Question 1

The reserve requirement is 4 percent, banks hold no excess reserves and people hold no currency. If the Fed sells $10,000 worth of bonds, what happens to the money supply?

Accepted Answer

A)   it increases by $250,000
B)   it increases by $200,000
C)   it decreases by $200,000
D)   it decreases by $250,000E) None of the above
F) A) and B)

Question 2

The money multiplier is when the reserve ratio is 12.5 percent.

Accepted Answer

The answer of The money multiplier is when the reserve...

Question 3

Which of the following can banks use to borrow from the Federal Reserve?

Accepted Answer

A)   the discount window or the term auction facility
B)   the discount window but not the term auction facility
C)   the term auction facility but not the discount window
D)   Banks cannot borrow from the Federal Reserve, only the government can.E) B) and D)
F) A) and C)

Question 4

The Federal Reserve primarily uses open-market operations to change the money supply.

Accepted Answer

A) True 
 B)False

Question 5

Table 29-1.
The information in the table pertains to an imaginary economy.
 
-Refer to Table 29-1. What is the value of M1 in billions of dollars?

Accepted Answer

A)   $1,915 billion
B)   $1,900 billion
C)   $2,665 billion
D)   $2,825 billionE) A) and D)
F) A) and C)

Question 6

Which of the following increases when the Fed makes open-market sales?

Accepted Answer

A)   currency and reserves
B)   currency but not reserves
C)   reserves but not currency
D)   neither currency nor reservesE) A) and D)
F) A) and C)

Question 7

All U.S. paper dollars read "This note is legal tender for all debts, public and private." This statement represents which characteristic of US currency?

Accepted Answer

A)   The U.S. operates under the gold standard.
B)   U.S. paper money is commodity money.
C)   U.S. paper money is fiat money.
D)   U.S. paper money is a convenient store of wealth.E) A) and C)
F) A) and B)

Question 8

In recent years the Federal Open Market Committee has focused on a target for

Accepted Answer

A)   M1 growth.
B)   the federal funds rate.
C)   the number of Treasury Securities issued by the federal government.
D)   total reserves of banks.E) C) and D)
F) B) and D)

Question 9

Treasury Bonds are

Accepted Answer

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

Question 10

You pay for cheese and bread from the deli with currency. Which function of money does this best illustrate?

Accepted Answer

A)   medium of exchange
B)   unit of account
C)   store of value
D)   liquidityE) A) and D)
F) A) and C)

Question 11

Table 29-1.
The information in the table pertains to an imaginary economy.
 
-Refer to Table 29-1. What is the value of M2 in billions of dollars?

Accepted Answer

A)   $9,815 billion
B)   $8,315 billion
C)   $7,565 billion
D)   $7,405 billionE) None of the above
F) B) and D)

Question 12

A bank has a 20 percent reserve requirement, $8,000 in loans, and has loaned out all it can given the reserve requirement.

Accepted Answer

A)   It has $6,400 in deposits.
B)   It has $10,000 in deposits.
C)   It has $9,600 in deposits.
D)   It has $1,600 in deposits.E) All of the above
F) A) and D)

Question 13

The regional Federal Reserve Banks

Accepted Answer

A)   are not allowed to make loans to banks in their region.
B)   regulate banks in their regions.
C)   have more voting members on the FOMC than does the Board of Governors.
D)   are each headed by a member of the Board of Governors.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. Assume that banks desire to continue holding the same ratio of excess reserves to deposits. What is the reserve requirement and the reserve ratio for Tazian Banks?

Accepted Answer

A)   5 percent, 8 percent
B)   4 percent, 8 percent
C)   4 percent, 5 percent
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 15

Table 29-4.
 
-Refer to Table 29-4. The reserve ratio for this bank is

Accepted Answer

A)   8 percent.
B)   12.5 percent.
C)   87.5 percent.
D)   25 percent.E) All of the above
F) C) and D)

Question 16

To increase the money supply, the Fed could

Accepted Answer

A)   sell government bonds.
B)   auction more loans to banks.
C)   increase the reserve requirement.
D)   None of the above is correct.E) B) and C)
F) A) and D)

Question 17

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold

Accepted Answer

A)   fewer reserves, so the reserve ratio will fall.
B)   fewer reserves, so the reserve ratio will rise.
C)   more reserves, so the reserve ratio will fall.
D)   more reserves, so the reserve ratio will rise.E) A) and B)
F) None of the above

Question 18

Which of the following is not correct?

