Question 1

In a system of 100-percent-reserve banking,

Accepted Answer

A)   banks do not make loans.
B)   currency is the only form of money.
C)   deposits are banks' only assets.
D)   All of the above are correct.E) B) and C)
F) None of the above

Question 2

If the reserve ratio is 8 percent,then an additional $1,000 of reserves can increase the money supply by as much as

Accepted Answer

A)   $6,400.
B)   $8,000.
C)   $12,500.
D)   $20,000.E) None of the above
F) A) and B)

Question 3

If a bank has a reserve ratio of 8 percent,then

Accepted Answer

A)   government regulation requires the bank to use at least 8 percent of its deposits to make loans.
B)   the bank's ratio of loans to deposits is 8 percent.
C)   the bank keeps 8 percent of its deposits as reserves and loans out the rest.
D)   the bank keeps 8 percent of its assets as reserves and loans out the rest.E) C) and D)
F) A) and B)

Question 4

Credit cards

Accepted Answer

A)   defer payments.
B)   are a store of value.
C)   have led to wider use of currency.
D)   are part of the money supply.E) A) and B)
F) C) and D)

Question 5

The most common method employed by the Fed to increase the money supply is the

Accepted Answer

A)   sale of U.S.government bonds.
B)   purchase of U.S.government bonds.
C)   sale of gold.
D)   increase of the federal debt ceiling.E) A) and C)
F) C) and D)

Question 6

Federal Reserve governors are given long terms to insulate them from politics.

Accepted Answer

A) True 
 B)False

Question 7

Treasury Bonds are

Accepted Answer

A)   liquid,but not a store of value.
B)   a store of value,but not liquid.
C)   both liquid and a store of value.
D)   neither liquid nor a store of value.E) B) and D)
F) A) and B)

Question 8

Table 16-4.
 
-Refer to Table 16-4.If the bank is holding $4,000 in excess reserves,then the reserve requirement with which it must comply is

Accepted Answer

A)   4 percent.
B)   6 percent.
C)   12 percent.
D)   14 percent.E) All of the above
F) B) and D)

Question 9

Paper dollars

Accepted Answer

A)   are commodity money and gold coins are fiat money.
B)   are fiat money and gold coins are commodity money.
C)   and gold coins are both commodity monies.
D)   and gold coins are both fiat monies.E) B) and D)
F) A) and D)

Question 10

Currently,U.S.currency is

Accepted Answer

A)   fiat money with intrinsic value.
B)   fiat money with no intrinsic value.
C)   commodity money with intrinsic value.
D)   commodity money with no intrinsic value.E) A) and B)
F) B) and C)

Question 11

Which of the following is included in M2 but not in M1?

Accepted Answer

A)   demand deposits
B)   corporate bonds
C)   large time deposits
D)   money market mutual fundsE) None of the above
F) A) and C)

Question 12

A problem that the Fed faces when it attempts to control the money supply is that

Accepted Answer

A)   the 100-percent-reserve banking system in the U.S.makes it difficult for the Fed to carry out its monetary policy.
B)   the Fed has to get the approval of the U.S.Treasury Department whenever it uses any of its monetary policy tools.
C)   the Fed does not have a tool that it can use to change the money supply by either a small amount or a large amount.
D)   the Fed does not control the amount of money that households choose to hold as deposits in banks.E) All of the above
F) A) and B)

Question 13

Over one time horizon or another,Fed policy decisions influence

Accepted Answer

A)   inflation and employment.
B)   inflation but not employment.
C)   employment but not inflation.
D)   neither inflation nor employment.E) None of the above
F) All of the above

Question 14

Which of the following institutions is a central bank?

Accepted Answer

A)   the Bank of Japan
B)   the Bank of England
C)   the Federal Reserve System
D)   All of the above are correct.E) A) and D)
F) B) and D)

Question 15

Which of the following is not correct?

Accepted Answer

A)   The president of the New York Federal Reserve bank is the only Federal Reserve Regional Bank President who gets to vote at every meeting of the Federal Open Market Committee.
B)   The Fed's policy decisions influence the economy's rate of inflation in the short run and the economy's employment and production in the long run.
C)   The Fed's primary monetary policy tool is open-market operations.
D)   All of the above are correct.E) All of the above
F) A) and C)

Question 16

Which of the three functions of money are commonly met by each of the following assets in the U.S.economy?
a.paper dollar
b.precious metals
c.collectibles such as baseball cards,stamps,and antiques

Accepted Answer

a.medium of exchange...

