Question 1

In an economy that relies on barter, trade requires a double-coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 2

Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 10 percent, and excess reserves are $3 billion. What is the level of loans?

Accepted Answer

A)  $3,603 billion
B)  $3,600 billion
C)  $3,573 billion
D)  $3,570 billionE) B) and C)
F) A) and D)

Question 3

Designers of the Federal Reserve System were concerned that the Fed might form policy favorable to one part of the country or to a particular party. What are some ways that the organization of the Fed reflects such concerns?

Accepted Answer

1. The president agpaints the Board of G...

Question 4

At the Federal Reserve,

Accepted Answer

A)  the nation's monetary and fiscal policies are made by the Federal Open Market Committee, which meets about every six weeks.
B)  the nation's monetary and fiscal policies are made by the Federal Open Market Committee, which meets twice a year.
C)  the nation's monetary policy is made by the Federal Open Market Committee, which meets about every six weeks.
D)  the nation's monetary policy is made by the Federal Open Market Committee, which meets twice a year.E) C) and D)
F) A) and B)

Question 5

Money market mutual funds are included in

Accepted Answer

A)  M1 but not M2.
B)  M1 and M2.
C)  M2 but not M1.
D)  neither M1 nor M2.E) B) and D)
F) B) and C)

Question 6

Money is the only asset that functions as a store of value.

Accepted Answer

A) True 
 B)False

Question 7

Table 16-5. 
-Refer to Table 16-5. Assume the Fed's reserve requirement is 9 percent and all banks besides the Bank of Pleasantville are exactly in compliance with the 9 percent requirement. Further assume that people hold only deposits and no currency. Starting from the situation as depicted by the T-account, if the Bank of Pleasantville decides to make new loans so as to end up with no excess reserves, then by how much does the money supply eventually increase?

Accepted Answer

A)  $555.00.
B)  $1,200.00.
C)  $1,777.78.
D)  $2,222.22.E) All of the above
F) B) and C)

Question 8

Other things the same if reserve requirements are decreased, the reserve ratio

Accepted Answer

A)  decreases, the money multiplier increases, and the money supply decreases.
B)  increases, the money multiplier increases, and the money supply increases.
C)  decreases, the money multiplier increases, and the money supply increases.
D)  increases, the money multiplier increases, and the money supply decreases.E) C) and D)
F) B) and C)

Question 9

If the reserve ratio is 8 percent, then $4,500 of additional reserves can create up to

Accepted Answer

A)  $4,500 of new money.
B)  $48, 913 of new money.
C)  $56,250 of new money.
D)  $75,000 of new money.E) B) and D)
F) C) and D)

Question 10

When conducting an open-market purchase, the Fed

Accepted Answer

A)  buys government bonds, and in so doing increases the money supply.
B)  buys government bonds, and in so doing decreases the money supply.
C)  sells government bonds, and in so doing increases the money supply.
D)  sells government bonds, and in so doing decreases the money supply.E) A) and B)
F) All of the above

Question 11

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) None of the above

Question 12

Gary's wealth is $1 million. Economists would say that Gary has $1 million worth of money.

Accepted Answer

A) True 
 B)False

Question 13

Consider the following traders who meet.   Bab  has an apple  wants an arange  Ted  has an arange  wants a peach  Mary  has a pear  wants an apple  Alice  has a peach  wants an arange \begin{array} { | l | l | l | } \hline 	ext { Bab } & 	ext { has an apple } & 	ext { wants an arange } \\hline 	ext { Ted } & 	ext { has an arange } & 	ext { wants a peach } \\hline 	ext { Mary } & 	ext { has a pear } & 	ext { wants an apple } \\hline 	ext { Alice } & 	ext { has a peach } & 	ext { wants an arange } \\hline\end{array} Bab  Ted  Mary  Alice ​ has an apple  has an arange  has a pear  has a peach ​ wants an arange  wants a peach  wants an apple  wants an arange ​​  Which, if any, pairs of traders has a double coincidence of wants?