Accepted Answer

A)   The regional Federal Reserve Banks play a role in regulating banks and ensuring the health of the banking system.
B)   The President of the New York Federal Reserve Regional Bank always gets to vote on the decisions made by the Federal Open Market Committee.
C)   U.S. monetary policy is made by the Federal Open Market Committee.
D)   The Federal Open Market Committee meets every 12 weeks.E) B) and C)
F) A) and D)

Question 19

In a 100-percent-reserve banking system, if people decided to decrease the amount of currency they held by increasing the amount they held in checkable deposits, then

Accepted Answer

A)   M1 would increase.
B)   M1 would decrease.
C)   M1 would not change.
D)   M1 might rise or fall.E) A) and C)
F) A) and B)

Question 20

How does the Fed Open Market Committee increase the money supply?

Accepted Answer

The answer of How does the Fed Open Market Committee...

Exam 11: The Monetary System

Which of the following increases when the Fed makes open-market sales?

Correct Answer
verified

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold

Correct Answer
verified

The regional Federal Reserve Banks

Correct Answer
verified

To increase the money supply, the Fed could

Correct Answer
verified

The Federal Reserve primarily uses open-market operations to change the money supply.

Correct Answer
verified

Table 29-1. The information in the table pertains to an imaginary economy. -Refer to Table 29-1. What is the value of M1 in billions of dollars?

Correct Answer
verified

Table 29-4. -Refer to Table 29-4. The reserve ratio for this bank is

Correct Answer
verified

Treasury Bonds are

Correct Answer
verified

A bank has a 20 percent reserve requirement, $8,000 in loans, and has loaned out all it can given the reserve requirement.

Correct Answer
verified

The money multiplier is when the reserve ratio is 12.5 percent.

Correct Answer
verified

Correct Answer
verified

Which of the following can banks use to borrow from the Federal Reserve?

Correct Answer
verified

Which of the following is not correct?

Correct Answer
verified

You pay for cheese and bread from the deli with currency. Which function of money does this best illustrate?

Correct Answer
verified

Table 29-1. The information in the table pertains to an imaginary economy. -Refer to Table 29-1. What is the value of M2 in billions of dollars?

Correct Answer
verified

The reserve requirement is 4 percent, banks hold no excess reserves and people hold no currency. If the Fed sells $10,000 worth of bonds, what happens to the money supply?

Correct Answer
verified

In a 100-percent-reserve banking system, if people decided to decrease the amount of currency they held by increasing the amount they held in checkable deposits, then

Correct Answer
verified

In recent years the Federal Open Market Committee has focused on a target for

Correct Answer
verified

All U.S. paper dollars read "This note is legal tender for all debts, public and private." This statement represents which characteristic of US currency?

Correct Answer
verified

How does the Fed Open Market Committee increase the money supply?

Correct Answer
verified

Exam 11: The Monetary System

Which of the following increases when the Fed makes open-market sales?

Correct AnswerverifiedShow Answer

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold

Correct AnswerverifiedShow Answer

The regional Federal Reserve Banks

Correct AnswerverifiedShow Answer

To increase the money supply, the Fed could

Correct AnswerverifiedShow Answer

The Federal Reserve primarily uses open-market operations to change the money supply.

Correct AnswerverifiedShow Answer

Table 29-1. The information in the table pertains to an imaginary economy. -Refer to Table 29-1. What is the value of M1 in billions of dollars?

Correct AnswerverifiedShow Answer

Table 29-4. -Refer to Table 29-4. The reserve ratio for this bank is

Correct AnswerverifiedShow Answer

Treasury Bonds are

Correct AnswerverifiedShow Answer

A bank has a 20 percent reserve requirement, $8,000 in loans, and has loaned out all it can given the reserve requirement.

Correct AnswerverifiedShow Answer

The money multiplier is when the reserve ratio is 12.5 percent.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following can banks use to borrow from the Federal Reserve?

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

You pay for cheese and bread from the deli with currency. Which function of money does this best illustrate?

Correct AnswerverifiedShow Answer

Table 29-1. The information in the table pertains to an imaginary economy. -Refer to Table 29-1. What is the value of M2 in billions of dollars?

Correct AnswerverifiedShow Answer

The reserve requirement is 4 percent, banks hold no excess reserves and people hold no currency. If the Fed sells $10,000 worth of bonds, what happens to the money supply?

Correct AnswerverifiedShow Answer

In a 100-percent-reserve banking system, if people decided to decrease the amount of currency they held by increasing the amount they held in checkable deposits, then

Correct AnswerverifiedShow Answer

In recent years the Federal Open Market Committee has focused on a target for

Correct AnswerverifiedShow Answer

All U.S. paper dollars read "This note is legal tender for all debts, public and private." This statement represents which characteristic of US currency?

Correct AnswerverifiedShow Answer

How does the Fed Open Market Committee increase the money supply?

Correct AnswerverifiedShow Answer

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