Question 1

Which of the following does the Federal Reserve not do?

Accepted Answer

A)   conduct monetary policy
B)   act as a lender of last resort
C)   convert Federal Reserve Notes into gold
D)   serve as a bank regulatorE) B) and C)
F) A) and B)

Question 2

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Accepted Answer

A) True 
 B)False

Question 3

Consider five individuals with different occupations.  In a barter system which of the following pairs has a double coincidence of wants?

Accepted Answer

A)   Allen and Eric
B)   Diedre and Calvin
C)   Both A and B are correct.
D)   None of the above are correct.E) A) and D)
F) A) and C)

Question 4

To increase 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) B) and C)

Question 5

Designers of the Federal Reserve System were concerned that the Fed might form policy favorable to one part of the country or to a particular party. What are some ways that the organization of the Fed reflects such concerns?

Accepted Answer

1. The president appoints the Board of G...

Question 6

One plausible explanation for the large amount of U.S. currency outstanding is that many dollars are held abroad.

Accepted Answer

A) True 
 B)False

Question 7

Reserves are

Accepted Answer

A)   the central bank of the U.S.
B)   deposits that banks hold in excess of the required amount.
C)   the purchase of bonds by the Federal Open Market Committee.
D)   deposits that banks have received but have not yet loaned out.E) B) and C)
F) A) and D)

Question 8

Marc puts prices on surfboards and skateboards at his sporting goods store. He is using money as a unit of account.

Accepted Answer

A) True 
 B)False

Question 9

If the discount rate is lowered, banks borrow

Accepted Answer

A)   less from the Fed so reserves increase.
B)   less from the Fed so reserves decrease.
C)   more from the Fed so reserves increase.
D)   more from the Fed so reserves decrease.E) A) and D)
F) A) and B)

Question 10

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

Accepted Answer

A)   decreases, the money multiplier increases, and the money supply decreases.
B)   increases, the money multiplier increases, and the money supply increases.
C)   decreases, the money multiplier increases, and the money supply increases.
D)   increases, the money multiplier increases, and the money supply decreases.E) B) and D)
F) B) and C)

Question 11

Bank runs

Accepted Answer

A)   will affect neither the money supply nor the money multiplier.
B)   increase the money supply.
C)   can be neither prevented nor mitigated by the Federal Reserve.
D)   are a problem because banks only hold a fraction of deposits as reserves.E) A) and B)
F) B) and D)

Question 12

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 13

Table 29-9
Metropolis National Bank is currently holding 2% of its deposits as excess reserves. 
-Refer to Table 29-9. Metropolis National Bank is currently holding 2% of deposits as excess reserves. Assume that no banks in the economy want to hold excess reserves and that people only hold deposits and no currency. How much does the money supply ultimately increase when Metropolis National Bank lends out its excess reserves?

Accepted Answer

A)   $100,000
B)   $110,000
C)   $120,000
D)   None of the above are correct.E) A) and D)
F) All of the above

Question 14

A bank has a 5 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement.

Accepted Answer

A)   It has $25 in reserves and $4,975 in loans.
B)   It has $250 in reserves and $4,750 in loans.
C)   It has $1,000 in reserves and $4,000 in loans.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 15

The banking system currently has $50 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 12.5 percent and at the same time sells $10 billion worth of bonds, then by how much does the money supply change?

Accepted Answer

A)   It falls by $20 billion.
B)   It falls by $110 billion.
C)   It falls by $180 billion.
D)   None of the above is correct.E) All of the above
F) A) and D)

Question 16

When the Fed makes open-market sales bank

Accepted Answer

A)   withdrawals and lending increase.
B)   withdrawals increase and lending decreases.
C)   deposits and lending increase.
D)   deposits increase and lending decreases.E) B) and D)
F) A) and D)

Question 17

Suppose a bank has $3,000 in reserves, $25,000 of deposits, and a 10 percent reserve requirement. What is the amount of excess reserves?

Accepted Answer

The answer of Suppose a bank has $3,000 in reserves,...

Question 18

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

Accepted Answer

When the reserve requirement is less tha...

Question 19

Which of the following best illustrates the concept of a store of value?

