Question 1

When we say that trade is roundabout we mean that

Accepted Answer

A)   people sometimes trade goods for goods.
B)   trades require a double coincidence of wants.
C)   currency is accepted primarily to make further trades.
D)   people must spend time searching for the products they wish to purchase.E) None of the above
F) All of the above

Question 2

Monetary policy affects employment

Accepted Answer

A)   only in the long run.
B)   only in the short run.
C)   in both the long run and the short run.
D)   in neither the long run nor the short run.E) All of the above
F) B) and D)

Question 3

Which of the following will not help to prevent bank runs?

Accepted Answer

A)   government insurance of deposits
B)   fractional reserve banking
C)   100% reserve banking
D)   All of the above prevent bank runs.E) B) and C)
F) A) and B)

Question 4

If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the Fed sells $25.5 million worth of bonds to the public, bank reserves

Accepted Answer

A)   increase by $25.5 million and the money supply eventually increases by $382.5 million.
B)   increase by $25.5 million and the money supply eventually increases by $170 million.
C)   decrease by $25.5 million and the money supply eventually decreases by $382.5 million.
D)   decrease by $25.5 million and the money supply eventually decreases by $170 million.E) None of the above
F) B) and D)

Question 5

List two reasons why the Fed cannot control the exact size of the money supply.

Accepted Answer

1) The Fed cannot control how much money...

Question 6

When the Fed purchases government bonds the money supply and the federal funds rate .

Accepted Answer

increases,...

Question 7

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) C) and D)
F) B) and C)

Question 8

Scenario 29-1.
The monetary policy of Namdian is determined by the Namdian Central Bank. The local currency is the dia. Namdian banks collectively hold 100 million dias of required reserves, 25 million dias of excess reserves, 250 million dias of Namdian Treasury Bonds, and their customers hold 1,000 million dias of deposits. Namdians prefer to use only demand deposits and so the money supply consists of demand deposits.
-Refer to Scenario 29-1 . Suppose the Central Bank of Namdia purchases 25 million dias of Namdian Treasury Bonds from banks. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply of Namdia change?

Accepted Answer

A)   200 million dias
B)   150 million dias
C)   100 million dias
D)   None of the above is correct.E) A) and B)
F) None of the above

Question 9

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

Accepted Answer

The Board of Governors runs the Federal ...

Question 10

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) None of the above
F) A) and D)

Question 11

When the Fed purchases $1000 worth of government bonds from the public, the U.S. money supply eventually increases by

Accepted Answer

A)   more than $1000.
B)   exactly $1000.
C)   less than $1000.
D)   None of the above are correct.E) A) and C)
F) A) and D)

Question 12

The federal funds rate is the

Accepted Answer

A)   percentage of face value that the Federal Reserve is willing to pay for Treasury Securities.
B)   percentage of deposits that banks must hold as reserves.
C)   interest rate at which the Federal Reserve makes short-term loans to banks.
D)   interest rate at which banks lend reserves to each other overnight.E) B) and D)
F) C) and D)

Question 13

Which of the following is both a store of value and regularly used as a medium of exchange?

Accepted Answer

A)   cash and stocks
B)   cash but not stocks
C)   stocks but not cash
D)   neither cash nor stocksE) A) and B)
F) None of the above

Question 14

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

Question 15

Under a fractional-reserve banking system, banks

Accepted Answer

A)   hold more reserves than deposits.
B)   generally lend out a majority of the funds deposited.
C)   cause the money supply to fall by lending out reserves.
D)   All of the above are correct.E) A) and D)
F) B) and D)

Question 16

Table 29-7. 
-Refer to Table 29-7. Assuming the Bank of Springfield and all other banks have the same reserve ratio, then what is the value of the money multiplier?

Accepted Answer

A)   1.1
B)   12.3
C)   8.1
D)   9.1E) B) and C)
F) A) and C)

Question 17

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 holding 2% of its deposits as excess reserves. Assume that no banks in the economy want to maintain holdings of excess reserves and that people only hold deposits and no currency. The Fed makes open market purchases of $10,000. The person who sold bonds to the Fed deposits all the funds in Metropolis National Bank. If the bank now loans out all its excess reserves, by how much will the money supply increase?

Accepted Answer

A)   $190,000
B)   $200,000
C)   $240,000
D)   None of the above are correct.E) A) and B)
F) None of the above

Question 18

Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate?

Accepted Answer

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

Question 19

A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve. Its deposits amount to

Accepted Answer

A)   $114.
B)   $2,166.
C)   $2,400.
D)   $45,600.E) B) and C)
F) A) and B)

Question 20

If traveler's checks were $1000 higher and saving deposits were $500 higher, M1 would be

Accepted Answer

A)   $500 higher and M2 would be $1,500 higher.
B)   $1,000 higher and M2 would be $1,500 higher.
C)   M2 and M1 would be $1,500 higher.
D)   $1,000 high and M2 would be $500 higher..E) A) and B)
F) B) and C)

Exam 29: The Monetary System

The rate at which the Fed lends money to banks is

Correct Answer
verified

When we say that trade is roundabout we mean that

Correct Answer
verified

Monetary policy affects employment

Correct Answer
verified

Which of the following will not help to prevent bank runs?

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

Correct Answer
verified

If traveler's checks were $1000 higher and saving deposits were $500 higher, M1 would be

Correct Answer
verified

A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve. Its deposits amount to

Correct Answer
verified

The federal funds rate is the

Correct Answer
verified

When the Fed purchases government bonds the money supply and the federal funds rate .

Correct Answer
verified
increases,...
View Answer

If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the Fed sells $25.5 million worth of bonds to the public, bank reserves

Correct Answer
verified

When the Fed purchases $1000 worth of government bonds from the public, the U.S. money supply eventually increases by

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

Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate?

Correct Answer
verified

List two reasons why the Fed cannot control the exact size of the money supply.

Correct Answer
verified
1) The Fed cannot control how much money...
View Answer

Which of the following is both a store of value and regularly used as a medium of exchange?

Correct Answer
verified

Table 29-7. -Refer to Table 29-7. Assuming the Bank of Springfield and all other banks have the same reserve ratio, then what is the value of the money multiplier?

Correct Answer
verified

Under a fractional-reserve banking system, banks

Correct Answer
verified

Correct Answer
verified

The Federal Deposit Insurance Corporation

Correct Answer
verified

Exam 29: The Monetary System

The rate at which the Fed lends money to banks is

Correct AnswerverifiedShow Answer

When we say that trade is roundabout we mean that

Correct AnswerverifiedShow Answer

Monetary policy affects employment

Correct AnswerverifiedShow Answer

Which of the following will not help to prevent bank runs?

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

Correct AnswerverifiedShow Answer

If traveler's checks were $1000 higher and saving deposits were $500 higher, M1 would be

Correct AnswerverifiedShow Answer

A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve. Its deposits amount to

Correct AnswerverifiedShow Answer

The federal funds rate is the

Correct AnswerverifiedShow Answer

When the Fed purchases government bonds the money supply and the federal funds rate .

Correct Answerverifiedincreases,...View AnswerShow Answer

If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the Fed sells $25.5 million worth of bonds to the public, bank reserves

Correct AnswerverifiedShow Answer

When the Fed purchases $1000 worth of government bonds from the public, the U.S. money supply eventually increases by

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

Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate?

Correct AnswerverifiedShow Answer

List two reasons why the Fed cannot control the exact size of the money supply.

Correct Answerverified1) The Fed cannot control how much money...View AnswerShow Answer

Which of the following is both a store of value and regularly used as a medium of exchange?

Correct AnswerverifiedShow Answer

Table 29-7. -Refer to Table 29-7. Assuming the Bank of Springfield and all other banks have the same reserve ratio, then what is the value of the money multiplier?

Correct AnswerverifiedShow Answer

Under a fractional-reserve banking system, banks

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The Federal Deposit Insurance Corporation

Correct AnswerverifiedShow Answer

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increases,...
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The Board of Governors runs the Federal ...
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1) The Fed cannot control how much money...
View Answer

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