Question 1

Commodity money

Accepted Answer

A)  has value independent of its use as money.
B)  has little to no value independent of its use as money.
C)  is backed by a valuable commodity such as gold.
D)  can be used to purchase commodities, but not services.E) None of the above
F) B) and D)

Question 2

Open market operations refer to the purchase or sale of ________ to control the money supply.

Accepted Answer

A)  corporate bonds and stocks by the Federal Reserve
B)  U) S.Treasury securities by the Federal Reserve
C)  corporate bonds and stocks by the U.S.Treasury
D)  U) S.Treasury securities by the U.S.TreasuryE) None of the above
F) A) and B)

Question 3

The quantity equation becomes the basis for a theory when we assume that velocity of money is constant.

Accepted Answer

A) True 
 B)False

Question 4

An increase in the purchasing power of money need not lead to an increase in the purchasing power of income,because the falling price level would likely mean falling wages and salaries.

Accepted Answer

A) True 
 B)False

Question 5

If the Fed wishes to decrease the supply of money and credit,it may sell government securities,raise the discount rate,or lower required reserve ratios.

Accepted Answer

A) True 
 B)False

Question 6

The statement "This Dell laptop costs $1,200" illustrates which function of money?

Accepted Answer

A)  medium of exchange
B)  unit of account
C)  store of value
D)  standard of deferred paymentE) A) and D)
F) B) and C)

Question 7

Suppose Bill Gates deposits $20 million into his checking account at Wells Fargo Bank.If the required reserve ratio is 10 percent,what is the maximum change in money supply?

Accepted Answer

A)  -$200 million
B)  -$180 million
C)  $2 million
D)  $180 million
E)  $200 millionF) B) and D)
G) A) and E)

Question 8

During the German hyperinflation of the 1920s,the large increases in the money supply were generated by the German government

Accepted Answer

A)  significantly lowering the required reserve ratio to enable German businesses to obtain loans.
B)  significantly raising the required reserve ratio to reduce business loans.
C)  printing large quantities of German marks.
D)  selling large quantities of government bonds to the central bank, the Reichsbank.E) C) and D)
F) None of the above

Question 9

Suppose that the required reserve ratio is 10 percent and you withdraw $25,000 from Comerica Bank.What is the deposit multiplier? What is the total decrease in deposits in the banking system? What is the change in the money supply?

Accepted Answer

The simple deposit multiplier is equal t...

Question 10

Why is the real-world deposit multiplier smaller than 1/RR,where RR is the required reserve ratio?

Accepted Answer

There are two reasons why the real world...

Question 11

In 1913,Congress established the Federal Reserve system with the intention of putting an end to

Accepted Answer

A)  high interest rates.
B)  high unemployment rates.
C)  inflation.
D)  bank panics.E) A) and B)
F) B) and C)

Question 12

If a person withdraws $500 from his/her savings account and puts it in his/her checking account,then M1 will ________ and M2 will ________.

Accepted Answer

A)  increase; decrease
B)  increase; not change
C)  not change; increase
D)  not change; decrease
E)  not change; not changeF) C) and D)
G) B) and E)

Question 13

When a government has a budget deficit,it must issue (sell)government bonds to finance the deficit.Does it matter for the rate of inflation if the government sells the government bonds to the public or sells the government bonds to the central bank? Explain why it does or does not matter.

Accepted Answer

It matters greatly.When the government s...

Question 14

In an economy with ________,there are more prices than in an economy with ________.

Accepted Answer

A)  barter; money
B)  money; barter
C)  fiat money; commodity money
D)  fiat money; barterE) C) and D)
F) A) and B)

Question 15

Which of the following is a true statement?

Accepted Answer

A)  excess reserves = actual reserves - required reserves
B)  excess reserves = deposits - required reserves
C)  excess reserves = deposits - loans
D)  excess reserves = loans - required reservesE) A) and B)
F) C) and D)

Question 16

Liquidity is defined as

Accepted Answer

A)  the ease with which a given asset can be converted to a store of value.
B)  the ease with which a given asset can be converted to a unit of account.
C)  the ease with which a given asset can be converted to a medium of exchange.
D)  the ease with which a given asset can be converted to a standard of deferred payment.E) A) and B)
F) A) and C)

Question 17

Why does the holding of excess reserves by banks and the holding of currency by households and firms cause the real-world deposit multiplier to be less than the simple deposit multiplier?

Accepted Answer

If banks hold excess reserves,these rese...

Question 18

The quantity equation states that

Accepted Answer

A)  the money supply (M) divided by the velocity of money (V) equals the price level (P) divided by real output (Y) , i.e., M/V = P/Y.
B)  M × V = P × Y.
C)  M + V = P + Y.
D)  M - V = P - Y.E) B) and C)
F) A) and D)

Question 19

Typically,a bank's largest asset is its

Accepted Answer

A)  reserves.
B)  holdings of securities.
C)  deposits of its customers.
D)  loans.E) A) and D)
F) B) and C)

Exam 16: Money, banks, and the Federal Reserve System

The quantity equation states that

Correct Answer
verified

If the Fed wishes to decrease the supply of money and credit,it may sell government securities,raise the discount rate,or lower required reserve ratios.

Correct Answer
verified

Suppose Bill Gates deposits $20 million into his checking account at Wells Fargo Bank.If the required reserve ratio is 10 percent,what is the maximum change in money supply?