Question 17

A bank loans Greg's Ice Cream $250,000 to remodel a building near campus to use as a new store.On their respective balance sheets,this loan is

Accepted Answer

A)   a liability for the bank and an asset for Greg's Ice Cream.The loan increases the money supply.
B)   a liability for the bank and an asset for Greg's Ice Cream.The loan does not increase the money supply.
C)   an asset for the bank and a liability for Greg's Ice Cream.The loan increases the money supply.
D)   an asset for the bank and a liability for Greg's Ice Cream.The loan does not increase the money supply.E) A) and D)
F) B) and D)

Question 18

A double coincidence of wants

Accepted Answer

A)   is required when there is no item in an economy that is widely accepted in exchange for goods and services.
B)   is required in an economy that relies on barter.
C)   is a hindrance to the allocation of resources when it is required for trade.
D)   All of the above are correct.E) B) and D)
F) B) and C)

Question 19

Table 16-4.
 
-Refer to Table 16-4.Suppose the bank faces a reserve requirement of 10 percent.Starting from the situation as depicted by the T-account,a customer deposits an additional $50,000 into his account at the bank.If the bank takes no other action it will

Accepted Answer

A)   have $65,000 in excess reserves.
B)   have $55,000 in excess reserves.
C)   need to raise an additional $5,000 of reserves to meet the reserve requirement ratio
D)   None of the above is correct.E) B) and D)
F) C) and D)

Question 20

Credit cards

Accepted Answer

A)   represent the largest component of M1.
B)   are not included in M1 but are included in M2.
C)   are a form of money unique to the U.S.
D)   are not considered money.E) All of the above
F) A) and D)

Exam 29: The Monetary System

Which of the three functions of money are commonly met by each of the following assets in the U.S.economy? a.paper dollar b.precious metals c.collectibles such as baseball cards,stamps,and antiques

Correct Answerverifieda.medium of exchange...View AnswerShow Answer

Table 16-4. -Refer to Table 16-4.Suppose the bank faces a reserve requirement of 10 percent.Starting from the situation as depicted by the T-account,a customer deposits an additional $50,000 into his account at the bank.If the bank takes no other action it will

Correct AnswerverifiedShow Answer

In a system of 100-percent-reserve banking,

Correct AnswerverifiedShow Answer

Over one time horizon or another,Fed policy decisions influence

Correct AnswerverifiedShow Answer

A problem that the Fed faces when it attempts to control the money supply is that

Correct AnswerverifiedShow Answer

Federal Reserve governors are given long terms to insulate them from politics.

Correct AnswerverifiedShow Answer

Paper dollars

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Which of the following is not correct?

Correct AnswerverifiedShow Answer

Which of the following institutions is a central bank?

Correct AnswerverifiedShow Answer

Which of the following is included in M2 but not in M1?

Correct AnswerverifiedShow Answer

If the reserve ratio is 8 percent,then an additional $1,000 of reserves can increase the money supply by as much as

Correct AnswerverifiedShow Answer

Credit cards

Correct AnswerverifiedShow Answer

Credit cards

Correct AnswerverifiedShow Answer

A bank loans Greg's Ice Cream $250,000 to remodel a building near campus to use as a new store.On their respective balance sheets,this loan is

Correct AnswerverifiedShow Answer

The most common method employed by the Fed to increase the money supply is the

Correct AnswerverifiedShow Answer

If a bank has a reserve ratio of 8 percent,then

Correct AnswerverifiedShow Answer

Currently,U.S.currency is

Correct AnswerverifiedShow Answer

Table 16-4. -Refer to Table 16-4.If the bank is holding $4,000 in excess reserves,then the reserve requirement with which it must comply is

Correct AnswerverifiedShow Answer

A double coincidence of wants

Correct AnswerverifiedShow Answer

Treasury Bonds are

Correct AnswerverifiedShow Answer

Correct Answer
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