Question 1

Members of the Board of Governors of the Federal Reserve System are appointed for life.

Accepted Answer

A) True 
 B)False

Question 2

When in France you notice that prices are posted in euros, this best illustrates money's function as

Accepted Answer

A)   a store of value.
B)   a medium of exchange.
C)   a unit of account.
D)   a method of barter.E) A) and B)
F) A) and C)

Question 3

Banks are able to create money only when

Accepted Answer

A)   interest rates are above 2%.
B)   the Fed sells U.S. government bonds.
C)   the reserve ratio is 100%.
D)   only a fraction of deposits are held in reserve.E) A) and D)
F) A) and C)

Question 4

Commodity money is

Accepted Answer

A)   backed by gold.
B)   the principal type of money in use today.
C)   money with intrinsic value.
D)   receipts created in international trade that are used as a medium of exchange.E) B) and C)
F) None of the above

Question 5

Suppose a bank is operating with a leverage rate of 10. A 6 percent increase in the value of assets

Accepted Answer

A)   will reduce liabilities by 6 percent.
B)   will result in a 60 percent increase in owner's equity.
C)   will result in a 60percent decrease in owner's equity.
D)   will reduce liabilities by 10 percent.E) None of the above
F) C) and D)

Question 6

In a fractional reserve economy where the required reserve ratio is 10%, must it be the case that an initial deposit of $100 increases the total money supply by $1,000? Explain.

Accepted Answer

No, this is not necessarily the case.
It...

Question 7

Table 29-5.
 
-Refer to Table 29-5. If the bank faces a reserve requirement of 8 percent, then the bank

Accepted Answer

A)   is in a position to make a new loan of $14,000.
B)   has fewer reserves than are required.
C)   has excess reserves of $16,400.
D)   None of the above is correct.E) C) and D)
F) B) and C)

Question 8

Derek decides to forego a major appliance purchase and save the money. He transfers $2,100 from his checking account to his money market mutual fund. As a result of this transfer,

Accepted Answer

A)   both M1 and M2 decrease by $2,100.
B)   M1 increases by $2,100 and M2 increases by $2,100.
C)   M1 decreases by $2,100 and M2 increases by $2,100.
D)   M1 decreases by $2,100 and M2 stays the same.E) None of the above
F) B) and C)

Question 9

The Federal Open Market Committee meets approximately

Accepted Answer

A)   every three weeks
B)   every six weeks
C)   every 3 months
D)   every 6 months.E) All of the above
F) None of the above

Question 10

Table 29-6.
 
-Refer to Table 29-6. From the table it follows that the Bank of Pleasantville operates in a

Accepted Answer

A)   fractional-reserve banking system, since its reserves are less than its deposits.
B)   fractional-reserve banking system, since its reserves are less than its loans.
C)   100-percent-reserve banking system, since its assets are equal to its liabilities.
D)   100­percent­reserve banking system if the Fed's reserve requirement is 10 percent; otherwise, it operates in a fractional-reserve banking system.E) None of the above
F) A) and B)

Question 11

Which of the following is not a reason the New York Federal Reserve Bank president always gets to vote at the Federal Open Market Committee meetings?

Accepted Answer

A)   New York is the traditional financial center of the U.S. economy.
B)   All Fed purchases and sales of bonds go through the New York Fed's trading desk.
C)   New York has higher population than other cities in the U.S.
D)   All of the above are reasons.E) A) and B)
F) All of the above

Question 12

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Accepted Answer

Commodity money has "intrinsic value," o...

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Under a fractional-reserve banking system, banks

Accepted Answer

A)   hold more reserves than deposits.
B)   generally lend out a majority of the funds deposited.
C)   cause the money supply to fall by lending out reserves.
D)   All of the above are correct.E) All of the above
F) A) and B)

Question 15

The manager of the bank where you work tells you that your bank has $10 million in excess reserves. She also tells you that the bank has $400 million in deposits and $375 million dollars in loans. Given this information you find that the reserve requirement must be

Accepted Answer

A)   10/400.
B)   25/400.
C)   35/400.
D)   15/400.E) A) and B)
F) B) and C)

Question 16

If the reserve requirement is 10 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $500, it

Accepted Answer

A)   must increase required reserves by $50.
B)   will initially see reserves increase by $500.
C)   will be able to use this deposit to make new loans amounting to $450.
D)   All of the above are correct.E) None of the above
F) B) and C)

Question 17

Scenario 29-2.
The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the taz. Aggregate banking statistics show that collectively the banks of Tazi hold 300 million tazes of required reserves, 75 million tazes of excess reserves, have issued 7,500 million tazes of deposits, and hold 225 million tazes of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank.
-Refer to Scenario 29-2. Suppose the Bank of Tazi loaned the banks of Tazi 10 million tazes. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply change?

