Question 1

What are the implications of the quantity theory of money for monetary policy and price stability?

Accepted Answer

If one assumes that the velocity of mone...

Question 2

The simple deposit multiplier is the ratio of the amount of

Accepted Answer

A)  new reserves created by the banks to the amount of deposits.
B)  new reserves created by the banks to the amount of loans.
C)  deposits created by the banks to the amount of new reserves.
D)  loans issued by the banks to deposits created by the banks.E) A) and B)
F) None of the above

Question 3

Soldiers in a World War II prisoner-of-war camp

Accepted Answer

A)  used gold as a fiat money.
B)  used cowrie shells as money.
C)  used cigarettes as money.
D)  used U.S.dollars as a commodity money.E) All of the above
F) A) and B)

Question 4

Money's most narrow definition is based on its function as a

Accepted Answer

A)  store of value.
B)  unit of account.
C)  standard of deferred payment.
D)  medium of exchange.
E)  standard of barter.F) A) and B)
G) A) and E)

Question 5

Suppose a transaction changes the balance sheet of Wells Fargo bank as indicated in the following T-account.  At this point,what percentage of the new deposits does Wells Fargo hold in reserves?

Accepted Answer

A)  100 percent
B)  10 percent
C)  5 percent
D)  1 percentE) A) and D)
F) B) and C)

Question 6

Which of the following tools of monetary policy is used least often?

Accepted Answer

A)  open market operations
B)  setting the required reserve ratio
C)  setting the discount rate
D)  acting as a lender of last resortE) All of the above
F) A) and B)

Question 7

Which of the following determines the amount of money the banking system as a whole can create?

Accepted Answer

A)  the quantity of bank reserves
B)  the quantity of vault cash held by banks
C)  the gold reserves held by the Federal Reserve
D)  the limit on profits by banks imposed by the U.S.CongressE) C) and D)
F) All of the above

Question 8

What are the four functions of money? Can something be considered money if it does not fulfill all four functions?

Accepted Answer

The four functions are medium ...

Question 9

Which of the following describes the degree of control that the Fed has over the money supply?

Accepted Answer

A)  The Fed has absolute control over the money supply.
B)  The Fed has no control of the money supply.
C)  The Fed has substantial control over the money supply.
D)  The Fed is not concerned about the level of the money supply,and does not attempt to control it.E) C) and D)
F) A) and D)

Question 10

A person's wealth is the same as his income.

Accepted Answer

A) True 
 B)False

Question 11

If households choose to take some fraction of each check they deposit and hold it as currency,then the simple deposit multiplier ________ the real-world multiplier.

Accepted Answer

A)  is greater than
B)  is less than
C)  is equal to
D)  bears no relationship toE) A) and C)
F) C) and D)

Question 12

Net worth is

Accepted Answer

A)  a measure of a firm's profits.
B)  part of stockholders' equity.
C)  the difference between a firm's assets and liabilities.
D)  listed on the asset side of a firm's balance sheet.E) B) and D)
F) A) and C)

Question 13

Which of the following best describes how banks create money?

Accepted Answer

A)  Banks charge higher interest rates on loans than they pay on deposits.
B)  Banks charge fees for providing financial advice.
C)  Banks create checking account deposits when making loans from excess reserves.
D)  Banks make loans from reserves.E) B) and C)
F) None of the above

Question 14

Suppose there is a bank panic.Which of the following would not be a consequence of this bank panic?

Accepted Answer

A)  Bank total reserves would decrease.
B)  Required reserves would increase.
C)  Bank checking account balances would decrease.
D)  Individual banks would have to shrink the value of loans they made.
E)  The economy would likely enter into a recession.F) A) and B)
G) A) and D)

Question 15

Money market mutual funds sell shares to investors and use the money to buy

Accepted Answer

A)  mortgage-backed securities.
B)  foreign currency.
C)  short-term securities.
D)  overseas assets through foreign direct investment.E) A) and C)
F) A) and B)

Question 16

According to the quantity theory of money,if the money supply grows at 6%,real GDP grows at 2%,and the velocity of money is constant,then the inflation rate will be

Accepted Answer

A)  8%.
B)  6%.
C)  4%.
D)  2%.E) B) and C)
F) A) and B)

Question 17

Suppose you deposit $4,000 in currency into your checking account at Bank of America.Assume that Bank of America has no excess reserves at the time you make your deposit and that the required reserve ratio is 10 percent.
a.Use a T-account to show the initial effect of this transaction on Bank of America's balance sheet.
b.Suppose that Bank of America makes the maximum loan they can from the funds you deposited.Use a T-account to show the initial effect on Bank of America's balance sheet from granting the loan.Also include in this T-account the transaction from question (a. ).
c.Now suppose that whoever took out the loan in question (b)writes a check for this amount and that the person receiving the check deposits it in Bank of Boston.Show the effect of these transactions on the balance sheet of Bank of America and Bank of Boston,after the check has been cleared.On the T-account for Bank of America,include the transactions from questions (a)and (b).
d.What is the maximum increase in checking account deposits that can result from your $4,000 deposit? What is the maximum increase in the money supply? Explain.

Accepted Answer

a.Bank of America's (Bank A)checking acc...

