Question 1

Which of the following actions would have the combined effect of raising the money supply and raising the money multiplier?

Accepted Answer

A)  The Fed sells bonds and raises the reserve requirement ratio.
B)  The Fed sells bonds and lowers the reserve requirement ratio.
C)  The Fed buys bonds and raises the reserve requirement ratio.
D)  The Fed buys bonds and lowers the reserve requirement ratio.E) B) and D)
F) A) and C)

Question 2

Compare the Board of Governors and the Federal Open Market Committee.

Accepted Answer

The Board of Governors runs the Federal ...

Question 3

Which of the following is not included in M1?

Accepted Answer

A)  currency
B)  demand deposits
C)  traveler's checks
D)  credit cardsE) None of the above
F) C) and D)

Question 4

When the Soviet Union began breaking up in the late 1980s,cigarettes began replacing the ruble as the medium of exchange even though the ruble was legal tender.The cigarettes provide an example of fiat money.

Accepted Answer

A) True 
 B)False

Question 5

Changes in the quantity of money affect

Accepted Answer

A)  interest rates
B)  prices
C)  production
D)  All of the above are correctE) A) and B)
F) C) and D)

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Other things the same,if banks decide to hold a smaller part of their deposits as excess reserves,the money supply will fall.

Accepted Answer

A) True 
 B)False

Question 8

If the reserve ratio is 12.5 percent,the money multiplier is

Accepted Answer

A)  6.25.
B)  8.
C)  12.5.
D)  25.E) B) and C)
F) All of the above

Question 9

Just after the terrorist attack on September 11,2001,the Fed stood ready to lend financial institutions funds.When the Fed did this,it was acting in its role of lender of last resort.

Accepted Answer

A) True 
 B)False

Question 10

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

The answer of Designers of the Federal Reserve System were...

Question 11

If the reserve ratio is 5 percent,$1,000 of additional reserves can create

Accepted Answer

A)  $200 of new money.
B)  $2,000 of new money.
C)  $20,000 of new money.
D)  None of the above is correct.E) A) and D)
F) None of the above

Question 12

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%.If the Fed lowers the reserve requirement ratio to 5% and at the same time buys $10 billion dollars of bonds,then by how much does the money supply change?

Accepted Answer

A)  It rises by $800 billion.
B)  It rises by $990 billion.
C)  It rises by $1220 billion
D)  None of the above is correct.E) B) and C)
F) None of the above

Question 13

The "yardstick" people use to post prices and record debts is called

Accepted Answer

A)  a medium of exchange.
B)  a unit of account.
C)  a store of value.
D)  liquidity.E) B) and D)
F) A) and B)

Question 14

When the Fed conducts open-market purchases,

Accepted Answer

A)  it buys Treasury securities, which increases the money supply.
B)  it buys Treasury securities, which decreases the money supply.
C)  it borrows money from member banks, which increases the money supply.
D)  it lends money to member banks, which decreases the money supply.E) B) and C)
F) None of the above

Question 15

In 1991 the Federal Reserve lowered the reserve requirement ratio from 12 percent to 10 percent.Other things the same this should have

Accepted Answer

A)  increased both the money multiplier and the money supply.
B)  decreased both the money multiplier and the money supply.
C)  increased the money multiplier and decreased the money supply.
D)  decreased the money multiplier and increased the money supply.E) B) and C)
F) A) and B)

Question 16

A decrease in the money supply might indicate that the Fed had

Accepted Answer

A)  purchased bonds in an attempt to increase the federal funds rate.
B)  purchased bonds in an attempt to reduce the federal funds rate.
C)  sold bonds in an attempt to increase the federal funds rate.
D)  sold bonds in an attempt to reduce the federal funds rate.E) A) and B)
F) C) and D)

Question 17

As the reserve ratio increases,the money multiplier

Accepted Answer

A)  increases.
B)  does not change.
C)  decreases.
D)  could do any of the above.E) B) and C)
F) A) and C)

Question 18

When the Fed conducts open-market sales,

Accepted Answer

A)  it sells Treasury securities, which increases the money supply.
B)  it sells Treasury securities, which decreases the money supply.
C)  it borrows from member banks, which increases the money supply.
D)  it lends money to member banks, which decreases the money supply.E) A) and D)
F) A) and C)

Question 19

Bank runs and the accompanying increase in the money multiplier caused the U.S.money supply to rise by 28 percent from 1929 to 1933.

Accepted Answer

A) True 
 B)False

Question 20

During the early 1930s there were a number of bank failures in the United States.What did this do to the money supply? The New York Federal Reserve Bank advocated open market purchases.Would these purchases have reversed the change in the money supply and helped banks? Explain.

