Question 1

If the reserve requirement is 15 percent a bank desires to hold no excess reserves and it receives a new deposit of $10, then this bank

Accepted Answer

A)  must increase its required reserves by $10.
B)  will initially see its total reserves increase by $15.
C)  will be able to make new loans up to a maximum of $8.50.
D)  All of the above are correct.E) None of the above
F) A) and B)

Question 2

The Fed can directly protect a bank during a bank run by

Accepted Answer

A)  increasing reserve requirements.
B)  selling government bonds to the bank.
C)  lending reserves to the bank.
D)  doing any of the above.E) C) and D)
F) A) and D)

Question 3

Which of the following is an asset of a bank and a liability for its customers?

Accepted Answer

A)  deposits of its customers and loans to it customers
B)  deposits of its customers but not loans to its customers
C)  loans of its customers but not the deposits of its customers
D)  neither the deposits of its customers nor the loans to its customersE) A) and B)
F) B) and D)

Question 4

In a fractional-reserve banking system, a bank

Accepted Answer

A)  does not make loans.
B)  does not accept deposits.
C)  keeps only a fraction of its deposits in reserve.
D)  None of the above is correct.E) B) and D)
F) B) and C)

Question 5

Table 16-5. 
-Refer to Table 16-5. If the Fed's reserve requirement is 9 percent, then what quantity of excess reserves does the Bank of Pleasantville now hold?

Accepted Answer

A)  $200
B)  $250
C)  $400
D)  $1,000E) None of the above
F) B) and C)

Question 6

There is a

Accepted Answer

A)  short-run tradeoff between inflation and unemployment.
B)  short-run tradeoff between an increase in the money supply and inflation.
C)  long-run tradeoff between inflation and unemployment.
D)  long-run tradeoff between an increase in the money supply and inflation.E) B) and D)
F) C) and D)

Question 7

Scenario 16-1.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 16-1. Suppose the Central Bank of Namdia loaned the banks of Namdia 5 million dias. 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)  60 million dias
B)  50 million dias
C)  40 million dias
D)  None of the above is correct.E) A) and B)
F) A) and D)

Question 8

Values of Assets
   Asset  Amount in $ Billions  Small time deposits 780 Large time deposits 1,700 Demand deposits 450 Other checkable deposits 370 Savings deposits 4950 Traveler’s checks 5 Money market mutual funds 740 Currency 880 Miscellaneous categories of M2 50\begin{array}{lc}	ext { Asset } & 	ext { Amount in } \$ 	ext { Billions } \	ext { Small time deposits } & 780 \	ext { Large time deposits } & 1,700 \	ext { Demand deposits } & 450 \	ext { Other checkable deposits } & 370 \	ext { Savings deposits } & 4950 \	ext { Traveler&#x27;s checks } & 5 \	ext { Money market mutual funds } & 740 \	ext { Currency } & 880 \	ext { Miscellaneous categories of M2 } & 50\end{array} Asset  Small time deposits  Large time deposits  Demand deposits  Other checkable deposits  Savings deposits  Traveler’s checks  Money market mutual funds  Currency  Miscellaneous categories of M2 ​ Amount in $ Billions 7801,7004503704950574088050​

-Refer to Value of Assets. What is the value of M1 in billions of dollars?

Accepted Answer

A)  1705
B)  2485
C)  6295
D)  7075 E) A) and B)
F) All of the above

Question 9

Which group within the Federal Reserve System meets to discuss changes in the economy and determine monetary policy?

Accepted Answer

A)  the Board of Governors
B)  the FOMC
C)  the regional Federal Reserve Bank presidents
D)  the Central Bank Policy CommissionE) A) and C)
F) A) and D)

Question 10

Suppose the Federal Reserve increases bank reserves and banks lend out some of these reserves, but at some point banks still have $5 million more they wish to lend out. If the reserve requirement is 10 percent, how much more money can banks create if they lend out the remaining amount?

Accepted Answer

A)  $55 million
B)  $50 million
C)  $45 million
D)  $40 millionE) A) and D)
F) A) and C)

Question 11

Traveler's checks are included in

Accepted Answer

A)  M1 but not M2.
B)  M2 but not M1.
C)  M1 and M2.
D)  neither M1 nor M2.E) B) and C)
F) A) and C)

Question 12

Which of the following is not included in either M1 or M2?

Accepted Answer

A)  U.S. Treasury bills
B)  small time deposits
C)  demand deposits
D)  money market mutual fundsE) All of the above
F) B) and D)

Question 13

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...