Question 18

Fiat money

Accepted Answer

A)  has no or very little value except as money.
B)  is rarely used in modern economies.
C)  functions well only if can be redeemed for gold or other precious metals.
D)  serves well as a medium of exchange,but not as a store of value.E) B) and C)
F) A) and D)

Question 19

Most payments in the United States for goods and services are made using

Accepted Answer

A)  currency.
B)  checking account deposits.
C)  traveler's checks.
D)  gold.E) A) and B)
F) None of the above

Question 20

If the Fed lowers the reserve requirement,then this

Accepted Answer

A)  increases excess reserves,encourages banks to make more loans,and increases the money supply.
B)  decreases excess reserves,causes banks to reduce their loans,and decreases the money supply.
C)  decreases excess reserves,causes banks to reduce their loans,and increases the money supply.
D)  increases excess reserves,causes banks to reduce their loans,and increases the money supply.E) B) and C)
F) A) and D)

Exam 14: Money,banks,and the Federal Reserve System

According to the quantity theory of money,if the money supply grows at 6%,real GDP grows at 2%,and the velocity of money is constant,then the inflation rate will be

Correct Answer
verified

Correct Answer
verified
a.Bank of America's (Bank A)checking acc...
View Answer

Fiat money

Correct Answer
verified

The simple deposit multiplier is the ratio of the amount of

Correct Answer
verified

Suppose there is a bank panic.Which of the following would not be a consequence of this bank panic?

Correct Answer
verified

A person's wealth is the same as his income.

Correct Answer
verified

Soldiers in a World War II prisoner-of-war camp

Correct Answer
verified

If the Fed lowers the reserve requirement,then this

Correct Answer
verified

Net worth is

Correct Answer
verified

Most payments in the United States for goods and services are made using

Correct Answer
verified

Which of the following best describes how banks create money?

Correct Answer
verified

What are the four functions of money? Can something be considered money if it does not fulfill all four functions?

Correct Answer
verified
The four functions are medium ...
View Answer

Which of the following determines the amount of money the banking system as a whole can create?

Correct Answer
verified

Money market mutual funds sell shares to investors and use the money to buy

Correct Answer
verified

Money's most narrow definition is based on its function as a

Correct Answer
verified

Suppose a transaction changes the balance sheet of Wells Fargo bank as indicated in the following T-account. At this point,what percentage of the new deposits does Wells Fargo hold in reserves?

Correct Answer
verified

If households choose to take some fraction of each check they deposit and hold it as currency,then the simple deposit multiplier ________ the real-world multiplier.

Correct Answer
verified

Which of the following tools of monetary policy is used least often?

Correct Answer
verified

Which of the following describes the degree of control that the Fed has over the money supply?

Correct Answer
verified

What are the implications of the quantity theory of money for monetary policy and price stability?

Correct Answer
verified
If one assumes that the velocity of mone...
View Answer

Exam 14: Money,banks,and the Federal Reserve System

According to the quantity theory of money,if the money supply grows at 6%,real GDP grows at 2%,and the velocity of money is constant,then the inflation rate will be

Correct AnswerverifiedShow Answer

Correct Answerverifieda.Bank of America's (Bank A)checking acc...View AnswerShow Answer

Fiat money

Correct AnswerverifiedShow Answer

The simple deposit multiplier is the ratio of the amount of

Correct AnswerverifiedShow Answer

Suppose there is a bank panic.Which of the following would not be a consequence of this bank panic?

Correct AnswerverifiedShow Answer

A person's wealth is the same as his income.

Correct AnswerverifiedShow Answer

Soldiers in a World War II prisoner-of-war camp

Correct AnswerverifiedShow Answer

If the Fed lowers the reserve requirement,then this

Correct AnswerverifiedShow Answer

Net worth is

Correct AnswerverifiedShow Answer

Most payments in the United States for goods and services are made using

Correct AnswerverifiedShow Answer

Which of the following best describes how banks create money?

Correct AnswerverifiedShow Answer

What are the four functions of money? Can something be considered money if it does not fulfill all four functions?

Correct AnswerverifiedThe four functions are medium ...View AnswerShow Answer

Which of the following determines the amount of money the banking system as a whole can create?

Correct AnswerverifiedShow Answer

Money market mutual funds sell shares to investors and use the money to buy

Correct AnswerverifiedShow Answer

Money's most narrow definition is based on its function as a

Correct AnswerverifiedShow Answer

Suppose a transaction changes the balance sheet of Wells Fargo bank as indicated in the following T-account. At this point,what percentage of the new deposits does Wells Fargo hold in reserves?

Correct AnswerverifiedShow Answer

If households choose to take some fraction of each check they deposit and hold it as currency,then the simple deposit multiplier ________ the real-world multiplier.

Correct AnswerverifiedShow Answer

Which of the following tools of monetary policy is used least often?

Correct AnswerverifiedShow Answer

Which of the following describes the degree of control that the Fed has over the money supply?

Correct AnswerverifiedShow Answer

What are the implications of the quantity theory of money for monetary policy and price stability?

Correct AnswerverifiedIf one assumes that the velocity of mone...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified
a.Bank of America's (Bank A)checking acc...
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
The four functions are medium ...
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
If one assumes that the velocity of mone...
View Answer