Question 1

The Bank of Mesquite has $2 million in deposits and $550,000 in reserves. If excess reserves are equal to $150,000, the required reserve ratio is

Accepted Answer

A)   15%.
B)   20%.
C)   35%.
D)   65%.E) A) and B)
F) A) and C)

Question 2

When the value of money falls as a result of a rapid increase in its supply, ________ occurs.

Accepted Answer

A)   currency debasement
B)   deflation
C)   negative exchange
D)   all of the aboveE) B) and C)
F) B) and D)

Question 3

Refer to the information provided in Scenario 10.1 below to answer the questions that follow.
SCENARIO 10.1: The following table shows the changes in deposits, reserves, and loans of 4 banks as a result of a $100,000 initial deposit in Bank No. 1. Assume all banks are loaned up. 
-Refer to Scenario 10.1. What is the required reserve ratio?

Accepted Answer

A)   4%
B)   5%
C)   8%
D)   10%E) None of the above
F) C) and D)

Question 4

Nominal income is equal to

Accepted Answer

A)   the aggregate money multiplier divided by the money supply.
B)   the real aggregate price level divided by the nominal interest rate.
C)   the aggregate price level multiplied by real aggregate income.
D)   aggregate money demand multiplied by aggregate money supply.E) All of the above
F) B) and D)

Question 5

Refer to the information provided in Table 10.3 below to answer the questions that follow.
Table 10.3 
-Refer to Table 10.3. Total loans of People's Bank equal $________.

Accepted Answer

A)   100,000
B)   400,000
C)   500,000
D)   800,000E) A) and B)
F) B) and C)

Question 6

Legal tender is

Accepted Answer

A)   money that must be backed by gold.
B)   money that cannot be counterfeited.
C)   money that has a value other than as a currency.
D)   money that a government has required to be accepted in settlement of debts.E) B) and C)
F) A) and C)

Question 7

The tool most frequently used by the Fed to change the money supply is changing the required reserve ratio.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following types of interest rates change daily?

Accepted Answer

A)   the prime rate
B)   the federal funds rate
C)   the discount rate
D)   the corporate rateE) A) and B)
F) A) and C)

Question 9

When the interest rate falls, bond values

Accepted Answer

A)   rise.
B)   fall.
C)   are unchanged because the interest rate paid on a bond is fixed.
D)   will either increase or decrease depending on the type of bond.E) C) and D)
F) B) and C)

Question 10

When the prices of goods and services rise

Accepted Answer

A)   imports decrease.
B)   exports increase.
C)   the value of money rises.
D)   the value of money falls.E) B) and C)
F) A) and D)

Question 11

The Federal Reserve was created in

Accepted Answer

A)   1893.
B)   1913.
C)   1921.
D)   1933.E) A) and C)
F) A) and B)

Question 12

All of the following are properties of bonds except

Accepted Answer

A)   bonds are issued with a face value.
B)   bonds come with a maturity date.
C)   bondholders are paid a fixed, specified amount each year.
D)   all bonds are issued for time periods of no less than one year and no more than ten years.E) A) and C)
F) A) and B)

Question 13

A commercial bank lists

Accepted Answer

A)   loans as liabilities.
B)   deposits as liabilities.
C)   required reserves as liabilities.
D)   excess reserves as liabilities.E) B) and C)
F) None of the above

Question 14

Transaction money is

Accepted Answer

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

Question 15

The main disadvantage of using money as a store of value is that

Accepted Answer

A)   money is not portable.
B)   it requires a double coincidence of wants.
C)   currency is intrinsically worthless.
D)   the value of money actually falls when the prices of goods and services rise.E) A) and B)
F) B) and D)

Question 16

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 required reserve ratio
B)   an increase in the discount rate
C)   an increase in federal tax rates
D)   buying government securities in the open marketE) All of the above
F) C) and D)

Question 17

The federal funds rate is the rate that the Fed controls most closely through

Accepted Answer

A)   its open market operations.
B)   setting the reserve requirement.
C)   printing money.
D)   setting margin requirements.E) B) and D)
F) A) and C)

Question 18

Refer to the information provided in Table 10.4 below to answer the questions that follow.
Table 10.4 
-Refer to Table 10.4. If the required reserve ratio were changed to 5% and First Charter Bank continues to hold $1,200,000 in reserves, its excess reserves will be

Accepted Answer

A)   $400,000.
B)   $600,000.
C)   $800,000.
D)   $1,000,000.E) B) and C)
F) A) and B)

Question 19

The Fed became an active participant in the in the private banking system in response to the financial crisis of 2008.

