leaves the money supply unchanged.E) B) and C)
F) A) and D)

Question 8

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 amou...

Question 9

The Federal Reserve Board of Governors

Accepted Answer

A)   rotate each four years.
B)   are appointed by the President and confirmed by the Senate.
C)   are elected by popular vote.
D)   hold lifetime appointments.E) C) and D)
F) A) and B)

Question 10

If the reserve requirement is 12 percent and banks desire to hold no excess reserves, when a bank receives a new deposit of $1,000,

Accepted Answer

A)   it must increase its required reserves by more than $150.
B)   its total reserves initially increase by $120.
C)   it will be able to make new loans up to a maximum of $880.
D)   None of the above is correct.E) None of the above
F) C) and D)

Question 11

At one time, people in a certain country had no access to banks; they relied exclusively on currency. Then, a fractional-reserve banking system was created. As a result, the money supply

Accepted Answer

A)   increased. The central bank could have reduced the size of this increase by buying bonds.
B)   increased. The central bank could have reduced the size of this increase by selling bonds.
C)   decreased. The central bank could have reduced the size of this decrease by buying bonds.
D)   decreased. The central bank could have reduced the size of this decrease by selling bonds.E) A) and C)
F) B) and C)

Question 12

Table 29-5.
 
-Refer to Table 29-5. If the bank faces a reserve requirement of 6 percent, then the bank

Accepted Answer

A)   is in a position to make a new loan of $12,000.
B)   is in a position to make a new loan of $18,000.
C)   has excess reserves of $12,000.
D)   None of the above is correct.E) A) and C)
F) None of the above

Question 13

When prisoners use cigarettes or some other good as money, cigarettes become

Accepted Answer

A)   commodity money, but do not function as a unit of account.
B)   commodity money and function as a unit of account.
C)   fiat money, but do not function as a unit of account.
D)   fiat money and function as a unit of account.E) B) and D)
F) A) and B)

Question 14

In measuring the stock of money in the U.S., M1 includes

Accepted Answer

A)   traveler's checks.
B)   savings deposits.
C)   credit cards
D)   none of the above.E) A) and C)
F) A) and B)

Question 15

If the reserve ratio is 8 percent, then an additional $800 of reserves can increase the money supply by as much as

Accepted Answer

A)   $6,400.
B)   $8,000.
C)   $12,500.
D)   $10,000.E) A) and B)
F) A) and C)

Question 16

In the special case of the 100 percent-reserve banking, the money multiplier is

Accepted Answer

A)   1 and banks create money.
B)   1 and banks do not create money.
C)   2 and banks create money
D)   2 and banks do not create money.E) A) and B)
F) C) and D)

Question 17

What does the text mean by the question, "Where Is All the Currency?" How does it answer the question?

Accepted Answer

The amount of currency per person is nea...

Question 18

Which of the following functions of money is also a common function of most other financial assets?

Accepted Answer

A)   a unit of account
B)   a store of value
C)   medium of exchange
D)   None of the above is correct.E) B) and D)
F) A) and B)

Question 19

The banking system currently has $100 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 lowers the reserve requirement to 5 percent and at the same time buys $10 billion worth of bonds, then by how much does the money supply change?

Accepted Answer

A)   It rises by $200 billion.
B)   It rises by $800 billion.
C)   It rises by $1,200 billion.
D)   None of the above is correct.E) C) and D)
F) A) and C)

Question 20

The rate at which the Fed lends money to banks is

Accepted Answer

A)   the prime rate.
B)   fixed at 4%.
C)   the federal funds rate.
D)   the discount rate.E) None of the above
F) A) and B)

Exam 16: The Monetary System

Which of the following functions of money is also a common function of most other financial assets?

Correct Answer
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Correct Answer
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In the special case of the 100 percent-reserve banking, the money multiplier is

Correct Answer
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When prisoners use cigarettes or some other good as money, cigarettes become

Correct Answer
verified

If the reserve requirement is 12 percent and banks desire to hold no excess reserves, when a bank receives a new deposit of $1,000,

Correct Answer
verified

During wars the public tends to hold relatively more currency and relatively fewer deposits. This decision makes reserves

Correct Answer
verified

Dollar bills, rare paintings, and emerald necklaces are all

Correct Answer
verified

At one time, people in a certain country had no access to banks; they relied exclusively on currency. Then, a fractional-reserve banking system was created. As a result, the money supply

Correct Answer
verified

The rate at which the Fed lends money to banks is

Correct Answer
verified

What does the text mean by the question, "Where Is All the Currency?" How does it answer the question?

Correct Answer
verified
The amount of currency per person is nea...
View Answer

The Federal Reserve Board of Governors

Correct Answer
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Which of the following lists is included in what economists call "money"?

Correct Answer
verified

In measuring the stock of money in the U.S., M1 includes

Correct Answer
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The money supply decreases if

Correct Answer
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Table 29-6. -Refer to Table 29-6. The Bank of Pleasantville's reserve ratio is

Correct Answer
verified

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 amou...
View Answer

An open-market purchase

Correct Answer
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Table 29-5. -Refer to Table 29-5. If the bank faces a reserve requirement of 6 percent, then the bank

Correct Answer
verified

If the reserve ratio is 12.5 percent, then $1,000 of additional reserves can create up to

Correct Answer
verified

If the reserve ratio is 8 percent, then an additional $800 of reserves can increase the money supply by as much as

Correct Answer
verified

Exam 16: The Monetary System

Which of the following functions of money is also a common function of most other financial assets?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the special case of the 100 percent-reserve banking, the money multiplier is

Correct AnswerverifiedShow Answer

When prisoners use cigarettes or some other good as money, cigarettes become

Correct AnswerverifiedShow Answer

If the reserve requirement is 12 percent and banks desire to hold no excess reserves, when a bank receives a new deposit of $1,000,

Correct AnswerverifiedShow Answer

During wars the public tends to hold relatively more currency and relatively fewer deposits. This decision makes reserves

Correct AnswerverifiedShow Answer

Dollar bills, rare paintings, and emerald necklaces are all

Correct AnswerverifiedShow Answer

At one time, people in a certain country had no access to banks; they relied exclusively on currency. Then, a fractional-reserve banking system was created. As a result, the money supply

Correct AnswerverifiedShow Answer

The rate at which the Fed lends money to banks is

Correct AnswerverifiedShow Answer

What does the text mean by the question, "Where Is All the Currency?" How does it answer the question?

Correct AnswerverifiedThe amount of currency per person is nea...View AnswerShow Answer

The Federal Reserve Board of Governors

Correct AnswerverifiedShow Answer

Which of the following lists is included in what economists call "money"?

Correct AnswerverifiedShow Answer

In measuring the stock of money in the U.S., M1 includes

Correct AnswerverifiedShow Answer

The money supply decreases if

Correct AnswerverifiedShow Answer

Table 29-6. -Refer to Table 29-6. The Bank of Pleasantville's reserve ratio is

Correct AnswerverifiedShow 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 amou...View AnswerShow Answer

An open-market purchase

Correct AnswerverifiedShow Answer

Table 29-5. -Refer to Table 29-5. If the bank faces a reserve requirement of 6 percent, then the bank

Correct AnswerverifiedShow Answer

If the reserve ratio is 12.5 percent, then $1,000 of additional reserves can create up to

Correct AnswerverifiedShow Answer

If the reserve ratio is 8 percent, then an additional $800 of reserves can increase the money supply by as much as

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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The amount of currency per person is nea...
View 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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First, the Fed does not control the amou...
View 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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