Accepted Answer

A)  Bob with Alice
B)  Ted with Alice
C)  Bob with Mary, Ted with Bob, and Ted with Alice
D)  None of the pairs above has a double coincidence of wants. E) A) and B)
F) A) and C)

Question 14

You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money?

Accepted Answer

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

Question 15

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 C)
F) None of the above

Question 16

The Board of Governors

Accepted Answer

A)  is chaired by the U.S. Secretary of the Treasury.
B)  members are elected by the U.S. public.
C)  has 7 members.
D)  All of the above are correct.E) B) and D)
F) A) and D)

Question 17

The use of money allows trade to be roundabout.

Accepted Answer

A) True 
 B)False

Question 18

Scenario 16-1.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 16-1. Assuming the only other item Namdian banks have on their balance sheets is loans, what is the value of existing loans made by Namdian banks?

Accepted Answer

A)  625 million dias
B)  875 million dias
C)  1,125 million dias
D)  None of the above is correct.E) B) and C)
F) C) and D)

Question 19

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

Question 20

Scenario 16-2.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 16-2. Assume that banks desire to continue holding the same ratio of excess reserves to deposits. What is the reserve requirement and the reserve ratio for Tazian Banks?

Accepted Answer

A)  5 percent, 8 percent
B)  4 percent, 8 percent
C)  4 percent, 5 percent
D)  None of the above is correct.E) B) and C)
F) A) and C)

Exam 16: The Monetary System

Correct Answer
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Correct Answer
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The use of money allows trade to be roundabout.

Correct Answer
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Money market mutual funds are included in

Correct Answer
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When conducting an open-market purchase, the Fed

Correct Answer
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In an economy that relies on barter, trade requires a double-coincidence of wants.

Correct Answer
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You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money?

Correct Answer
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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 Answer
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Correct Answer
verified

If the reserve ratio is 8 percent, then $4,500 of additional reserves can create up to

Correct Answer
verified

Designers of the Federal Reserve System were concerned that the Fed might form policy favorable to one part of the country or to a particular party. What are some ways that the organization of the Fed reflects such concerns?

Correct Answer
verified
1. The president agpaints the Board of G...
View Answer

The Board of Governors

Correct Answer
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At the Federal Reserve,

Correct Answer
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Gary's wealth is $1 million. Economists would say that Gary has $1 million worth of money.

Correct Answer
verified

The Fed decreases reserves if it conducts open market

Correct Answer
verified

Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 10 percent, and excess reserves are $3 billion. What is the level of loans?

Correct Answer
verified

Money is the only asset that functions as a store of value.

Correct Answer
verified

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

Correct Answer
verified

Other things the same if reserve requirements are decreased, the reserve ratio

Correct Answer
verified

Correct Answer
verified

Exam 16: The Monetary System

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The use of money allows trade to be roundabout.

Correct AnswerverifiedShow Answer

Money market mutual funds are included in

Correct AnswerverifiedShow Answer

When conducting an open-market purchase, the Fed

Correct AnswerverifiedShow Answer

In an economy that relies on barter, trade requires a double-coincidence of wants.

Correct AnswerverifiedShow Answer

You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the reserve ratio is 8 percent, then $4,500 of additional reserves can create up to

Correct AnswerverifiedShow Answer

Designers of the Federal Reserve System were concerned that the Fed might form policy favorable to one part of the country or to a particular party. What are some ways that the organization of the Fed reflects such concerns?

Correct Answerverified1. The president agpaints the Board of G...View AnswerShow Answer

The Board of Governors

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At the Federal Reserve,

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Gary's wealth is $1 million. Economists would say that Gary has $1 million worth of money.

Correct AnswerverifiedShow Answer

The Fed decreases reserves if it conducts open market

Correct AnswerverifiedShow Answer

Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 10 percent, and excess reserves are $3 billion. What is the level of loans?

Correct AnswerverifiedShow Answer

Money is the only asset that functions as a store of value.

Correct AnswerverifiedShow Answer

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

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Other things the same if reserve requirements are decreased, the reserve ratio

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Correct AnswerverifiedShow Answer

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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1. The president agpaints the Board of G...
View 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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Correct Answer
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Correct Answer
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