Question 1

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) All of the above
F) None of the above

Question 2

What is the difference between money and wealth?

Accepted Answer

Money is defined as the set of...

Question 3

Reserves increase if the Federal Reserve

Accepted Answer

A)   raises the discount rate or auctions more credit.
B)   raises the discount rate but not if it auctions more credit.
C)   lowers the discount rate or auctions more credit.
D)   lowers the discount rate but not if it auctions more credit.E) A) and B)
F) B) and C)

Question 4

Roundabout trade decreases production.

Accepted Answer

A) True 
 B)False

Question 5

The agency responsible for regulating the U.S. monetary system is the

Accepted Answer

A)   U.S. Treasury
B)   Federal Reserve
C)   Department of Justice
D)   Federal Trade CommissionE) A) and B)
F) None of the above

Question 6

The amount of currency per person in the United States is about

Accepted Answer

A)   $110.
B)   $300.
C)   $2,450.
D)   $4,490.E) A) and C)
F) None of the above

Question 7

If the reserve ratio is 5 percent, banks do not hold excess reserves, and people do not hold currency, then when the Fed purchases $20 million worth of government bonds, bank reserves

Accepted Answer

A)   increase by $20 million and the money supply eventually increases by $400 million.
B)   decrease by $20 million and the money supply eventually decreases by $400 million.
C)   increase by $20 million and the money supply eventually increases by $100 million.
D)   decrease by $20 million and the money supply eventually decreases by $100 million.E) B) and C)
F) A) and D)

Question 8

Which of the three functions of money are commonly met by each of the following assets in the U.S. economy?
a. paper dollar
b. precious metals
c. collectibles such as baseball cards, stamps, and antiques

Accepted Answer

a. medium of exchang...

Question 9

Economists use the term "money" to refer to

Accepted Answer

A)   all wealth.
B)   all assets, including real assets and financial assets.
C)   all financial assets, but not real assets.
D)   those types of wealth that are regularly accepted by sellers in exchange for goods and services.E) None of the above
F) All of the above

Question 10

Table 29-8
 
-Refer to Table 29-8. This bank's leverage ratio is

Accepted Answer

A)   2.
B)   50.
C)   13.3.
D)   7.5.E) A) and B)
F) A) and C)

Question 11

Small time deposits 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) A) and C)
F) B) and D)

Question 12

An open-market sale

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) A) and C)

Question 13

Suppose a bank has $3,000 in reserves, $25,000 of deposits, and a 10 percent reserve requirement. What is the amount of excess reserves?

Accepted Answer

The answer of Suppose a bank has $3,000 in reserves,...

Question 14

Which of the following is not a reason the New York Federal Reserve Bank president always gets to vote at the Federal Open Market Committee meetings?

Accepted Answer

A)   New York is the traditional financial center of the U.S. economy.
B)   All Fed purchases and sales of bonds go through the New York Fed's trading desk.
C)   New York has higher population than other cities in the U.S.
D)   All of the above are reasons.E) C) and D)
F) B) and C)

Question 15

The Fed sets the interest that borrowers pay on loans from

Accepted Answer

A)   the discount window and the term auction facility
B)   the discount window but not the term auction facility
C)   the term auction facility but not the discount window
D)   neither the discount window nor the term auction facilityE) A) and C)
F) A) and B)

Question 16

The fractional reserve characteristic of the banking system allows banks to create money and also create wealth from bank deposits. Describe why this statement is or is not true.

Accepted Answer

This statement is not true.
Banks can cr...

Question 17

Commodity money is

Accepted Answer

A)   backed by gold.
B)   the principal type of money in use today.
C)   money with intrinsic value.
D)   receipts created in international trade that are used as a medium of exchange.E) B) and D)
F) B) and C)

Question 18

Bank runs

Accepted Answer

A)   will affect neither the money supply nor the money multiplier.
B)   increase the money supply.
C)   can be neither prevented nor mitigated by the Federal Reserve.
D)   are a problem because banks only hold a fraction of deposits as reserves.E) B) and C)
F) C) and D)

Question 19

The interest rate that the Fed charges banks that borrow reserves from it is the

Accepted Answer

A)   federal funds rate.
B)   discount rate.
C)   reserve requirement.
D)   prime rate.E) All of the above
F) A) and B)

Question 20

The Federal Open Market Committee meets approximately

Accepted Answer

A)   every three weeks
B)   every six weeks
C)   every 3 months
D)   every 6 months.E) A) and C)
F) B) and D)

Exam 21: The Monetary System

The interest rate that the Fed charges banks that borrow reserves from it is the

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What is the difference between money and wealth?

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

Small time deposits are included in

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Reserves increase if the Federal Reserve

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The agency responsible for regulating the U.S. monetary system is the

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Commodity money is

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Roundabout trade decreases production.

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The amount of currency per person in the United States is about

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An open-market sale

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Which of the following is not a reason the New York Federal Reserve Bank president always gets to vote at the Federal Open Market Committee meetings?

Correct AnswerverifiedShow Answer

Bank runs

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The fractional reserve characteristic of the banking system allows banks to create money and also create wealth from bank deposits. Describe why this statement is or is not true.

Correct AnswerverifiedThis statement is not true.Banks can cr...View AnswerShow Answer

Economists use the term "money" to refer to

Correct AnswerverifiedShow Answer

The Federal Open Market Committee meets approximately

Correct AnswerverifiedShow Answer

If the reserve ratio is 5 percent, banks do not hold excess reserves, and people do not hold currency, then when the Fed purchases $20 million worth of government bonds, bank reserves

Correct AnswerverifiedShow Answer

Which of the three functions of money are commonly met by each of the following assets in the U.S. economy? a. paper dollar b. precious metals c. collectibles such as baseball cards, stamps, and antiques

Correct Answerverifieda. medium of exchang...View AnswerShow Answer

Suppose a bank has $3,000 in reserves, $25,000 of deposits, and a 10 percent reserve requirement. What is the amount of excess reserves?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Fed sets the interest that borrowers pay on loans from

Correct AnswerverifiedShow Answer

Table 29-8 -Refer to Table 29-8. This bank's leverage ratio is

Correct AnswerverifiedShow Answer

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Money is defined as the set of...
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This statement is not true.
Banks can cr...
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a. medium of exchang...
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