Question 1

Which of the following is not included in M1?

Accepted Answer

A)  currency
B)  demand deposits
C)  savings deposits
D)  travelers' checksE) A) and D)
F) All of the above

Question 2

Members of the Board of Governors

Accepted Answer

A)  are appointed by the U.S.president, while presidents of the Federal Reserve regional banks are appointed by the banks' boards of directors.
B)  are appointed by the banks' boards of directors while the presidents of the Federal Reserve regional banks are appointed by the U.S.president.
C)  and the presidents of the Federal Reserve regional banks are appointed by the U.S.president.
D)  and the presidents of the Federal Reserve regional banks are appointed by the banks' boards of directors.E) B) and C)
F) A) and C)

Question 3

Which of the following statements about the Federal Reserve is not correct?

Accepted Answer

A)  The members of the Board of Governors are also presidents of the Federal Reserve's regional banks.
B)  The Federal Open Market Committee makes monetary policy.
C)  All members of the Board of Governors sit on the Federal Open Market Committee.
D)  The Federal Reserve serves as a bank regulator.E) All of the above
F) None of the above

Question 4

Credit cards

Accepted Answer

A)  are included in M1 but not M2.
B)  are included in M1 and M2.
C)  are included in M2 but not M1
D)  are not included in any measure of the money supply.E) B) and D)
F) B) and C)

Question 5

M2 is both larger and more liquid than M1.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is included in the M2 definition of the money supply?

Accepted Answer

A)  credit cards
B)  money market mutual funds
C)  corporate bonds
D)  large time depositsE) A) and D)
F) B) and C)

Question 7

Which of the following lists two things that both increase the money supply?

Accepted Answer

A)  the Fed buys bonds and lowers the discount rate
B)  the Fed buys bonds and raises the discount rate
C)  the Fed sells bonds and lowers the discount rate
D)  the Fed sells bonds and raises the discount rateE) A) and C)
F) All of the above

Question 8

Today,bank runs are

Accepted Answer

A)  uncommon because of the high required reserve ratio.
B)  uncommon because of FDIC deposit insurance.
C)  common because of the low required reserve ratio.
D)  common because the FDIC is nearly bankrupt.E) A) and C)
F) None of the above

Question 9

Other things the same if reserve requirements are decreased,the reserve ratio

Accepted Answer

A)  decreases, the money multiplier increases, and the money supply decreases.
B)  increases, the money multiplier increases, and the money supply increases.
C)  decreases, the money multiplier increases, and the money supply increases.
D)  increases, the money multiplier increases, and the money supply decreases.E) None of the above
F) All of the above

Question 10

Imagine that the Federal Funds rate was below the level the Federal Reserve had targeted.To move the rate back towards it's target the Federal Reserve could

Accepted Answer

A)  buy bonds.This buying would increase the money supply.
B)  buy bonds.This buying would reduce the money supply.
C)  sell bonds.This selling would increase the money supply.
D)  sell bonds.This selling would reduce the money supply.E) A) and B)
F) A) and D)

Question 11

Table 29-5
 
-Refer to Table 29-5.Assume that the Bank of Springfield is holding the required percent of deposits as reserves.Also,assume all other banks hold only the required percent of deposits as reserves.What is the money multiplier?

Accepted Answer

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

Question 12

Use the balance sheet for the following questions.
Table 29-3
 
-Refer to Table 29-3.The reserve requirement is 10 percent and then someone deposits an additional $50,000 into the bank,then 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
D)  None of the above is correct.E) A) and D)
F) A) and C)

Question 13

Money

Accepted Answer

A)  is more efficient than barter.
B)  makes trades easier.
C)  allows greater specialization.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 14

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following lists two things that both decrease the money supply?

Accepted Answer

A)  lower the discount rate, raise the reserve requirement ratio
B)  lower the discount rate, lower the reserve requirement ratio
C)  raise the discount rate, raise the reserve requirement ratio
D)  raise the discount rate, lower the reserve requirement ratioE) A) and D)
F) B) and C)

Question 16

Fiat money

Accepted Answer

A)  is worthless.
B)  has no intrinsic value.
C)  may be used as a medium of exchange, but is not legal tender.
D)  performs all the functions of money except providing a unit of account.E) None of the above
F) A) and B)

Question 17

Which of the following isn't included in either M1 or M2?

Accepted Answer

A)  U.S.Treasury bills
B)  small time deposits
C)  demand deposits
D)  money market mutual fundsE) None of the above
F) C) and D)

Question 18

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, www.sweettooth.com, in dollars.
B)  You pay for your WNBA tickets with dollars.
C)  You keep $10 in your backpack for emergencies.
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 19

During recessions,banks typically choose to hold more excess reserves relative to their deposits.This action

Accepted Answer

A)  increases the money multiplier and increases the money supply.
B)  decreases the money multiplier and decreases the money supply.
C)  does not change the money multiplier, but increases the money supply.
D)  does not change the money multiplier, but decreases the money supply.E) A) and C)
F) B) and C)

Question 20

A bank's

Accepted Answer

A)  reserves and the deposits of its customers are both assets.
B)  reserves and the deposits of its customers are both liabilities.
C)  reserves are assets and the deposits of its customers are liabilities.
D)  reserves are liabilities and the deposits of its customers are assets.E) B) and C)
F) A) and B)

Exam 29: The Monetary System

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

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M2 is both larger and more liquid than M1.

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Other things the same if reserve requirements are decreased,the reserve ratio

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Today,bank runs are

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Use the balance sheet for the following questions. Table 29-3 -Refer to Table 29-3.The reserve requirement is 10 percent and then someone deposits an additional $50,000 into the bank,then if the bank takes no other action it will

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Imagine that the Federal Funds rate was below the level the Federal Reserve had targeted.To move the rate back towards it's target the Federal Reserve could

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Which of the following is not included in M1?

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Which of the following lists two things that both decrease the money supply?

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Which of the following isn't included in either M1 or M2?

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Credit cards

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Money

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Table 29-5 -Refer to Table 29-5.Assume that the Bank of Springfield is holding the required percent of deposits as reserves.Also,assume all other banks hold only the required percent of deposits as reserves.What is the money multiplier?

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Members of the Board of Governors

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Which of the following statements about the Federal Reserve is not correct?

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A bank's

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Which of the following lists two things that both increase the money supply?

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During recessions,banks typically choose to hold more excess reserves relative to their deposits.This action

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

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Which of the following is included in the M2 definition of the money supply?

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Fiat money

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