Question 1

The discount rate is

Accepted Answer

A)  the interest rate commercial banks charge each other for borrowing funds.
B)  the interest rate commercial banks charge their new customers.
C)  the interest rate the Fed charges commercial banks for borrowing funds.
D)  the interest rate commercial banks charge their most creditworthy customers.E) B) and C)
F) A) and D)

Question 2

When you take $100 from your saving account and deposit it in your checking account,M2 decreases.

Accepted Answer

A) True 
 B)False

Question 3

Crescent City Bank has $200 million in deposits.Crescent City Bank is meeting its reserve requirement and has no excess reserves.It has $40 million in reserves.Crescent City Bank faces a required reserve ratio of

Accepted Answer

A)  4%.
B)  5%.
C)  20%.
D)  25%.E) None of the above
F) B) and D)

Question 4

Among the liabilities of commercial banks are

Accepted Answer

A)  loans.
B)  demand deposits.
C)  reserves.
D)  government securities.E) B) and D)
F) B) and C)

Question 5

The President of the NY Federal Reserve Bank is always a member of the Federal Open Market Committee.

Accepted Answer

A) True 
 B)False

Question 6

Transaction money is

Accepted Answer

A)  M1.
B)  M2.
C)  M3.
D)  M4.E) A) and B)
F) A) and D)

Question 7

The interest rate banks pay to borrow money from the Fed is the

Accepted Answer

A)  federal funds rate.
B)  discount rate.
C)  prime lending rate.
D)  reserve rate.E) All of the above
F) None of the above

Question 8

Refer to the information provided in Table 10.1 below to answer the questions that follow.
Table 10.1
 
-Refer to Table 10.1.First Charter Bank's total assets are

Accepted Answer

A)  $400.
B)  $800.
C)  $1,200.
D)  $2,400.E) B) and C)
F) A) and D)

Question 9

Neon Bank has $300 million in deposits.The required reserve ratio is 25%.Neon Bank must keep ________ in reserves.

Accepted Answer

A)  $275 million
B)  $145 million
C)  $120 million
D)  $75 millionE) A) and D)
F) All of the above

Question 10

When you pay $8 for salad you ordered for lunch,you are using money as a(n)

Accepted Answer

A)  store of value.
B)  investment good.
C)  medium of exchange.
D)  unit of account.E) A) and D)
F) All of the above

Question 11

Which of the following would NOT be included in M1?

Accepted Answer

A)  demand deposits
B)  money market accounts
C)  checking accounts
D)  traveler's checksE) A) and D)
F) None of the above

Question 12

Refer to the information provided in Table 10.1 below to answer the questions that follow.
Table 10.1
 
-Refer to Table 10.1.The required reserve ratio is 25%.If the First Charter Bank is meeting its reserve requirement and has no excess reserves,its loans equal

Accepted Answer

A)  $1,800.
B)  $1,000.
C)  $900.
D)  $600.E) A) and C)
F) A) and D)

Question 13

Assume there is no leakage from the banking system and that all commercial banks are loaned up.The required reserve ratio is 16%.If the Fed sells $5 million worth of government securities to the public,the change in the money supply will be

Accepted Answer

A)  -$31.25 million.
B)  -$21 million.
C)  -$16 million.
D)  -$11.75 million.E) None of the above
F) B) and C)

Question 14

Which of the following factors causes the barter system to be inefficient?

Accepted Answer

A)  Its cost of transaction is too low.
B)  The cost associated with information search is too low.
C)  It requires a double coincidence of wants.
D)  It requires high liquidity.E) B) and D)
F) B) and C)

Question 15

Which of the following is an example of fiat money?

Accepted Answer

A)  cigarettes
B)  an ounce of gold
C)  a U.S.one-hundred dollar bill
D)  a government bondE) A) and B)
F) B) and C)

Question 16

When you use money to fill your car with gas every week,you are using money as a unit of account.

Accepted Answer

A) True 
 B)False

Question 17

Veronica received a federal income tax refund of $600 in May 2012.Veronica put this money in a saving account so that she could spend it when she went on vacation in July 2012.This is an example of money serving as a(n)

Accepted Answer

A)  store of value.
B)  medium of exchange.
C)  unit of account.
D)  investment good.E) None of the above
F) A) and B)

Question 18

Related to the Economics in Practice on p.503: In Santa Cruz,the red feathers of the Scarlet Honeyeater bird were used as currency.Using feathers to make a purchase would be using the feathers as a(n)

Accepted Answer

A)  medium of exchange.
B)  store of value.
C)  unit of account.
D)  legal tender.E) A) and B)
F) None of the above

Question 19

Narnia National Bank has $750 million in deposits.The required reserve ratio is 30%.Narnia National Bank must keep ________ in reserves.

Accepted Answer

A)  $125 million
B)  $150 million
C)  $225 million
D)  $250 millionE) A) and B)
F) A) and C)

Question 20

Which of the following represents an action by the Federal Reserve that is designed to decrease the money supply?

Accepted Answer

A)  a decrease in the discount rate
B)  a decrease in federal spending
C)  selling government securities in the open market
D)  a decrease in the required reserve ratioE) All of the above
F) B) and C)

Exam 10: The Money Supply and the Federal Reserve System

The interest rate banks pay to borrow money from the Fed is the

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The President of the NY Federal Reserve Bank is always a member of the Federal Open Market Committee.

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When you use money to fill your car with gas every week,you are using money as a unit of account.

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When you take $100 from your saving account and deposit it in your checking account,M2 decreases.

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Related to the Economics in Practice on p.503: In Santa Cruz,the red feathers of the Scarlet Honeyeater bird were used as currency.Using feathers to make a purchase would be using the feathers as a(n)

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Narnia National Bank has $750 million in deposits.The required reserve ratio is 30%.Narnia National Bank must keep ________ in reserves.

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Among the liabilities of commercial banks are

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Refer to the information provided in Table 10.1 below to answer the questions that follow. Table 10.1 -Refer to Table 10.1.First Charter Bank's total assets are

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The discount rate is

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Which of the following would NOT be included in M1?

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Crescent City Bank has $200 million in deposits.Crescent City Bank is meeting its reserve requirement and has no excess reserves.It has $40 million in reserves.Crescent City Bank faces a required reserve ratio of

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Which of the following represents an action by the Federal Reserve that is designed to decrease the money supply?

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Neon Bank has $300 million in deposits.The required reserve ratio is 25%.Neon Bank must keep ________ in reserves.

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Refer to the information provided in Table 10.1 below to answer the questions that follow. Table 10.1 -Refer to Table 10.1.The required reserve ratio is 25%.If the First Charter Bank is meeting its reserve requirement and has no excess reserves,its loans equal

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Veronica received a federal income tax refund of $600 in May 2012.Veronica put this money in a saving account so that she could spend it when she went on vacation in July 2012.This is an example of money serving as a(n)

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When you pay $8 for salad you ordered for lunch,you are using money as a(n)

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Transaction money is

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Which of the following is an example of fiat money?

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Assume there is no leakage from the banking system and that all commercial banks are loaned up.The required reserve ratio is 16%.If the Fed sells $5 million worth of government securities to the public,the change in the money supply will be

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Which of the following factors causes the barter system to be inefficient?

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