Question 1

In a system of 100-percent-reserve banking,

Accepted Answer

A)  banks do not accept deposits.
B)  banks do not influence the supply of money.
C)  loans are the only asset item for banks.
D)  All of the above are correct.E) B) and C)
F) All of the above

Question 2

If the public decides to hold more currency and fewer deposits in banks, bank reserves

Accepted Answer

A)  decrease and the money supply eventually decreases.
B)  decrease but the money supply does not change.
C)  increase and the money supply eventually increases.
D)  increase but the money supply does not change.E) A) and B)
F) A) and C)

Question 3

The Soviet government in the 1980's never abandoned the ruble as the official currency. However, the people of Moscow preferred to accept

Accepted Answer

A)  cigarettes in exchange for goods and services, because they were convinced that cigarettes were going to soon become hard to come by.
B)  American dollars in exchange for goods and services, because rubles were extremely hard to come by.
C)  goods such as cigarettes or American dollars in exchange for goods and services, reminding us of the fact that government decree by itself is not sufficient for the success of a commodity money.
D)  All of the above are correct.E) A) and B)
F) A) and D)

Question 4

As banks create money, they create wealth.

Accepted Answer

A) True 
 B)False

Question 5

One surprising thing about the U.S. money stock is that

Accepted Answer

A)  banks hold so much currency relative to the public.
B)  the public holds so much currency relative to banks.
C)  there is so little currency per person.
D)  there is so much currency per person.E) A) and C)
F) A) and B)

Question 6

Which of the following groups is largely responsible for carrying out the Fed's tasks of regulating banks and ensuring the health of the financial system?

Accepted Answer

A)  FOMC
B)  the Board of Governors
C)  the New York Fed
D)  the regional Federal Reserve BanksE) A) and B)
F) A) and C)

Question 7

Credit card limits 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) C) and D)
F) A) and B)

Question 8

If people decide to hold more currency relative to deposits, the money supply

Accepted Answer

A)  falls. The Fed could lessen the impact of this by buying Treasury bonds.
B)  falls. The Fed could lessen the impact of this by selling Treasury bonds.
C)  rises. The Fed could lessen the impact of this by buying Treasury bonds.
D)  rises. The Fed could lessen the impact of the by selling Treasury bonds.E) A) and C)
F) B) and C)

Question 9

An increase in the reserve requirement ratio increases reserves and decreases the money supply.

Accepted Answer

A) True 
 B)False

Question 10

Suppose banks desire to hold no excess reserves and that the Fed has set a reserve requirement of 10 percent. If you deposit $9,000 into First Jayhawk Bank,

Accepted Answer

A)  First Jayhawk's required reserves increase by $900.
B)  First Jayhawk will be able to lend out $8,100.
C)  First Jayhawk's assets and liabilities both will increase by $9,000.
D)  All of the above are correct.E) All of the above
F) C) and D)

Question 11

If the money multiplier decreased from 20 to 12.5, then

Accepted Answer

A)  the Fed increased the reserve ratio from 5 percent to 8 percent.
B)  the Fed increased the fed funds rate from 5 percent to 8 percent..
C)  the Fed decreased the reserve ratio from 8 percent to 5 percent.
D)  the Fed decreased the fed funds rate from 8 percent to 5 percent.E) A) and D)
F) All of the above

Question 12

When you purchase school supplies at the book store using cash, you are using money as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 13

On a bank's T-account, which are part of the banks liabilities?

Accepted Answer

A)  both deposits made by its customers and reserves
B)  deposits made by its customers but not reserves
C)  reserves but not deposits made by its customers
D)  neither deposits made by its customers nor reservesE) C) and D)
F) B) and C)

Question 14

U.S. dollars are an example of commodity money and hides used to make trades are an example of fiat money.

Accepted Answer

A) True 
 B)False

Question 15

The Fed's primary tool to change the money supply is

Accepted Answer

A)  changing the interest rate on reserves.
B)  changing the reserve requirement.
C)  conducting open market operations.
D)  redeeming Federal Reserve notes.E) A) and B)
F) None of the above

Question 16

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 17

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 18

Table 16-4. 
-Refer to Table 16-4. Suppose the bank faces a reserve requirement of 10 percent. Starting from the situation as depicted by the T-account, a customer deposits an additional $50,000 into his account at the bank. If the bank takes no other action it will

Accepted Answer

A)  have $65,000 in excess reserves.
B)  have $55,000 in excess reserves.
C)  need to raise an additional $5,000 of reserves to meet the reserve requirement ratio
D)  None of the above is correct.E) B) and C)
F) B) and D)

