Question 1

A bank's reserve ratio is 10 percent and the bank has $5,000 in deposits. Its reserves amount to

Accepted Answer

A)   $50.
B)   $500.
C)   $4,500.
D)   $4,950.E) A) and D)
F) C) and D)

Question 2

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 B)
F) A) and D)

Question 3

Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 8 percent, and excess reserves amount to $5 billion. What is the level of deposits?

Accepted Answer

A)   $5,000 billion
B)   $4,937.5 billion
C)   $5,062.5 billion
D)   $4,995 billionE) A) and D)
F) A) and C)

Question 4

The confidence you have that a retailer will accept dollars in exchange for goods is based primarily on money

Accepted Answer

A)   being a unit of account.
B)   being a medium of exchange.
C)   serving as a store of value.
D)   having intrinsic value.E) B) and D)
F) None of the above

Question 5

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)   refers to highly liquid assets that do not serve as a medium of exchange.E) A) and C)
F) A) and D)

Question 6

Why do Federal Reserve Board of Governors have long (14 year) terms?

Accepted Answer

Long terms allow Fed Board of ...

Question 7

In 1991, the Federal Reserve lowered the reserve requirement from 12 percent to 10 percent. Other things the same this should have

Accepted Answer

A)   increased both the money multiplier and the money supply.
B)   decreased both the money multiplier and the money supply.
C)   increased the money multiplier and decreased the money supply.
D)   decreased the money multiplier and increased the money supply.E) A) and C)
F) A) and B)

Question 8

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) All of the above
F) A) and B)

Question 9

Table 29-7. 
-Refer to Table 29-7. If the Bank of Springfield has lent out all the money it can given its level of deposits, then what is the reserve requirement?

Accepted Answer

A)   8.1 percent
B)   11.0 percent
C)   12.4 percent
D)   89.0 percentE) A) and D)
F) None of the above

Question 10

Monetary policy has an important influence on and in the short run.

Accepted Answer

inflation,...

Question 11

A bank has $30,000 in deposits and has $5,400 in reserves. What is its reserve ratio?

Accepted Answer

The answer of A bank has $30,000 in deposits and...

Question 12

In a fractional-reserve banking system, a bank

Accepted Answer

A)   does not make loans.
B)   does not accept deposits.
C)   keeps only a fraction of its deposits in reserve.
D)   None of the above is correct.E) None of the above
F) A) and B)

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

An open-market sale

Accepted Answer

A)   increases the number of dollars and the number of bonds in the hands of the public.
B)   increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public.
C)   decreases the number of dollars and the number of bonds in the hands of the public.
D)   decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public.E) C) and D)
F) None of the above

Question 15

When we measure and record economic value, we use money as the

Accepted Answer

A)   liquid asset.
B)   medium of exchange.
C)   unit of account.
D)   store of value.E) All of the above
F) None of the above

Question 16

If the reserve ratio is 12.5 percent, then $5,600 of money can be generated by

Accepted Answer

A)   $64 of new reserves.
B)   $448 of new reserves.
C)   $700 of new reserves.
D)   $800 of new reserves.E) All of the above
F) A) and B)

Question 17

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) A) and B)
F) All of the above

Question 18

If the Fed sells government bonds to the public, then reserves

Accepted Answer

A)   increase and the money supply increases.
B)   increase and the money supply decreases.
C)   decrease and the money supply increases.
D)   decrease and the money supply decreases.E) C) and D)
F) None of the above

Question 19

The manager of the bank where you work tells you that the bank has $300 million in deposits and $255 million dollars in loans. If the reserve requirement is 8.5 percent, how much is the bank holding in excess reserves?

Accepted Answer

A)   $15 million
B)   $19.5 million
C)   $25.5 million
D)   $0 millionE) A) and B)
F) A) and C)

Question 20

If the reserve ratio increased from 10 percent to 20 percent, the money multiplier would

Accepted Answer

A)   rise from 10 to 20.
B)   rise from 5 to 10.
C)   fall from 10 to 5.
D)   not change.E) B) and D)
F) B) and C)

Exam 29: The Monetary System

Monetary policy has an important influence on and in the short run.

Correct Answerverifiedinflation,...View AnswerShow Answer

The measure of the money stock called M1 includes

Correct AnswerverifiedShow Answer

Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 8 percent, and excess reserves amount to $5 billion. What is the level of deposits?

Correct AnswerverifiedShow Answer

Table 29-7. -Refer to Table 29-7. If the Bank of Springfield has lent out all the money it can given its level of deposits, then what is the reserve requirement?

Correct AnswerverifiedShow Answer

Why do Federal Reserve Board of Governors have long (14 year) terms?

Correct AnswerverifiedLong terms allow Fed Board of ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

The confidence you have that a retailer will accept dollars in exchange for goods is based primarily on money

Correct AnswerverifiedShow Answer

If the reserve ratio increased from 10 percent to 20 percent, the money multiplier would

Correct AnswerverifiedShow Answer

In a fractional-reserve banking system, a bank

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

An open-market sale

Correct AnswerverifiedShow Answer

When we measure and record economic value, we use money as the

Correct AnswerverifiedShow Answer

If the reserve ratio is 12.5 percent, then $5,600 of money can be generated by

Correct AnswerverifiedShow Answer

In 1991, the Federal Reserve lowered the reserve requirement from 12 percent to 10 percent. Other things the same this should have

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Fiat money

Correct AnswerverifiedShow Answer

A bank's reserve ratio is 10 percent and the bank has $5,000 in deposits. Its reserves amount to

Correct AnswerverifiedShow Answer

The manager of the bank where you work tells you that the bank has $300 million in deposits and $255 million dollars in loans. If the reserve requirement is 8.5 percent, how much is the bank holding in excess reserves?

Correct AnswerverifiedShow Answer

A bank has $30,000 in deposits and has $5,400 in reserves. What is its reserve ratio?

Correct AnswerverifiedShow Answer

If the Fed sells government bonds to the public, then reserves

Correct AnswerverifiedShow Answer

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inflation,...
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Long terms allow Fed Board of ...
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