Accepted Answer

A) True 
 B)False

Question 20

Fiat money is money the government says is money.

Accepted Answer

A) True 
 B)False

Exam 10: Money, the Federal Reserve, and the Interest Rate

Refer to the information provided in Table 10.3 below to answer the questions that follow. Table 10.3 -Refer to Table 10.3. Total loans of People's Bank equal $________.

Correct Answer
verified

Transaction money is

Correct Answer
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The Federal Reserve was created in

Correct Answer
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Which of the following types of interest rates change daily?

Correct Answer
verified

When the prices of goods and services rise

Correct Answer
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All of the following are properties of bonds except

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

Correct Answer
verified

Refer to the information provided in Table 10.4 below to answer the questions that follow. Table 10.4 -Refer to Table 10.4. If the required reserve ratio were changed to 5% and First Charter Bank continues to hold $1,200,000 in reserves, its excess reserves will be

Correct Answer
verified

The Bank of Mesquite has $2 million in deposits and $550,000 in reserves. If excess reserves are equal to $150,000, the required reserve ratio is

Correct Answer
verified

The main disadvantage of using money as a store of value is that

Correct Answer
verified

A commercial bank lists

Correct Answer
verified

Fiat money is money the government says is money.

Correct Answer
verified

The Fed became an active participant in the in the private banking system in response to the financial crisis of 2008.

Correct Answer
verified

When the interest rate falls, bond values

Correct Answer
verified

The federal funds rate is the rate that the Fed controls most closely through

Correct Answer
verified

Legal tender is

Correct Answer
verified

When the value of money falls as a result of a rapid increase in its supply, ________ occurs.

Correct Answer
verified

The tool most frequently used by the Fed to change the money supply is changing the required reserve ratio.

Correct Answer
verified

Correct Answer
verified

Nominal income is equal to

Correct Answer
verified

Exam 10: Money, the Federal Reserve, and the Interest Rate

Refer to the information provided in Table 10.3 below to answer the questions that follow. Table 10.3 -Refer to Table 10.3. Total loans of People's Bank equal $________.

Correct AnswerverifiedShow Answer

Transaction money is

Correct AnswerverifiedShow Answer

The Federal Reserve was created in

Correct AnswerverifiedShow Answer

Which of the following types of interest rates change daily?

Correct AnswerverifiedShow Answer

When the prices of goods and services rise

Correct AnswerverifiedShow Answer

All of the following are properties of bonds except

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Refer to the information provided in Table 10.4 below to answer the questions that follow. Table 10.4 -Refer to Table 10.4. If the required reserve ratio were changed to 5% and First Charter Bank continues to hold $1,200,000 in reserves, its excess reserves will be

Correct AnswerverifiedShow Answer

The Bank of Mesquite has $2 million in deposits and $550,000 in reserves. If excess reserves are equal to $150,000, the required reserve ratio is

Correct AnswerverifiedShow Answer

The main disadvantage of using money as a store of value is that

Correct AnswerverifiedShow Answer

A commercial bank lists

Correct AnswerverifiedShow Answer

Fiat money is money the government says is money.

Correct AnswerverifiedShow Answer

The Fed became an active participant in the in the private banking system in response to the financial crisis of 2008.

Correct AnswerverifiedShow Answer

When the interest rate falls, bond values

Correct AnswerverifiedShow Answer

The federal funds rate is the rate that the Fed controls most closely through

Correct AnswerverifiedShow Answer

Legal tender is

Correct AnswerverifiedShow Answer

When the value of money falls as a result of a rapid increase in its supply, ________ occurs.

Correct AnswerverifiedShow Answer

The tool most frequently used by the Fed to change the money supply is changing the required reserve ratio.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Nominal income is equal to

Correct AnswerverifiedShow Answer

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