Question 19

The set of items that serve as media of exchange clearly includes

Accepted Answer

A)  balances that lie behind debit cards.
B)  demand deposits.
C)  other checkable depositis.
D)  All of the above are correct.E) None of the above
F) A) and B)

Question 20

Given the following information, what are the values of M1 and M2? Small time deposits
$1,100 billion
Demand deposits and other checkable deposits
$800 billion
Savings deposits
$1,350 billion
Money market mutual funds
$900 billion
Traveler's checks
$30 billion
Large time deposits
$750 billion
Currency
$150 billion
Miscellaneous categories in M2
$40 billion

Accepted Answer

A)  M1 = $830 billion, M2 = $4,370 billion.
B)  M1 = $980 billion, M2 = $4,370 billion.
C)  M1 = $980 billion, M2 = $3, 390 billion.
D)  M1 = $1,020 billion, M2 = $3,390 billion.E) A) and C)
F) None of the above

Exam 16: The Monetary System

Correct Answer
verified

As banks create money, they create wealth.

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

The set of items that serve as media of exchange clearly includes

Correct Answer
verified

If people decide to hold more currency relative to deposits, the money supply

Correct Answer
verified

An increase in the reserve requirement ratio increases reserves and decreases the money supply.

Correct Answer
verified

If the money multiplier decreased from 20 to 12.5, then

Correct Answer
verified

The Soviet government in the 1980's never abandoned the ruble as the official currency. However, the people of Moscow preferred to accept

Correct Answer
verified

Credit card limits are included in

Correct Answer
verified

Table 16-4. -Refer to Table 16-4. Suppose the bank faces a reserve requirement of 10 percent. Starting from the situation as depicted by the T-account, a customer deposits an additional $50,000 into his account at the bank. If the bank takes no other action it will

Correct Answer
verified

On a bank's T-account, which are part of the banks liabilities?

Correct Answer
verified

If the public decides to hold more currency and fewer deposits in banks, bank reserves

Correct Answer
verified

Which of the following groups is largely responsible for carrying out the Fed's tasks of regulating banks and ensuring the health of the financial system?

Correct Answer
verified

In a system of 100-percent-reserve banking,

Correct Answer
verified

Suppose banks desire to hold no excess reserves and that the Fed has set a reserve requirement of 10 percent. If you deposit $9,000 into First Jayhawk Bank,

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

One surprising thing about the U.S. money stock is that

Correct Answer
verified

U.S. dollars are an example of commodity money and hides used to make trades are an example of fiat money.

Correct Answer
verified

When you purchase school supplies at the book store using cash, you are using money as a medium of exchange.

Correct Answer
verified

The Fed's primary tool to change the money supply is

Correct Answer
verified

Exam 16: The Monetary System

Correct AnswerverifiedShow Answer

As banks create money, they create wealth.

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

The set of items that serve as media of exchange clearly includes

Correct AnswerverifiedShow Answer

If people decide to hold more currency relative to deposits, the money supply

Correct AnswerverifiedShow Answer

An increase in the reserve requirement ratio increases reserves and decreases the money supply.

Correct AnswerverifiedShow Answer

If the money multiplier decreased from 20 to 12.5, then

Correct AnswerverifiedShow Answer

The Soviet government in the 1980's never abandoned the ruble as the official currency. However, the people of Moscow preferred to accept

Correct AnswerverifiedShow Answer

Credit card limits are included in

Correct AnswerverifiedShow Answer

Table 16-4. -Refer to Table 16-4. Suppose the bank faces a reserve requirement of 10 percent. Starting from the situation as depicted by the T-account, a customer deposits an additional $50,000 into his account at the bank. If the bank takes no other action it will

Correct AnswerverifiedShow Answer

On a bank's T-account, which are part of the banks liabilities?

Correct AnswerverifiedShow Answer

If the public decides to hold more currency and fewer deposits in banks, bank reserves

Correct AnswerverifiedShow Answer

Which of the following groups is largely responsible for carrying out the Fed's tasks of regulating banks and ensuring the health of the financial system?

Correct AnswerverifiedShow Answer

In a system of 100-percent-reserve banking,

Correct AnswerverifiedShow Answer

Suppose banks desire to hold no excess reserves and that the Fed has set a reserve requirement of 10 percent. If you deposit $9,000 into First Jayhawk Bank,

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

One surprising thing about the U.S. money stock is that

Correct AnswerverifiedShow Answer

U.S. dollars are an example of commodity money and hides used to make trades are an example of fiat money.

Correct AnswerverifiedShow Answer

When you purchase school supplies at the book store using cash, you are using money as a medium of exchange.

Correct AnswerverifiedShow Answer

The Fed's primary tool to change the money supply is

Correct AnswerverifiedShow Answer

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