Question 1

Explain how each of the following changes the money supply.
a. the Fed buys bonds
b. the Fed auctions credit
c. the Fed raises the discount rate
d. the Fed raises the reserve requirement

Accepted Answer

a. If the Fed buys bonds, it pays for th...

Question 2

A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can given the reserve requirement.

Accepted Answer

A)   It has $80 in reserves and $9,920 in loans.
B)   It has $800 in reserves and $9,200 in loans.
C)   It has $1,250 in reserves and $8,750 in loans.
D)   None of the above is correct.E) All of the above
F) C) and D)

Question 3

The president of each regional Federal Reserve Bank is appointed by

Accepted Answer

A)   the U.S. president with the approval of the Senate.
B)   the Board of Governors.
C)   the voting members of the Federal Open Market Committee.
D)   the board of directors of that regional Federal Reserve Bank.E) None of the above
F) A) and B)

Question 4

The Federal Reserve can alter the size of the money supply by changing reserves or changing reserve requirements.

Accepted Answer

A) True 
 B)False

Question 5

If banks hold any amount of their deposits in reserve, then they do not have the ability to influence the money supply.

Accepted Answer

A) True 
 B)False

Question 6

Trace the effects on the money supply when the Fed decreases the discount rate.

Accepted Answer

The discount rate represents the cost of...

Question 7

Which of the following items is not included in the most narrow definition of money, M1?

Accepted Answer

A)   currency
B)   savings deposits
C)   traveler's checks
D)   demand depositsE) B) and C)
F) A) and B)

Question 8

Which list ranks assets from most to least liquid?

Accepted Answer

A)   currency, demand deposits, money market mutual funds
B)   currency, money market mutual funds, demand deposits
C)   money market mutual funds, demand deposits, currency
D)   demand deposits, money market mutual funds, currencyE) None of the above
F) B) and C)

Question 9

All Fed purchases and sales of

Accepted Answer

A)   corporate stocks and bonds are conducted at the New York Fed's trading desk.
B)   government bonds are conducted at the New York Fed's trading desk.
C)   real estate and other real assets are conducted by the Federal Open Market Committee.
D)   All of the above are correct.E) B) and C)
F) C) and D)

Question 10

John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account to purchase $2,500 worth of traveler's checks. As a result of these changes,

Accepted Answer

A)   M1 increases by $2,500 and M2 decrease by $2,500.
B)   M1 increases by $2,500 and M2 stays the same.
C)   M1 and M2 stay the same.
D)   M1 decreases by $2,500 and M2 increases by $2,500.E) None of the above
F) A) and B)

Question 11

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 12

As opposed to a payments system based on barter, a payments system based on money

Accepted Answer

A)   requires a double coincidence of wants.
B)   leads to less specialization.
C)   makes trades less costly.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 13

If the reserve ratio is 100-percent, then a new deposit of $1000 into a bank account

Accepted Answer

A)   eventually increases the money supply by $1000.
B)   leaves the size of the money supply unchanged.
C)   eventually decreases the size of the money supply by $1000.
D)   eventually increases the money supply by $2000.E) None of the above
F) C) and D)

Question 14

You saved $500 in currency in your piggy bank to purchase a new laptop. The $500 you kept in your piggy bank illustrates money's function as a . The laptop's price is posted as $500. The $500 price illustrates money's function as a . You use the $500 to purchase the laptop. This transaction illustrates money's function as a ______.

Accepted Answer

A)   store of value, medium of exchange, unit of account
B)   store of value, unit of account, medium of exchange
C)   medium of exchange, unit of account, store of value
D)   medium of exchange, store of value, unit of accountE) B) and D)
F) A) and C)

Question 15

When the federal funds rate is below the target rate, the Fed will bonds.
This action will the money supply.

Accepted Answer

The answer of When the federal funds rate is below...

Question 16

The Fed decreases reserves if it conducts open market

Accepted Answer

A)   purchases or auctions term credit.
B)   purchases but not if it auctions term credit
C)   sales or auctions term credit
D)   sales but not if it auctions term creditE) B) and D)
F) A) and D)

Question 17

If the Fed increases the reserve ratio from 5 percent to 12.5 percent, then the money multiplier

Accepted Answer

A)   decreases from 20 to 8.
B)   decreases from 12.5 to 5.
C)   increases from 8 to 20.
D)   increases from 5 to 12.5.E) B) and D)
F) A) and D)

Question 18

Table 29-1.
The information in the table pertains to an imaginary economy.
 
-Refer to Table 29-1. What is the value of M2 in billions of dollars?

Accepted Answer

A)   $9,815 billion
B)   $8,315 billion
C)   $7,565 billion
D)   $7,405 billionE) C) and D)
F) B) and D)

Question 19

List two examples of commodity money.

Accepted Answer

Commodity money refers to mone...

Question 20

Which of the following is not a central bank?

Accepted Answer

A)   The Bank of England
B)   The Bank of Japan
C)   The Bank of America
D)   The Federal ReserveE) All of the above
F) B) and C)

Exam 21: The Monetary System

A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can given the reserve requirement.

Correct Answer
verified

If the Fed increases the reserve ratio from 5 percent to 12.5 percent, then the money multiplier

Correct Answer
verified

Explain how each of the following changes the money supply. a. the Fed buys bonds b. the Fed auctions credit c. the Fed raises the discount rate d. the Fed raises the reserve requirement

Correct Answer
verified
a. If the Fed buys bonds, it pays for th...
View Answer

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

Correct Answer
verified

Which of the following items is not included in the most narrow definition of money, M1?

Correct Answer
verified

The Federal Reserve can alter the size of the money supply by changing reserves or changing reserve requirements.

Correct Answer
verified

If banks hold any amount of their deposits in reserve, then they do not have the ability to influence the money supply.

Correct Answer
verified

The president of each regional Federal Reserve Bank is appointed by

Correct Answer
verified

Which of the following is not a central bank?

Correct Answer
verified

Correct Answer
verified

Which list ranks assets from most to least liquid?

Correct Answer
verified

List two examples of commodity money.

Correct Answer
verified
Commodity money refers to mone...
View Answer

All Fed purchases and sales of

Correct Answer
verified

John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account to purchase $2,500 worth of traveler's checks. As a result of these changes,

Correct Answer
verified

Trace the effects on the money supply when the Fed decreases the discount rate.

Correct Answer
verified
The discount rate represents the cost of...
View Answer

Table 29-1. The information in the table pertains to an imaginary economy. -Refer to Table 29-1. What is the value of M2 in billions of dollars?

Correct Answer
verified

When the federal funds rate is below the target rate, the Fed will bonds. This action will the money supply.

Correct Answer
verified

The Fed decreases reserves if it conducts open market

Correct Answer
verified

If the reserve ratio is 100-percent, then a new deposit of $1000 into a bank account

Correct Answer
verified

As opposed to a payments system based on barter, a payments system based on money

Correct Answer
verified

Exam 21: The Monetary System

A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can given the reserve requirement.

Correct AnswerverifiedShow Answer

If the Fed increases the reserve ratio from 5 percent to 12.5 percent, then the money multiplier

Correct AnswerverifiedShow Answer

Explain how each of the following changes the money supply. a. the Fed buys bonds b. the Fed auctions credit c. the Fed raises the discount rate d. the Fed raises the reserve requirement

Correct Answerverifieda. If the Fed buys bonds, it pays for th...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following items is not included in the most narrow definition of money, M1?

Correct AnswerverifiedShow Answer

The Federal Reserve can alter the size of the money supply by changing reserves or changing reserve requirements.

Correct AnswerverifiedShow Answer

If banks hold any amount of their deposits in reserve, then they do not have the ability to influence the money supply.

Correct AnswerverifiedShow Answer

The president of each regional Federal Reserve Bank is appointed by

Correct AnswerverifiedShow Answer

Which of the following is not a central bank?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which list ranks assets from most to least liquid?

Correct AnswerverifiedShow Answer

List two examples of commodity money.

Correct AnswerverifiedCommodity money refers to mone...View AnswerShow Answer

All Fed purchases and sales of

Correct AnswerverifiedShow Answer

John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account to purchase $2,500 worth of traveler's checks. As a result of these changes,

Correct AnswerverifiedShow Answer

Trace the effects on the money supply when the Fed decreases the discount rate.

Correct AnswerverifiedThe discount rate represents the cost of...View AnswerShow Answer

Table 29-1. The information in the table pertains to an imaginary economy. -Refer to Table 29-1. What is the value of M2 in billions of dollars?

Correct AnswerverifiedShow Answer

When the federal funds rate is below the target rate, the Fed will bonds. This action will the money supply.

Correct AnswerverifiedShow Answer

The Fed decreases reserves if it conducts open market

Correct AnswerverifiedShow Answer

If the reserve ratio is 100-percent, then a new deposit of $1000 into a bank account

Correct AnswerverifiedShow Answer

As opposed to a payments system based on barter, a payments system based on money

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a. If the Fed buys bonds, it pays for th...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Commodity money refers to mone...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The discount rate represents the cost of...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified