Question 1

The existence of money makes trade easier. How is it that money can also increase the standard of living?

Accepted Answer

The existence of money means the economy...

Question 2

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

Question 3

In a fractional-reserve banking system, an increase in reserve requirements

Accepted Answer

A)   increases both the money multiplier and the money supply.
B)   decreases both the money multiplier and the money supply.
C)   increases the money multiplier, but decreases the money supply.
D)   decreases the money multiplier, but increases the money supply.E) B) and D)
F) None of the above

Question 4

Table 29-5.
 
-Refer to Table 29-5. If the bank is holding $4,000 in excess reserves, then the reserve requirement with which it must comply is

Accepted Answer

A)   17 percent.
B)   12 percent.
C)   13 percent.
D)   14 percent.E) A) and B)
F) A) and C)

Question 5

Name three actions the Fed can take to increase the money supply.

Accepted Answer

Open-market purchases buy gove...

Question 6

The Federal Reserve

Accepted Answer

A)   was created in 1913.
B)   is the U.S.'s central bank.
C)   has other duties in addition to controlling the money supply.
D)   All of the above are correct.E) B) and C)
F) C) and D)

Question 7

When the Fed decreases the discount rate, banks will

Accepted Answer

A)   borrow more from the Fed and lend more to the public. The money supply increases.
B)   borrow more from the Fed and lend less to the public. The money supply decreases.
C)   borrow less from the Fed and lend more to the public. The money supply increases.
D)   borrow less from the Fed and lend less to the public. The money supply decreases.E) B) and C)
F) A) and D)

Question 8

Jim transfers money from his money market account to his savings account. This action

Accepted Answer

A)   reduced M1 and increases M2.
B)   increases M1 and reduces M2.
C)   has no effect on M1 or M2.
D)   increases M1 and M2.E) C) and D)
F) B) and D)

Question 9

When the Fed buys government bonds,

Accepted Answer

A)   the money supply increases and the federal funds rate increases.
B)   the money supply increases and the federal funds rate decreases.
C)   the money supply decreases and the federal funds rate increases.
D)   the money supply decreases and the federal funds rate decreases.E) A) and B)
F) A) and C)

Question 10

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) All of the above
F) C) and D)

Question 11

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 D)
F) A) and C)

Question 12

Bottles of very fine wine are less liquid than demand deposits.

Accepted Answer

A) True 
 B)False

Question 13

Compare the Board of Governors and the Federal Open Market Committee.

Accepted Answer

The Board of Governors runs the Federal ...

Question 14

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) A) and B)
F) None of the above

Question 15

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) A) and C)

Question 16

Why is the president of the New York Fed always a voting member of the FOMC?

Accepted Answer

New York is the financial capitol of the...

Question 17

When the Fed makes open-market sales bank

Accepted Answer

A)   withdrawals and lending increase.
B)   withdrawals increase and lending decreases.
C)   deposits and lending increase.
D)   deposits increase and lending decreases.E) None of the above
F) All of the above

Question 18

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 19

A bank has $1000 in deposits and maintains a 12 percent reserve ratio. Its reserves are $ .

Accepted Answer

The answer of A bank has $1000 in deposits and...

Question 20

The Fed bonds when it conducts an open-market purchase. This action the money supply.

Accepted Answer

The answer of The Fed bonds when it conducts an...

Exam 16: The Monetary System

The Federal Reserve

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The Fed bonds when it conducts an open-market purchase. This action the money supply.

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Jim transfers money from his money market account to his savings account. This action

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The existence of money makes trade easier. How is it that money can also increase the standard of living?

Correct AnswerverifiedThe existence of money means the economy...View AnswerShow Answer

Name three actions the Fed can take to increase the money supply.

Correct AnswerverifiedOpen-market purchases buy gove...View AnswerShow Answer

When the Fed makes open-market sales bank

Correct AnswerverifiedShow Answer

A bank has $1000 in deposits and maintains a 12 percent reserve ratio. Its reserves are $ .

Correct AnswerverifiedShow Answer

Bottles of very fine wine are less liquid than demand deposits.

Correct AnswerverifiedShow Answer

Table 29-5. -Refer to Table 29-5. If the bank is holding $4,000 in excess reserves, then the reserve requirement with which it must comply is

Correct AnswerverifiedShow Answer

Why is the president of the New York Fed always a voting member of the FOMC?

Correct AnswerverifiedNew York is the financial capitol of the...View AnswerShow Answer

When the Fed buys government bonds,

Correct AnswerverifiedShow Answer

In a system of 100-percent-reserve banking,

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

In a fractional-reserve banking system, an increase in reserve requirements

Correct AnswerverifiedShow Answer

When the Fed decreases the discount rate, banks will

Correct AnswerverifiedShow Answer

Compare the Board of Governors and the Federal Open Market Committee.

Correct AnswerverifiedThe Board of Governors runs the Federal ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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The existence of money means the economy...
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Open-market purchases buy gove...
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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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New York is the financial capitol of the...
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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...
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Correct Answer
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Correct Answer
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Correct Answer
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The Board of Governors runs the Federal ...
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Correct Answer
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Correct Answer
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