Question 14

Today, bank runs are not a major problem for the U.S. banking system because

Accepted Answer

A)  bank runs are now illegal.
B)  banks now hold 100 percent of their deposits in reserve.
C)  banks are now all government-operated.
D)  the federal government now guarantees the safety of deposits at most banks.E) B) and C)
F) None of the above

Question 15

Over one time horizon or another, Fed policy decisions influence

Accepted Answer

A)  inflation and employment.
B)  inflation but not employment.
C)  employment but not inflation.
D)  neither inflation nor employment.E) A) and D)
F) C) and D)

Question 16

A problem that the Fed faces when it attempts to control the money supply is that

Accepted Answer

A)  since the U.S. has a fractional-reserve banking system, the amount of money in the economy depends in part on the behavior of depositors and bankers.
B)  the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools.
C)  while the Fed has the ability to change the money supply by a large amount, it does not have the ability to change it by a small amount.
D)  federal legislation in the 1950s stripped the Fed of its power to act as a lender of last resort to banks.E) B) and C)
F) A) and D)

Question 17

The Fed's control of the money supply is not precise because

Accepted Answer

A)  Congress can also make changes to the money supply.
B)  there are not always government bonds available for purchase when the Fed wants to perform open-market operations.
C)  the Fed does not know where all U.S. currency is located.
D)  the amount of money in the economy depends in part on the behavior of depositors and bankers.E) B) and C)
F) B) and D)

Question 18

Members of the Board of Governors are appointed by the president of the U.S. and confirmed by the U.S. Senate.

Accepted Answer

A) True 
 B)False

Question 19

In a system of 100-percent-reserve banking, the purpose of a bank is to

Accepted Answer

A)  make loans to households.
B)  influence the money supply.
C)  give depositors a safe place to keep their money.
D)  buy and sell gold.E) A) and B)
F) A) and D)

Question 20

A bank has a 10 percent reserve requirement, $4,000 in deposits, and has loaned out all it can given the reserve requirement.

Accepted Answer

A)  It has $40 in reserves and $3,960 in loans.
B)  It has $400 in reserves and $3,600 in loans.
C)  It has $444 in reserves and $3,556 in loans.
D)  None of the above is correct.E) B) and D)
F) All of the above

Exam 16: The Monetary System

Traveler's checks are included in

Correct Answer
verified

Suppose the Federal Reserve increases bank reserves and banks lend out some of these reserves, but at some point banks still have $5 million more they wish to lend out. If the reserve requirement is 10 percent, how much more money can banks create if they lend out the remaining amount?

Correct Answer
verified

If the reserve requirement is 15 percent a bank desires to hold no excess reserves and it receives a new deposit of $10, then this bank

Correct Answer
verified

Correct Answer
verified

Members of the Board of Governors are appointed by the president of the U.S. and confirmed by the U.S. Senate.

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

Which group within the Federal Reserve System meets to discuss changes in the economy and determine monetary policy?

Correct Answer
verified

The Fed can directly protect a bank during a bank run by

Correct Answer
verified

There is a

Correct Answer
verified

Correct Answer
verified

In a fractional-reserve banking system, a bank

Correct Answer
verified

Table 16-5. -Refer to Table 16-5. If the Fed's reserve requirement is 9 percent, then what quantity of excess reserves does the Bank of Pleasantville now hold?

Correct Answer
verified

Which of the following is an asset of a bank and a liability for its customers?

Correct Answer
verified

A problem that the Fed faces when it attempts to control the money supply is that

Correct Answer
verified

Which of the following is not included in either M1 or M2?

Correct Answer
verified

Over one time horizon or another, Fed policy decisions influence

Correct Answer
verified

A bank has a 10 percent reserve requirement, $4,000 in deposits, and has loaned out all it can given the reserve requirement.

Correct Answer
verified

In a system of 100-percent-reserve banking, the purpose of a bank is to

Correct Answer
verified

Today, bank runs are not a major problem for the U.S. banking system because

Correct Answer
verified

The Fed's control of the money supply is not precise because

Correct Answer
verified

Exam 16: The Monetary System

Traveler's checks are included in

Correct AnswerverifiedShow Answer

Suppose the Federal Reserve increases bank reserves and banks lend out some of these reserves, but at some point banks still have $5 million more they wish to lend out. If the reserve requirement is 10 percent, how much more money can banks create if they lend out the remaining amount?

Correct AnswerverifiedShow Answer

If the reserve requirement is 15 percent a bank desires to hold no excess reserves and it receives a new deposit of $10, then this bank

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Members of the Board of Governors are appointed by the president of the U.S. and confirmed by the U.S. Senate.

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

Which group within the Federal Reserve System meets to discuss changes in the economy and determine monetary policy?

Correct AnswerverifiedShow Answer

The Fed can directly protect a bank during a bank run by

Correct AnswerverifiedShow Answer

There is a

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In a fractional-reserve banking system, a bank

Correct AnswerverifiedShow Answer

Table 16-5. -Refer to Table 16-5. If the Fed's reserve requirement is 9 percent, then what quantity of excess reserves does the Bank of Pleasantville now hold?

Correct AnswerverifiedShow Answer

Which of the following is an asset of a bank and a liability for its customers?

Correct AnswerverifiedShow Answer

A problem that the Fed faces when it attempts to control the money supply is that

Correct AnswerverifiedShow Answer

Which of the following is not included in either M1 or M2?

Correct AnswerverifiedShow Answer

Over one time horizon or another, Fed policy decisions influence

Correct AnswerverifiedShow Answer

A bank has a 10 percent reserve requirement, $4,000 in deposits, and has loaned out all it can given the reserve requirement.

Correct AnswerverifiedShow Answer

In a system of 100-percent-reserve banking, the purpose of a bank is to

Correct AnswerverifiedShow Answer

Today, bank runs are not a major problem for the U.S. banking system because

Correct AnswerverifiedShow Answer

The Fed's control of the money supply is not precise because

Correct AnswerverifiedShow Answer

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

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Correct Answer
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