Correct Answer
verified

Open market operations refer to the purchase or sale of ________ to control the money supply.

Correct Answer
verified

In 1913,Congress established the Federal Reserve system with the intention of putting an end to

Correct Answer
verified

The quantity equation becomes the basis for a theory when we assume that velocity of money is constant.

Correct Answer
verified

Suppose that the required reserve ratio is 10 percent and you withdraw $25,000 from Comerica Bank.What is the deposit multiplier? What is the total decrease in deposits in the banking system? What is the change in the money supply?

Correct Answer
verified
The simple deposit multiplier is equal t...
View Answer

During the German hyperinflation of the 1920s,the large increases in the money supply were generated by the German government

Correct Answer
verified

An increase in the purchasing power of money need not lead to an increase in the purchasing power of income,because the falling price level would likely mean falling wages and salaries.

Correct Answer
verified

Typically,a bank's largest asset is its

Correct Answer
verified

Liquidity is defined as

Correct Answer
verified

If a person withdraws $500 from his/her savings account and puts it in his/her checking account,then M1 will and M2 will .

Correct Answer
verified

In an economy with ,there are more prices than in an economy with .

Correct Answer
verified

The statement "This Dell laptop costs $1,200" illustrates which function of money?

Correct Answer
verified

Which of the following is a true statement?

Correct Answer
verified

Why does the holding of excess reserves by banks and the holding of currency by households and firms cause the real-world deposit multiplier to be less than the simple deposit multiplier?

Correct Answer
verified
If banks hold excess reserves,these rese...
View Answer

Why is the real-world deposit multiplier smaller than 1/RR,where RR is the required reserve ratio?

Correct Answer
verified
There are two reasons why the real world...
View Answer

When a government has a budget deficit,it must issue (sell)government bonds to finance the deficit.Does it matter for the rate of inflation if the government sells the government bonds to the public or sells the government bonds to the central bank? Explain why it does or does not matter.

Correct Answer
verified
It matters greatly.When the government s...
View Answer

Commodity money

Correct Answer
verified

Exam 16: Money, banks, and the Federal Reserve System

The quantity equation states that

Correct AnswerverifiedShow Answer

If the Fed wishes to decrease the supply of money and credit,it may sell government securities,raise the discount rate,or lower required reserve ratios.

Correct AnswerverifiedShow Answer

Suppose Bill Gates deposits $20 million into his checking account at Wells Fargo Bank.If the required reserve ratio is 10 percent,what is the maximum change in money supply?

Correct AnswerverifiedShow Answer

Open market operations refer to the purchase or sale of ________ to control the money supply.

Correct AnswerverifiedShow Answer

In 1913,Congress established the Federal Reserve system with the intention of putting an end to

Correct AnswerverifiedShow Answer

The quantity equation becomes the basis for a theory when we assume that velocity of money is constant.

Correct AnswerverifiedShow Answer

Suppose that the required reserve ratio is 10 percent and you withdraw $25,000 from Comerica Bank.What is the deposit multiplier? What is the total decrease in deposits in the banking system? What is the change in the money supply?

Correct AnswerverifiedThe simple deposit multiplier is equal t...View AnswerShow Answer

During the German hyperinflation of the 1920s,the large increases in the money supply were generated by the German government

Correct AnswerverifiedShow Answer

An increase in the purchasing power of money need not lead to an increase in the purchasing power of income,because the falling price level would likely mean falling wages and salaries.

Correct AnswerverifiedShow Answer

Typically,a bank's largest asset is its

Correct AnswerverifiedShow Answer

Liquidity is defined as

Correct AnswerverifiedShow Answer

If a person withdraws $500 from his/her savings account and puts it in his/her checking account,then M1 will ________ and M2 will ________.

Correct AnswerverifiedShow Answer

In an economy with ________,there are more prices than in an economy with ________.

Correct AnswerverifiedShow Answer

The statement "This Dell laptop costs $1,200" illustrates which function of money?

Correct AnswerverifiedShow Answer

Which of the following is a true statement?

Correct AnswerverifiedShow Answer

Why does the holding of excess reserves by banks and the holding of currency by households and firms cause the real-world deposit multiplier to be less than the simple deposit multiplier?

Correct AnswerverifiedIf banks hold excess reserves,these rese...View AnswerShow Answer

Why is the real-world deposit multiplier smaller than 1/RR,where RR is the required reserve ratio?

Correct AnswerverifiedThere are two reasons why the real world...View AnswerShow Answer

When a government has a budget deficit,it must issue (sell)government bonds to finance the deficit.Does it matter for the rate of inflation if the government sells the government bonds to the public or sells the government bonds to the central bank? Explain why it does or does not matter.

Correct AnswerverifiedIt matters greatly.When the government s...View AnswerShow Answer

Commodity money

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
The simple deposit multiplier is equal t...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

If a person withdraws $500 from his/her savings account and puts it in his/her checking account,then M1 will and M2 will .

Correct Answer
verified

In an economy with ,there are more prices than in an economy with .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
If banks hold excess reserves,these rese...
View Answer

Correct Answer
verified
There are two reasons why the real world...
View Answer

Correct Answer
verified
It matters greatly.When the government s...
View Answer

Correct Answer
verified