Accepted Answer

A)   You are a precious-metals dealer, and you are always aware of how many ounces of platinum trade for an ounce of gold.
B)   You sell items on eBay, and your prices are stated in terms of dollars.
C)   You keep 6 ounces of gold in your safe-deposit box at the bank for emergencies.
D)   None of the above is correct.E) B) and C)
F) C) and D)

Question 20

Derek decides to forego a major appliance purchase and save the money. He transfers $2,100 from his checking account to his money market mutual fund. As a result of this transfer,

Accepted Answer

A)   both M1 and M2 decrease by $2,100.
B)   M1 increases by $2,100 and M2 increases by $2,100.
C)   M1 decreases by $2,100 and M2 increases by $2,100.
D)   M1 decreases by $2,100 and M2 stays the same.E) All of the above
F) C) and D)

Exam 29: The Monetary System

Designers of the Federal Reserve System were concerned that the Fed might form policy favorable to one part of the country or to a particular party. What are some ways that the organization of the Fed reflects such concerns?

Correct Answer
verified
1. The president appoints the Board of G...
View Answer

A bank has a 5 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement.

Correct Answer
verified

Which of the following best illustrates the concept of a store of value?

Correct Answer
verified

Reserves are

Correct Answer
verified

Consider five individuals with different occupations. In a barter system which of the following pairs has a double coincidence of wants?

Correct Answer
verified

Which of the following does the Federal Reserve not do?

Correct Answer
verified

One plausible explanation for the large amount of U.S. currency outstanding is that many dollars are held abroad.

Correct Answer
verified

To increase the money supply, the Fed can

Correct Answer
verified

Correct Answer
verified

Derek decides to forego a major appliance purchase and save the money. He transfers $2,100 from his checking account to his money market mutual fund. As a result of this transfer,

Correct Answer
verified

Suppose a bank has $3,000 in reserves, $25,000 of deposits, and a 10 percent reserve requirement. What is the amount of excess reserves?

Correct Answer
verified

Marc puts prices on surfboards and skateboards at his sporting goods store. He is using money as a unit of account.

Correct Answer
verified

If the discount rate is lowered, banks borrow

Correct Answer
verified

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

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

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

Correct Answer
verified
When the reserve requirement is less tha...
View Answer

When the Fed makes open-market sales bank

Correct Answer
verified

Bank runs

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Exam 29: The Monetary System

Designers of the Federal Reserve System were concerned that the Fed might form policy favorable to one part of the country or to a particular party. What are some ways that the organization of the Fed reflects such concerns?

Correct Answerverified1. The president appoints the Board of G...View AnswerShow Answer

A bank has a 5 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement.

Correct AnswerverifiedShow Answer

Which of the following best illustrates the concept of a store of value?

Correct AnswerverifiedShow Answer

Reserves are

Correct AnswerverifiedShow Answer

Consider five individuals with different occupations. In a barter system which of the following pairs has a double coincidence of wants?

Correct AnswerverifiedShow Answer

Which of the following does the Federal Reserve not do?

Correct AnswerverifiedShow Answer

One plausible explanation for the large amount of U.S. currency outstanding is that many dollars are held abroad.

Correct AnswerverifiedShow Answer

To increase the money supply, the Fed can

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Derek decides to forego a major appliance purchase and save the money. He transfers $2,100 from his checking account to his money market mutual fund. As a result of this transfer,

Correct AnswerverifiedShow Answer

Suppose a bank has $3,000 in reserves, $25,000 of deposits, and a 10 percent reserve requirement. What is the amount of excess reserves?

Correct AnswerverifiedShow Answer

Marc puts prices on surfboards and skateboards at his sporting goods store. He is using money as a unit of account.

Correct AnswerverifiedShow Answer

If the discount rate is lowered, banks borrow

Correct AnswerverifiedShow Answer

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

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

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

Correct AnswerverifiedWhen the reserve requirement is less tha...View AnswerShow Answer

When the Fed makes open-market sales bank

Correct AnswerverifiedShow Answer

Bank runs

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified
1. The president appoints the Board of G...
View 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
a. medium of exchang...
View Answer

Correct Answer
verified
When the reserve requirement is less tha...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified