Question 1

Which of the following is correct?

Accepted Answer

A)   The Fed can control the money supply precisely.
B)   The amount of money in the economy does not depend on the behavior of depositors.
C)   The amount of money in the economy depends in part on the behavior of banks.
D)   None of the above is correct.E) C) and D)
F) None of the above

Question 2

Trace the effects on the money supply when the Fed decreases the discount rate.

Accepted Answer

The discount rate represents the cost of...

Question 3

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150. If customers deposit $50 into the bank, what is the value of the money supply?

Accepted Answer

A)   $50
B)   $100
C)   $150
D)   $200E) B) and D)
F) A) and B)

Question 4

Economists use the word "money" to refer to

Accepted Answer

A)   income generated by the production of goods and services.
B)   those assets regularly used to buy goods and services.
C)   financial assets such as stocks and bonds.
D)   any type of wealth.E) A) and B)
F) A) and C)

Question 5

When the federal funds rate is below the target rate, the Fed will bonds.
This action will the money supply.

Accepted Answer

The answer of When the federal funds rate is below...

Question 6

In the 19th century, when crop failures often led to bank runs, banks would make relatively fewer loans and hold relatively more excess reserves. By itself, these actions by the banks should have

Accepted Answer

A)   increased the money multiplier and the money supply.
B)   decreased the money multiplier and increased the money supply.
C)   increased the money multiplier and decreased the money supply.
D)   decreased both the money multiplier and the money supply.E) B) and D)
F) A) and D)

Question 7

Given the following information, what are the values of M1 and M2? Small time deposits $1,800 billion
Demand deposits and other checkable deposits $1,000 billion
Savings deposits $1,400 billion
Money market mutual funds $1,000 billion
Traveler's checks $50 billion
Large time deposits $600 billion
Currency $300 billion
Miscellaneous categories in M2 $50 billion

Accepted Answer

A)   M1 = $3,150 billion, M2 = $6,200 billion.
B)   M1 = $1,350 billion, M2 = $5,600 billion.
C)   M1 = $1,400 billion, M2 = $6,200 billion.
D)   M1 = $1,300 billion, M2 = $5,600 billion.E) None of the above
F) C) and D)

Question 8

Which of the following best illustrates the unit of account function of money?

Accepted Answer

A)   You list prices for candy sold on your Web site, ? HYPERLINK "http://www.sweettooth.com/" ?www.sweettooth.com, ?in dollars.
B)   You pay for your theater tickets with dollars.
C)   You hold currency even though you don't intend to spend it right away.
D)   None of the above is correct.E) A) and B)
F) B) and C)

Question 9

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) All of the above

Question 10

Which of the following does the U.S. president appoint and the U.S. Senate confirm?

Accepted Answer

A)   members of the Board of Governors and regional Federal Reserve Bank Presidents.
B)   members of the Board of Governors but not the regional Federal Reserve Bank Presidents.
C)   the regional Federal Reserve Bank Presidents, but not members of the Board of Governors.
D)   neither members of the Board of Governors nor regional Federal Reserve Bank Presidents.E) C) and D)
F) B) and C)

Question 11

When in France you notice that prices are posted in euros, this best illustrates money's function as

Accepted Answer

A)   a store of value.
B)   a medium of exchange.
C)   a unit of account.
D)   a method of barter.E) B) and D)
F) A) and B)

Question 12

If people decide to hold more currency relative to deposits, the money supply

Accepted Answer

A)   falls. The Fed could lessen the impact of this by buying Treasury bonds.
B)   falls. The Fed could lessen the impact of this by selling Treasury bonds.
C)   rises. The Fed could lessen the impact of this by buying Treasury bonds.
D)   rises. The Fed could lessen the impact of the by selling Treasury bonds.E) C) and D)
F) A) and C)

Question 13

The federal funds rate is the interest rate

Accepted Answer

A)   the Federal Reserve charges for loans it makes to the federal government.
B)   the Federal Reserve charges banks for short-term loans.
C)   banks charge each other for short-term loans of reserves.
D)   on newly issued one-year Treasury bonds.E) A) and B)
F) B) and C)

Question 14

Scenario 29-2.
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 29-2. Suppose that the Bank of Tazi changes the reserve requirement to 3 percent. Assuming that the banks still want to hold the same percentage of excess reserves what is the value of the money supply after the change in the reserve requirement?