Accepted Answer

Bank failures cause people to lose confi...

Exam 29: The Monetary System

If the reserve ratio is 5 percent,$1,000 of additional reserves can create

Correct Answer
verified

Bank runs and the accompanying increase in the money multiplier caused the U.S.money supply to rise by 28 percent from 1929 to 1933.

Correct Answer
verified

When the Fed conducts open-market sales,

Correct Answer
verified

Just after the terrorist attack on September 11,2001,the Fed stood ready to lend financial institutions funds.When the Fed did this,it was acting in its role of lender of last resort.

Correct Answer
verified

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

In 1991 the Federal Reserve lowered the reserve requirement ratio from 12 percent to 10 percent.Other things the same this should have

Correct Answer
verified

As the reserve ratio increases,the money multiplier

Correct Answer
verified

Changes in the quantity of money affect

Correct Answer
verified

Compare the Board of Governors and the Federal Open Market Committee.

Correct Answer
verified
The Board of Governors runs the Federal ...
View Answer

Which of the following is not included in M1?

Correct Answer
verified

When the Soviet Union began breaking up in the late 1980s,cigarettes began replacing the ruble as the medium of exchange even though the ruble was legal tender.The cigarettes provide an example of fiat money.

Correct Answer
verified

When the Fed conducts open-market purchases,

Correct Answer
verified

Which of the following actions would have the combined effect of raising the money supply and raising the money multiplier?

Correct Answer
verified

If the reserve ratio is 12.5 percent,the money multiplier is

Correct Answer
verified

The "yardstick" people use to post prices and record debts is called

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Other things the same,if banks decide to hold a smaller part of their deposits as excess reserves,the money supply will fall.

Correct Answer
verified

A decrease in the money supply might indicate that the Fed had

Correct Answer
verified

During the early 1930s there were a number of bank failures in the United States.What did this do to the money supply? The New York Federal Reserve Bank advocated open market purchases.Would these purchases have reversed the change in the money supply and helped banks? Explain.

Correct Answer
verified
Bank failures cause people to lose confi...
View Answer

Exam 29: The Monetary System

If the reserve ratio is 5 percent,$1,000 of additional reserves can create

Correct AnswerverifiedShow Answer

Bank runs and the accompanying increase in the money multiplier caused the U.S.money supply to rise by 28 percent from 1929 to 1933.

Correct AnswerverifiedShow Answer

When the Fed conducts open-market sales,

Correct AnswerverifiedShow Answer

Just after the terrorist attack on September 11,2001,the Fed stood ready to lend financial institutions funds.When the Fed did this,it was acting in its role of lender of last resort.

Correct AnswerverifiedShow Answer

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 AnswerverifiedShow Answer

In 1991 the Federal Reserve lowered the reserve requirement ratio from 12 percent to 10 percent.Other things the same this should have

Correct AnswerverifiedShow Answer

As the reserve ratio increases,the money multiplier

Correct AnswerverifiedShow Answer

Changes in the quantity of money affect

Correct AnswerverifiedShow Answer

Compare the Board of Governors and the Federal Open Market Committee.

Correct AnswerverifiedThe Board of Governors runs the Federal ...View AnswerShow Answer

Which of the following is not included in M1?

Correct AnswerverifiedShow Answer

When the Soviet Union began breaking up in the late 1980s,cigarettes began replacing the ruble as the medium of exchange even though the ruble was legal tender.The cigarettes provide an example of fiat money.

Correct AnswerverifiedShow Answer

When the Fed conducts open-market purchases,

Correct AnswerverifiedShow Answer

Which of the following actions would have the combined effect of raising the money supply and raising the money multiplier?

Correct AnswerverifiedShow Answer

If the reserve ratio is 12.5 percent,the money multiplier is

Correct AnswerverifiedShow Answer

The "yardstick" people use to post prices and record debts is called

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same,if banks decide to hold a smaller part of their deposits as excess reserves,the money supply will fall.

Correct AnswerverifiedShow Answer

A decrease in the money supply might indicate that the Fed had

Correct AnswerverifiedShow Answer

During the early 1930s there were a number of bank failures in the United States.What did this do to the money supply? The New York Federal Reserve Bank advocated open market purchases.Would these purchases have reversed the change in the money supply and helped banks? Explain.

Correct AnswerverifiedBank failures cause people to lose confi...View AnswerShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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verified
The Board of Governors runs the Federal ...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

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
verified
Bank failures cause people to lose confi...
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