Question 1

Which of the following is a liability of a bank and an asset of its customers?

Accepted Answer

A)   deposits of its customers and loans to its customers
B)   deposits of its customers but not loans to its customers
C)   loans of its customers but not the deposits of its customers
D)   neither the deposits of its customers nor the loans to its customersE) A) and C)
F) A) and B)

Question 2

Which of the following is not included in M1?

Accepted Answer

A)   currency
B)   demand deposits
C)   traveler's checks
D)   credit cardsE) B) and D)
F) A) and B)

Question 3

Suppose banks desire to hold no excess reserves and that the Fed has set a reserve requirement of 6 percent. If you deposit $8,000 into First Raven Bank,

Accepted Answer

A)   First Raven's required reserves increase by $480.
B)   First Raven will be able to lend out $7,520.
C)   First Raven's assets and liabilities both will increase by $8,000.
D)   All of the above are correct.E) B) and D)
F) A) and D)

Question 4

Who was reappointed Chair of the Board of Governors in 2009 by President Barrack Obama?

Accepted Answer

A)   Ben Bernanke
B)   Christina Romer
C)   Timothy Geithner
D)   Bernie MadoffE) None of the above
F) B) and C)

Question 5

The Fed purchases $200 worth of government bonds from the public. The reserve requirement is 12.5 percent, people hold no currency, and the banking system keeps no excess reserves. The U.S. money supply eventually increases by

Accepted Answer

A)   $25.
B)   between $200 and $300.
C)   $1,600.
D)   $2,500.E) A) and D)
F) A) and C)

Question 6

Fractional reserve banking is a system where banks must hold an amount of cash based on a percentage of its loans.

Accepted Answer

A) True 
 B)False

Question 7

In Ugoland, the money supply is $8 million and reserves are $1 million. Assuming that people hold only deposits and no currency, and that banks hold no excess reserves, then the reserve requirement is

Accepted Answer

A)   14 percent.
B)   12.5 percent.
C)   8 percent.
D)   None of the above is correct.E) B) and C)
F) A) and D)

Question 8

The Federal Reserve Board of Governors

Accepted Answer

A)   rotate each four years.
B)   are appointed by the President and confirmed by the Senate.
C)   are elected by popular vote.
D)   hold lifetime appointments.E) A) and D)
F) None of the above

Question 9

To decrease the money supply, the Fed could

Accepted Answer

A)   sell government bonds.
B)   increase the discount rate.
C)   increase the reserve requirement.
D)   All of the above are correct.E) A) and C)
F) All of the above

Question 10

When the Fed conducts open-market purchases,

Accepted Answer

A)   banks buy Treasury securities from Fed, which increases the money supply.
B)   banks buy Treasury securities from the Fed, which decreases the money supply.
C)   it buys Treasury securities, which increases the money supply.
D)   it buys Treasury securities, which decreases the money supply.E) C) and D)
F) B) and C)

Question 11

Consider the following traders who meet.  Which, if any, pairs of traders has a double coincidence of wants?

Accepted Answer

A)   Bill with Mike
B)   Time with Amy
C)   Bill with Mike, and Tim with Amy
D)   Bill with Tim, and Mike with AmyE) None of the above
F) All of the above

Question 12

People can write checks against

Accepted Answer

A)   demand deposits and money market mutual funds
B)   demand deposits but not money market mutual funds
C)   money market mutual funds but not demand deposits
D)   neither demand deposits nor money market mutual fundsE) A) and D)
F) A) and C)

Question 13

During recessions, banks typically choose to hold more excess reserves relative to their deposits. This action

Accepted Answer

A)   increases the money multiplier and increases the money supply.
B)   decreases the money multiplier and decreases the money supply.
C)   does not change the money multiplier, but increases the money supply.
D)   does not change the money multiplier, but decreases the money supply.E) None of the above
F) B) and C)

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) A) and D)

Question 15

Monetary policy is determined by a committee whose voting members include all the presidents of the regional Federal Reserve Banks.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is correct?

Accepted Answer

A)   The Federal Reserve has 14 regional banks. The Board of Governors has 12 members who serve 7-year terms.
B)   The Federal Reserve has 14 regional banks. The Board of Governors has 7 members who serve 14-year terms.
C)   The Federal Reserve has 12 regional banks. The Board of Governors has 12 members who serve 7-year terms.
D)   The Federal Reserve has 12 regional banks. The Board of Governors has 7 members who serve 14-year terms.E) C) and D)
F) A) and C)

Question 17

Sam wants to trade eggs for sausage. Sally wants to trade sausage for eggs. Sam and Sally have a double- coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 18

Credit cards are

Accepted Answer

A)   a medium of exchange.
B)   counted as part of M2 but not as part of M1.
C)   important for analyzing the monetary system.
D)   All of the above are correct.E) A) and D)
F) A) and B)

Question 19

The primary tool used by the Federal Reserve to change the money supply is .

Accepted Answer

open-marke...

Question 20

M1 includes savings deposits.

Accepted Answer

A) True 
 B)False

Exam 29: The Monetary System

In Ugoland, the money supply is $8 million and reserves are $1 million. Assuming that people hold only deposits and no currency, and that banks hold no excess reserves, then the reserve requirement is

Correct AnswerverifiedShow Answer

The Fed purchases $200 worth of government bonds from the public. The reserve requirement is 12.5 percent, people hold no currency, and the banking system keeps no excess reserves. The U.S. money supply eventually increases by

Correct AnswerverifiedShow Answer

The Federal Reserve Board of Governors

Correct AnswerverifiedShow Answer

Which of the following is a liability of a bank and an asset of its customers?

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To decrease the money supply, the Fed could

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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

Who was reappointed Chair of the Board of Governors in 2009 by President Barrack Obama?

Correct AnswerverifiedShow Answer

Credit cards are

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Sam wants to trade eggs for sausage. Sally wants to trade sausage for eggs. Sam and Sally have a double- coincidence of wants.

Correct AnswerverifiedShow Answer

The primary tool used by the Federal Reserve to change the money supply is .

Correct Answerverifiedopen-marke...View AnswerShow Answer

Monetary policy is determined by a committee whose voting members include all the presidents of the regional Federal Reserve Banks.

Correct AnswerverifiedShow Answer

When the Fed conducts open-market purchases,

Correct AnswerverifiedShow Answer

Suppose banks desire to hold no excess reserves and that the Fed has set a reserve requirement of 6 percent. If you deposit $8,000 into First Raven Bank,

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

During recessions, banks typically choose to hold more excess reserves relative to their deposits. This action

Correct AnswerverifiedShow Answer

Fractional reserve banking is a system where banks must hold an amount of cash based on a percentage of its loans.

Correct AnswerverifiedShow Answer

People can write checks against

Correct AnswerverifiedShow Answer

Consider the following traders who meet. Which, if any, pairs of traders has a double coincidence of wants?

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M1 includes savings deposits.

Correct AnswerverifiedShow Answer

Which of the following is not included in M1?

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