Question 1

U.S. dollars are an example of commodity money and hides used to make trades are an example of fiat money.

Accepted Answer

A) True 
 B)False

Question 2

The manager of the bank where you work tells you that the bank has $400 million in deposits and $340 million dollars in loans. The Fed then raises the reserve requirement from 10 percent to 15 percent. Assuming everything else stays the same, how much is the bank holding in excess reserves after the increase in the reserve requirement?

Accepted Answer

A)   $0
B)   $20 million
C)   $40 million
D)   $60 millionE) B) and C)
F) None of the above

Question 3

Table 11-5.
 
-Refer to Table 11-5. Assume there is a reserve requirement and the Bank of Pleasantville is exactly in compliance with that requirement. Assume the same is true for all other banks. Lastly, assume people hold only deposits and no currency. What is the money multiplier?

Accepted Answer

A)   5
B)   10
C)   15
D)   20E) A) and D)
F) A) and C)

Question 4

The series of bank failures in 1907 occurred despite the creation of the Federal Reserve many years earlier.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following increase when the Fed makes open market purchases?

Accepted Answer

A)   currency and reserves
B)   currency but not reserves
C)   reserves but not currency
D)   neither currency nor reservesE) A) and B)
F) None of the above

Question 6

If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 10 percent receives a deposit of $400 it has a

Accepted Answer

A)   $400 increase in excess reserves and no increase in required reserves.
B)   $400 increase in required reserves and no increase in excess reserves.
C)   $360 increase in excess reserves and a $40 increase in required reserves.
D)   $40 increase in excess reserves and a $360 increase in required reserves.E) None of the above
F) A) and B)

Question 7

The measure of the money stock called M1 includes

Accepted Answer

A)   wealth held by people in their checking accounts.
B)   wealth held by people in their savings accounts.
C)   wealth held by people in money market mutual funds.
D)   everything that is included in M2 plus some additional items.E) All of the above
F) B) and D)

Question 8

Which tool of monetary policy does the Federal Reserve use most often?

Accepted Answer

A)   term auctions
B)   open-market operations
C)   changes in reserve requirements
D)   changes in the discount rateE) A) and D)
F) None of the above

Question 9

M2 is both larger and less liquid than M1.

Accepted Answer

A) True 
 B)False

Question 10

If the reserve ratio is 10 percent, banks do not hold excess reserves, people hold only deposits and no currency, then when the Fed sells $10 million worth of bonds to the public, bank reserves

Accepted Answer

A)   increase by $1 million and the money supply eventually increases by $10 million.
B)   increase by $10 million and the money supply eventually increases by $100 million.
C)   decrease by $1 million and the money supply eventually increases by $10 million.
D)   decrease by $10 million and the money supply eventually decreases by $100 million.E) None of the above
F) A) and C)

Question 11

The discount rate is the interest rate that

Accepted Answer

A)   banks charge one another for loans.
B)   banks charge the Fed for loans.
C)   the Fed charges banks for loans.
D)   the Fed charges Congress for loans.E) All of the above
F) A) and D)

Question 12

If the reserve ratio is 4 percent, then $81,250 of new money can be generated by

Accepted Answer

A)   $325 of new reserves.
B)   $3,250 of new reserves.
C)   $20,312.50 of new reserves.
D)   $2,031,250 of new reserves.E) A) and C)
F) A) and B)

Question 13

The "yardstick" people use to post prices and record debts is called

Accepted Answer

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

Question 14

The Fed can reduce the federal funds rate by

Accepted Answer

A)   decreasing the money supply. To decrease the money supply it could sell bonds.
B)   decreasing the money supply. To decrease the money supply it could buy bonds.
C)   increasing the money supply. To increase the money supply it could sell bonds.
D)   increasing the money supply. To increase the money supply it could buy bonds.E) B) and C)
F) A) and C)

Question 15

At any given time, the voting members of the Federal Open Market Committee include

Accepted Answer

A)   five of the presidents of the regional Federal Reserve banks.
B)   the president of the Federal Reserve Bank of New York.
C)   the seven members of the Board of Governors.
D)   All of the above are correct.E) B) and D)
F) B) and C)

Question 16

In an economy that relies on barter, trade requires a double-coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 17

At any meeting of the Federal Open Market Committee, that committee's voting members consist of

Accepted Answer

A)   5 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors.
B)   5 Federal Reserve Regional Bank Presidents and 5 members of the Board of Governors.
C)   12 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors.
D)   12 Federal Reserve Regional Bank Presidents and 5 members of the Board of Governors.E) None of the above
F) A) and C)

Question 18

To increase the money supply, the Fed could

Accepted Answer

A)   sell government bonds.
B)   increase the discount rate.
C)   decrease the reserve requirement.
D)   None of the above is correct.E) None of the above
F) A) and B)

Question 19

Table 11-5.
 