Accepted Answer

A)   9,375 million tazes
B)   10,000 million tazes
C)   12,500 million tazes
D)   None of the above is correct to the nearest million tazes.E) All of the above
F) C) and D)

Question 15

In the United States, currency holdings per person average about

Accepted Answer

A)   $110; one explanation for this relatively small average is that many people use credit and debit cards to make transactions.
B)   $110; one explanation for this relatively small average is that U.S. citizens hold a lot of foreign currency.
C)   $4,490; one explanation for this relatively large amount is that criminals probably prefer currency as a medium of exchange.
D)   $4,490; one explanation for this relatively large average is that U.S. citizens hold a lot of foreign currency.E) A) and D)
F) A) and C)

Question 16

Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the

Accepted Answer

A)   money supply to fall. To reduce the impact of this the Fed could sell Treasury bonds.
B)   money supply to fall. To reduce the impact of this the Fed could buy Treasury bonds.
C)   money supply to rise. To reduce the impact of this the Fed could sell Treasury bonds.
D)   money supply to rise. To reduce the impact of this the Fed could buy Treasury bonds.E) None of the above
F) C) and D)

Question 17

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) A) and B)
F) All of the above

Question 18

Suppose a bank is operating with a leverage ratio of 20. What is the maximum decrease in the market value of assets before the bank becomes insolvent?

Accepted Answer

A leverage ratio of 20 implies each perc...

Question 19

The members of the Federal Reserve's Board of Governors

Accepted Answer

A)   are appointed by the president of the U.S. and confirmed by the U.S. Senate.
B)   serve six-year terms.
C)   are also the presidents of the regional Federal Reserve banks.
D)   share power equally, with no governor having any more influence or power than any other governor.E) All of the above
F) B) and C)

Question 20

Which of the following items is included in M2?

Accepted Answer

A)   credit cards
B)   money market mutual funds
C)   corporate bonds
D)   large time depositsE) All of the above
F) None of the above

Exam 29: The Monetary System

When in France you notice that prices are posted in euros, this best illustrates money's function as

Correct Answer
verified

Trace the effects on the money supply when the Fed decreases the discount rate.

Correct Answer
verified
The discount rate represents the cost of...
View Answer

Which of the following items is included in M2?

Correct Answer
verified

Which of the following does the U.S. president appoint and the U.S. Senate confirm?

Correct Answer
verified

In the United States, currency holdings per person average about

Correct Answer
verified

If people decide to hold more currency relative to deposits, the money supply

Correct Answer
verified

Economists use the word "money" to refer to

Correct Answer
verified

The Board of Governors

Correct Answer
verified

The federal funds rate is the interest rate

Correct Answer
verified

The Fed decreases reserves if it conducts open market

Correct Answer
verified

Which of the following best illustrates the unit of account function of money?

Correct Answer
verified

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150. If customers deposit $50 into the bank, what is the value of the money supply?

Correct Answer
verified

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

In the 19th century, when crop failures often led to bank runs, banks would make relatively fewer loans and hold relatively more excess reserves. By itself, these actions by the banks should have

Correct Answer
verified

When the federal funds rate is below the target rate, the Fed will bonds. This action will the money supply.

Correct Answer
verified

Correct Answer
verified

Suppose a bank is operating with a leverage ratio of 20. What is the maximum decrease in the market value of assets before the bank becomes insolvent?

Correct Answer
verified
A leverage ratio of 20 implies each perc...
View Answer

Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the

Correct Answer
verified

The members of the Federal Reserve's Board of Governors

Correct Answer
verified

Exam 29: The Monetary System

When in France you notice that prices are posted in euros, this best illustrates money's function as

Correct AnswerverifiedShow Answer

Trace the effects on the money supply when the Fed decreases the discount rate.

Correct AnswerverifiedThe discount rate represents the cost of...View AnswerShow Answer

Which of the following items is included in M2?

Correct AnswerverifiedShow Answer

Which of the following does the U.S. president appoint and the U.S. Senate confirm?

Correct AnswerverifiedShow Answer

In the United States, currency holdings per person average about

Correct AnswerverifiedShow Answer

If people decide to hold more currency relative to deposits, the money supply

Correct AnswerverifiedShow Answer

Economists use the word "money" to refer to

Correct AnswerverifiedShow Answer

The Board of Governors

Correct AnswerverifiedShow Answer

The federal funds rate is the interest rate

Correct AnswerverifiedShow Answer

The Fed decreases reserves if it conducts open market

Correct AnswerverifiedShow Answer

Which of the following best illustrates the unit of account function of money?

Correct AnswerverifiedShow Answer

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150. If customers deposit $50 into the bank, what is the value of the money supply?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

In the 19th century, when crop failures often led to bank runs, banks would make relatively fewer loans and hold relatively more excess reserves. By itself, these actions by the banks should have

Correct AnswerverifiedShow Answer

When the federal funds rate is below the target rate, the Fed will bonds. This action will the money supply.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose a bank is operating with a leverage ratio of 20. What is the maximum decrease in the market value of assets before the bank becomes insolvent?

Correct AnswerverifiedA leverage ratio of 20 implies each perc...View AnswerShow Answer

Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the

Correct AnswerverifiedShow Answer

The members of the Federal Reserve's Board of Governors

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
The discount rate represents the cost of...
View 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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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
verified
A leverage ratio of 20 implies each perc...
View Answer

Correct Answer
verified

Correct Answer
verified