Question 1

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

Accepted Answer

When the reserve requirement is less tha...

Question 2

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

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

Question 3

Sandra routinely uses currency to purchase her groceries.She is using money as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 4

If a bank has a reserve ratio of 8 percent,then

Accepted Answer

A)   government regulation requires the bank to use at least 8 percent of its deposits to make loans.
B)   the bank's ratio of loans to deposits is 8 percent.
C)   the bank keeps 8 percent of its deposits as reserves and loans out the rest.
D)   the bank keeps 8 percent of its assets as reserves and loans out the rest.E) A) and B)
F) A) and C)

Question 5

Which of the following is a store of value?

Accepted Answer

A)   currency
B)   U.S.government bonds
C)   fine art
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 6

If the reserve ratio increased from 10 percent to 20 percent,the money multiplier would

Accepted Answer

A)   rise from 10 to 20.
B)   rise from 5 to 10.
C)   fall from 10 to 5.
D)   not change.E) B) and C)
F) A) and D)

Question 7

The members of the Federal Reserve's Board of Governors

Accepted Answer

A)   are appointed by the president of the U.S.and confirmed by the U.S.Senate.
B)   serve six-year terms.
C)   are also the presidents of the regional Federal Reserve banks.
D)   share power equally,with no governor having any more influence or power than any other governor.E) None of the above
F) B) and C)

Question 8

If the Fed increases the reserve ratio from 4 percent to 10 percent,then the money multiplier

Accepted Answer

A)   decreases from 25 to 10.
B)   decreases from 20 to 10.
C)   increases from 10 to 25.
D)   increases from 10 to 20.E) None of the above
F) B) and D)

Question 9

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

Question 10

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 11

When the Federal Reserve conducts open-market operations to increase the money supply,it

Accepted Answer

A)   redeems Federal Reserve notes.
B)   buys government bonds from the public.
C)   raises the discount rate.
D)   decreases its lending to member banks.E) A) and B)
F) C) and D)

Question 12

Draw a simple T-account for First National Bank which has $5,000 of deposits,a required reserve ratio of 10 percent,and excess reserves of $300.Make sure your balance sheet balances.

Accepted Answer

The answer of Draw a simple T-account for First National...

Question 13

Scenario 21-1.
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 21-1.Assume that banks desire to continue holding the same ratio of excess reserves to deposits.What is the reserve requirement and what is the reserve ratio?

Accepted Answer

A)   2 percent,8 percent
B)   8 percent,10 percent
C)   10 percent,12.5 percent
D)   None of the above is correct.E) A) and D)
F) All of the above

Question 14

Which of the following does the Federal Reserve not do?

Accepted Answer

A)   conduct monetary policy
B)   act as a lender of last resort
C)   convert Federal Reserve Notes into gold
D)   serve as a bank regulatorE) A) and D)
F) B) and D)

Question 15

Scenario 21-2.
The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi.The local unit of currency is the taz.Aggregate banking statistics show that collectively the banks of Tazi hold 300 million tazes of required reserves,75 million tazes of excess reserves,have issued 7,500 million tazes of deposits,and hold 225 million tazes of Tazian Treasury bonds.Tazians prefer to use only demand deposits and so all money is on deposit at the bank.
-Refer to Scenario 21-2.Suppose the Bank of Tazi purchased 50 million tazes of Tazian Treasury Bonds from the banks.Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same.By how much does the money supply change?

Accepted Answer

A)   625 million tazes
B)   1,000 million tazes
C)   1,250 million tazes
D)   None of the above is correct.E) A) and D)
F) A) and C)

Question 16

Scenario 21-2.
The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi.The local unit of currency is the taz.Aggregate banking statistics show that collectively the banks of Tazi hold 300 million tazes of required reserves,75 million tazes of excess reserves,have issued 7,500 million tazes of deposits,and hold 225 million tazes of Tazian Treasury bonds.Tazians prefer to use only demand deposits and so all money is on deposit at the bank.
-Refer to Scenario 21-2.Assuming the only other thing Tazian banks have on their balance sheets is loans,what is the value of existing loans made by Tazian banks?

Accepted Answer

A)   6,900 million tazes
B)   7,125 million tazes
C)   7,350 million tazes
D)   None of the above is correct.E) B) and D)
F) B) and C)

Question 17

If a bank desires to hold no excess reserves,the reserve requirement is 5 percent,and it receives a new deposit of $1,000

Accepted Answer

A)   its required reserves increase by $50.
B)   its total reserves initially increase by $1,000.
C)   it will be able to make a new loan of up to $950.
D)   All of the above are correct.E) C) and D)
F) B) and C)

Question 18

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

Question 19

An open-market purchase

Accepted Answer

A)   increases the number of dollars and the number of bonds in the hands of the public.
B)   increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public.
C)   decreases the number of dollars and the number of bonds in the hands of the public.
D)   decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public.E) A) and B)
F) None of the above

Question 20

What is the difference between money and wealth?

Accepted Answer

Money is defined as the set of...

Exam 21: The Monetary System

Correct Answer
verified

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

Correct Answer
verified
When the reserve requirement is less tha...
View 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 Answer
verified

If a bank desires to hold no excess reserves,the reserve requirement is 5 percent,and it receives a new deposit of $1,000

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

If the reserve ratio increased from 10 percent to 20 percent,the money multiplier would

Correct Answer
verified

What is the difference between money and wealth?

Correct Answer
verified
Money is defined as the set of...
View Answer

Which of the following does the Federal Reserve not do?

Correct Answer
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Which of the following is a store of value?

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

The members of the Federal Reserve's Board of Governors

Correct Answer
verified

Sandra routinely uses currency to purchase her groceries.She is using money as a medium of exchange.

Correct Answer
verified

If a bank has a reserve ratio of 8 percent,then

Correct Answer
verified

An open-market purchase

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

Draw a simple T-account for First National Bank which has $5,000 of deposits,a required reserve ratio of 10 percent,and excess reserves of $300.Make sure your balance sheet balances.

Correct Answer
verified

When the Federal Reserve conducts open-market operations to increase the money supply,it

Correct Answer
verified

If the Fed increases the reserve ratio from 4 percent to 10 percent,then the money multiplier

Correct Answer
verified

Exam 21: The Monetary System

Correct AnswerverifiedShow Answer

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

Correct AnswerverifiedWhen the reserve requirement is less tha...View AnswerShow 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 a bank desires to hold no excess reserves,the reserve requirement is 5 percent,and it receives a new deposit of $1,000

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the reserve ratio increased from 10 percent to 20 percent,the money multiplier would

Correct AnswerverifiedShow Answer

What is the difference between money and wealth?

Correct AnswerverifiedMoney is defined as the set of...View AnswerShow Answer

Which of the following does the Federal Reserve not do?

Correct AnswerverifiedShow Answer

Which of the following is a store of value?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The members of the Federal Reserve's Board of Governors

Correct AnswerverifiedShow Answer

Sandra routinely uses currency to purchase her groceries.She is using money as a medium of exchange.

Correct AnswerverifiedShow Answer

If a bank has a reserve ratio of 8 percent,then

Correct AnswerverifiedShow Answer

An open-market purchase

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

Draw a simple T-account for First National Bank which has $5,000 of deposits,a required reserve ratio of 10 percent,and excess reserves of $300.Make sure your balance sheet balances.

Correct AnswerverifiedShow Answer

When the Federal Reserve conducts open-market operations to increase the money supply,it

Correct AnswerverifiedShow Answer

If the Fed increases the reserve ratio from 4 percent to 10 percent,then the money multiplier

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
When the reserve requirement is less tha...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Money is defined as the set of...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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
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