-Refer to Table 11-5. If the Fed's reserve requirement is 9 percent, then what quantity of excess reserves does the Bank of Pleasantville now hold?

Accepted Answer

A)   $200
B)   $250
C)   $400
D)   $1,000E) A) and B)
F) A) and C)

Question 20

Which group within the Federal Reserve System meets to discuss changes in the economy and determine monetary policy?

Accepted Answer

A)   the Board of Governors
B)   the FOMC
C)   the regional Federal Reserve Bank presidents
D)   the Central Bank Policy CommissionE) C) and D)
F) B) and D)

Exam 11: The Monetary System

The Fed can reduce the federal funds rate by

Correct Answer
verified

At any meeting of the Federal Open Market Committee, that committee's voting members consist of

Correct Answer
verified

If the reserve ratio is 10 percent, banks do not hold excess reserves, people hold only deposits and no currency, then when the Fed sells $10 million worth of bonds to the public, bank reserves

Correct Answer
verified

To increase the money supply, the Fed could

Correct Answer
verified

Table 11-5. -Refer to Table 11-5. If the Fed's reserve requirement is 9 percent, then what quantity of excess reserves does the Bank of Pleasantville now hold?

Correct Answer
verified

If the reserve ratio is 4 percent, then $81,250 of new money can be generated by

Correct Answer
verified

Table 11-5. -Refer to Table 11-5. Assume there is a reserve requirement and the Bank of Pleasantville is exactly in compliance with that requirement. Assume the same is true for all other banks. Lastly, assume people hold only deposits and no currency. What is the money multiplier?

Correct Answer
verified

At any given time, the voting members of the Federal Open Market Committee include

Correct Answer
verified

If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 10 percent receives a deposit of $400 it has a

Correct Answer
verified

Which of the following increase when the Fed makes open market purchases?

Correct Answer
verified

The measure of the money stock called M1 includes

Correct Answer
verified

Which group within the Federal Reserve System meets to discuss changes in the economy and determine monetary policy?

Correct Answer
verified

Which tool of monetary policy does the Federal Reserve use most often?

Correct Answer
verified

The "yardstick" people use to post prices and record debts is called

Correct Answer
verified

Correct Answer
verified

The discount rate is the interest rate that

Correct Answer
verified

In an economy that relies on barter, trade requires a double-coincidence of wants.

Correct Answer
verified

U.S. dollars are an example of commodity money and hides used to make trades are an example of fiat money.

Correct Answer
verified

M2 is both larger and less liquid than M1.

Correct Answer
verified

The series of bank failures in 1907 occurred despite the creation of the Federal Reserve many years earlier.

Correct Answer
verified

Exam 11: The Monetary System

The Fed can reduce the federal funds rate by

Correct AnswerverifiedShow Answer

At any meeting of the Federal Open Market Committee, that committee's voting members consist of

Correct AnswerverifiedShow Answer

If the reserve ratio is 10 percent, banks do not hold excess reserves, people hold only deposits and no currency, then when the Fed sells $10 million worth of bonds to the public, bank reserves

Correct AnswerverifiedShow Answer

To increase the money supply, the Fed could

Correct AnswerverifiedShow Answer

Table 11-5. -Refer to Table 11-5. If the Fed's reserve requirement is 9 percent, then what quantity of excess reserves does the Bank of Pleasantville now hold?

Correct AnswerverifiedShow Answer

If the reserve ratio is 4 percent, then $81,250 of new money can be generated by

Correct AnswerverifiedShow Answer

Table 11-5. -Refer to Table 11-5. Assume there is a reserve requirement and the Bank of Pleasantville is exactly in compliance with that requirement. Assume the same is true for all other banks. Lastly, assume people hold only deposits and no currency. What is the money multiplier?

Correct AnswerverifiedShow Answer

At any given time, the voting members of the Federal Open Market Committee include

Correct AnswerverifiedShow Answer

If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 10 percent receives a deposit of $400 it has a

Correct AnswerverifiedShow Answer

Which of the following increase when the Fed makes open market purchases?

Correct AnswerverifiedShow Answer

The measure of the money stock called M1 includes

Correct AnswerverifiedShow Answer

Which group within the Federal Reserve System meets to discuss changes in the economy and determine monetary policy?

Correct AnswerverifiedShow Answer

Which tool of monetary policy does the Federal Reserve use most often?

Correct AnswerverifiedShow Answer

The "yardstick" people use to post prices and record debts is called

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The discount rate is the interest rate that

Correct AnswerverifiedShow Answer

In an economy that relies on barter, trade requires a double-coincidence of wants.

Correct AnswerverifiedShow Answer

U.S. dollars are an example of commodity money and hides used to make trades are an example of fiat money.

Correct AnswerverifiedShow Answer

M2 is both larger and less liquid than M1.

Correct AnswerverifiedShow Answer

The series of bank failures in 1907 occurred despite the creation of the Federal Reserve many years earlier.

Correct AnswerverifiedShow Answer

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