Question 1

The definition of M2 includes:

Accepted Answer

A)  cash and checking account balances.
B)  hard money and savings account balances.
C)  cash,checking account,and savings account balances.
D)  cash,checking accounts,savings accounts,and other financial instruments where money is locked away for a specified period of time.E) A) and B)
F) C) and D)

Question 2

The entity that carries full responsibility for setting the overall direction of monetary policy and guiding the money supply is:

Accepted Answer

A)  the Federal Open Market Committee.
B)  the Federal Reserve Chairman.
C)  the Board of Governors.
D)  the regional bank presidents' cabinet.E) A) and C)
F) B) and C)

Question 3

If there were no fractional reserve banking,then:

Accepted Answer

A)  the reserve ratio must be 100 percent.
B)  banks would not create money in the economy.
C)  no lending would occur using deposits.
D)  All of these are true.E) B) and D)
F) All of the above

Question 4

The Federal Reserve System has 12:

Accepted Answer

A)  regional banks.
B)  members on its Board of Governors.
C)  member banks.
D)  basic functions.E) All of the above
F) B) and D)

Question 5

One of the functions of money is to serve as a:

Accepted Answer

A)  store of value.
B)  medium of exchange.
C)  unit of account.
D)  All of these are functions of money.E) A) and B)
F) A) and C)

Question 6

The larger is the reserve ratio,the:

Accepted Answer

A)  smaller is the money multiplier,and the less money will be created in the economy.
B)  smaller is the money multiplier,and the more money will be created in the economy.
C)  larger is the money multiplier,and the less money will be created in the economy.
D)  larger is the money multiplier,and the more money will be created in the economy.E) A) and B)
F) B) and C)

Question 7

The regulation that sets the minimum fraction of deposits banks must hold in reserve is called the:

Accepted Answer

A)  reserve requirement.
B)  money multiplier.
C)  interest rate.
D)  dual mandate.E) C) and D)
F) B) and D)

Question 8

If the Fed wishes to increase the money supply,it can:

Accepted Answer

A)  sell a bond to bank,and take the money it receives in exchange out of circulation in the economy.
B)  buy a bond from a bank,giving the bank cash in return,which it can then lend out.
C)  sell a bond to a bank,and take the money it receives and lend it out to someone else.
D)  buy a bond from a bank,requiring the bank to hold the money it receives as excess reserves.E) B) and D)
F) None of the above

Question 9

If there was only full-reserve banking:

Accepted Answer

A)  the financial system would grind to a halt.
B)  absolutely no lending using deposits would be able to occur.
C)  banks would not make money lending deposits.
D)  All of these are true.E) A) and B)
F) A) and C)

Question 10

An example of a good that can be used for money that has no intrinsic value is:

Accepted Answer

A)  gold.
B)  paper dollar bills.
C)  cigarettes.
D)  None of these has intrinsic value.E) B) and C)
F) All of the above

Question 11

In the simple liquidity-preference model,the money supply curve:

Accepted Answer

A)  is vertical,and moves at the sole discretion of the Fed.
B)  is horizontal,and moves at the sole discretion of the Fed.
C)  is vertical,and moves when people change their rate of savings.
D)  is horizontal,and moves when people change their rate of savings.E) None of the above
F) B) and D)

Question 12

The "dual mandate" refers to the:

Accepted Answer

A)  twin responsibilities of the Federal Reserve,to use monetary policy to ensure price stability and maintain full employment.
B)  orders given to both the Federal Reserve and the Treasury department to ensure price stability.
C)  responsibility given to the Federal Reserve and the Congress to conduct monetary and fiscal policy respectively,to ensure price stability.
D)  None of these is true.E) B) and D)
F) A) and C)

Question 13

We say that money is a unit of account because it represents:

Accepted Answer

A)  a certain amount of purchasing power held over time.
B)  something you can use to purchase goods and services.
C)  something you can directly offer,like any good or service,in exchange for some good or service you want.
D)  a standard unit of comparison.E) A) and B)
F) A) and C)

Question 14

The money multiplier is approximated as being equal to:

Accepted Answer

A)  one divided by the reserve ratio.
B)  one divided by the federal funds.
C)  demand deposits multiplied by the interest rate.
D)  demand deposits multiplied by the reserve ratio.E) B) and C)
F) C) and D)

Question 15

The Fed classifies different types of money depending on its:

Accepted Answer

A)  liquidity.
B)  resale value.
C)  commodity back.
D)  intrinsic value.E) B) and C)
F) A) and C)

Question 16

When contractionary monetary policy increases the interest rate,it causes the price level to:

Accepted Answer

A)  decrease,and output to decrease.
B)  rise,and output to increase.
C)  decrease,and output to increase.
D)  rise,and output to decrease.E) A) and D)
F) B) and C)

Question 17

Modern banks in the United States can keep reserves as:

Accepted Answer

A)  commodity money only.
B)  a deposit at the Federal Reserve.
C)  gold.
D)  All of these are ways banks hold reserves.E) A) and D)
F) C) and D)

Question 18

During one week of October during the financial crisis of 2008,banks:

Accepted Answer

A)  borrowed $117 billion from the discount window,a historically large figure.
B)  borrowed $117 billion from the discount window,a historically small amount.
C)  kept over $117 billion in excess reserves,and the discount rate dropped.
D)  kept over $117 billion in excess reserves,and the discount rate increased.E) None of the above
F) A) and D)

Question 19

When banks hold excess reserves:

Accepted Answer

A)  the money multiplier overestimates how much money will be created in the economy.
B)  the money multiplier underestimates how much money will be created in the economy.
C)  the reserve ratio is not fully functioning,and should be raised.
D)  the reserve ratio is not fully functioning,and should be lowered.E) A) and B)
F) All of the above

Question 20

The Board of Governors is made up of experts in:

Accepted Answer

A)  banking.
B)  international trade.
C)  fiscal policy.
D)  All of these are true.E) A) and C)
F) A) and B)

Exam 31: Money and the Monetary System

When banks hold excess reserves:

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Modern banks in the United States can keep reserves as:

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The Federal Reserve System has 12:

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If there was only full-reserve banking:

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The Fed classifies different types of money depending on its:

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The money multiplier is approximated as being equal to:

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If the Fed wishes to increase the money supply,it can:

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The regulation that sets the minimum fraction of deposits banks must hold in reserve is called the:

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When contractionary monetary policy increases the interest rate,it causes the price level to:

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The larger is the reserve ratio,the:

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If there were no fractional reserve banking,then:

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During one week of October during the financial crisis of 2008,banks:

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The entity that carries full responsibility for setting the overall direction of monetary policy and guiding the money supply is:

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One of the functions of money is to serve as a:

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The Board of Governors is made up of experts in:

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We say that money is a unit of account because it represents:

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In the simple liquidity-preference model,the money supply curve:

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An example of a good that can be used for money that has no intrinsic value is:

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The definition of M2 includes:

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The "dual mandate" refers to the:

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