Question 1

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) None of the above
F) B) and D)

Question 2

As banks create money, they create wealth.

Accepted Answer

A) True 
 B)False

Question 3

There is a

Accepted Answer

A)   short-run tradeoff between inflation and unemployment.
B)   short-run tradeoff between an increase in the money supply and inflation.
C)   long-run tradeoff between inflation and unemployment.
D)   long-run tradeoff between an increase in the money supply and inflation.E) C) and D)
F) None of the above

Question 4

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) All of the above
F) C) and D)

Question 5

A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can given the reserve requirement.

Accepted Answer

A)   It has $80 in reserves and $9,920 in loans.
B)   It has $800 in reserves and $9,200 in loans.
C)   It has $1,250 in reserves and $8,750 in loans.
D)   None of the above is correct.E) All of the above
F) None of the above

Question 6

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) A) and D)
F) A) and C)

Question 7

Fiat money

Accepted Answer

A)   has no intrinsic value.
B)   is backed by gold.
C)   is a medium of exchange but not a unit of account.
D)   is any close substitute for currency such as checkable deposits.E) B) and C)
F) A) and B)

Question 8

If the Federal Open Market Committee decides to increase the money supply, then the Federal Reserve

Accepted Answer

A)   creates dollars and uses them to purchase government bonds from the public.
B)   sells government bonds from its portfolio to the public.
C)   creates dollars and uses them to purchase various types of stocks and bonds from the public.
D)   sells various types of stocks and bonds from its portfolio to the public.E) B) and D)
F) B) and C)

Question 9

On a bank's T-account, which are part of the banks liabilities?

Accepted Answer

A)   both deposits made by its customers and reserves
B)   deposits made by its customers but not reserves
C)   reserves but not deposits made by its customers
D)   neither deposits made by its customers nor reservesE) B) and D)
F) B) and C)

Question 10

The existence of money leads to

Accepted Answer

A)   greater specialization in production, but not to a higher standard of living.
B)   a higher standard of living, but not to greater specialization.
C)   greater specialization and to a higher standard of living.
D)   neither greater specialization nor to a higher standard of living.E) B) and C)
F) B) and D)

Question 11

In the U.S., the average adult holds about $4,490 in

Accepted Answer

A)   currency.
B)   wealth.
C)   M1.
D)   M2.E) C) and D)
F) B) and C)

Question 12

What is the difference between money and wealth?

Accepted Answer

Money is defined as the set of...

Question 13

The money multiplier equals 1/(1 - R), where R represents the reserve ratio.

Accepted Answer

A) True 
 B)False

Question 14

As the reserve ratio decreases, the money multiplier

Accepted Answer

A)   increases.
B)   does not change.
C)   decreases.
D)   could do any of the above.E) A) and B)
F) None of the above

Question 15

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 D)
F) B) and C)

Question 16

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) B) and C)
F) A) and D)

Question 17

Which of the following is an asset of a bank and a liability for its customers?

Accepted Answer

A)   deposits of its customers and loans to its customers
B)   deposits of its customers but not loans to its customers
C)   loans to its customers but not the deposits of its customers
D)   neither the deposits of its customers nor the loans to its customersE) A) and B)
F) A) and C)

Question 18

A decrease in the money supply might indicate that the Fed had

Accepted Answer

A)   purchased bonds to increase banks reserves.
B)   purchased bonds to decrease banks reserves.
C)   sold bonds to increase banks reserves.
D)   sold bonds to decrease banks reserves.E) A) and D)
F) B) and D)

Question 19

A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits. Its reserves amount to

Accepted Answer

A)   $8.
B)   $80.
C)   $92.
D)   $920.E) A) and C)
F) None of the above

Question 20

In a fractional-reserve banking system, an increase in reserve requirements

Accepted Answer

A)   increases both the money multiplier and the money supply.
B)   decreases both the money multiplier and the money supply.
C)   increases the money multiplier, but decreases the money supply.
D)   decreases the money multiplier, but increases the money supply.E) C) and D)
F) A) and C)

Exam 29: The Monetary System

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

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In the U.S., the average adult holds about $4,490 in

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The existence of money leads to

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In a fractional-reserve banking system, an increase in reserve requirements

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If the Federal Open Market Committee decides to increase the money supply, then the Federal Reserve

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There is a

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To increase the money supply, the Fed could

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Which of the following is an asset of a bank and a liability for its customers?

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Fiat money

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A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can given the reserve requirement.

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

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As the reserve ratio decreases, the money multiplier

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A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits. Its reserves amount to

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Treasury Bonds are

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What is the difference between money and wealth?

Correct AnswerverifiedMoney is defined as the set of...View AnswerShow Answer

As banks create money, they create wealth.

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On a bank's T-account, which are part of the banks liabilities?

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To increase the money supply, the Fed could

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The money multiplier equals 1/(1 - R), where R represents the reserve ratio.

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A decrease in the money supply might indicate that the Fed had

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Money is defined as the set of...
View Answer

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