Accepted Answer

A)   250 million tazes
B)   200 million tazes
C)   125 million tazes
D)   None of the above is correct.E) B) and C)
F) A) and C)

Question 18

When the Fed conducts open-market purchases,

Accepted Answer

A)   it buys Treasury securities, which increases the money supply.
B)   it buys Treasury securities, which decreases the money supply.
C)   it borrows money from member banks, which increases the money supply.
D)   it lends money to member banks, which decreases the money supply.E) A) and C)
F) A) and D)

Question 19

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

Question 20

On a bank's T­account, which are part of the bank's assets?

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 C)
F) A) and D)

Exam 11: The Monetary System

Correct Answer
verified

When the Fed conducts open-market purchases,

Correct Answer
verified

Which of the following is not a reason the New York Federal Reserve Bank president always gets to vote at the Federal Open Market Committee meetings?

Correct Answer
verified

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Correct Answer
verified
Commodity money has "intrinsic value," o...
View Answer

Derek decides to forego a major appliance purchase and save the money. He transfers $2,100 from his checking account to his money market mutual fund. As a result of this transfer,

Correct Answer
verified

On a bank's Taccount, which are part of the bank's assets?

Correct Answer
verified

Under a fractional-reserve banking system, banks

Correct Answer
verified

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

Correct Answer
verified

Table 29-5. -Refer to Table 29-5. If the bank faces a reserve requirement of 8 percent, then the bank

Correct Answer
verified

If the reserve requirement is 10 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $500, it

Correct Answer
verified

When in France you notice that prices are posted in euros, this best illustrates money's function as

Correct Answer
verified

Members of the Board of Governors of the Federal Reserve System are appointed for life.

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Suppose a bank is operating with a leverage rate of 10. A 6 percent increase in the value of assets

Correct Answer
verified

In a fractional reserve economy where the required reserve ratio is 10%, must it be the case that an initial deposit of $100 increases the total money supply by $1,000? Explain.

Correct Answer
verified
No, this is not necessarily the case.
It...
View Answer

The manager of the bank where you work tells you that your bank has $10 million in excess reserves. She also tells you that the bank has $400 million in deposits and $375 million dollars in loans. Given this information you find that the reserve requirement must be

Correct Answer
verified

Banks are able to create money only when

Correct Answer
verified

The Federal Open Market Committee meets approximately

Correct Answer
verified

Commodity money is

Correct Answer
verified

Exam 11: The Monetary System

Table 29-6. -Refer to Table 29-6. From the table it follows that the Bank of Pleasantville operates in a

Correct AnswerverifiedShow Answer

When the Fed conducts open-market purchases,

Correct AnswerverifiedShow Answer

Which of the following is not a reason the New York Federal Reserve Bank president always gets to vote at the Federal Open Market Committee meetings?

Correct AnswerverifiedShow Answer

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Correct AnswerverifiedCommodity money has "intrinsic value," o...View AnswerShow Answer

Derek decides to forego a major appliance purchase and save the money. He transfers $2,100 from his checking account to his money market mutual fund. As a result of this transfer,

Correct AnswerverifiedShow Answer

On a bank's T­account, which are part of the bank's assets?

Correct AnswerverifiedShow Answer

Under a fractional-reserve banking system, banks

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Table 29-5. -Refer to Table 29-5. If the bank faces a reserve requirement of 8 percent, then the bank

Correct AnswerverifiedShow Answer

If the reserve requirement is 10 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $500, it

Correct AnswerverifiedShow Answer

When in France you notice that prices are posted in euros, this best illustrates money's function as

Correct AnswerverifiedShow Answer

Members of the Board of Governors of the Federal Reserve System are appointed for life.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose a bank is operating with a leverage rate of 10. A 6 percent increase in the value of assets

Correct AnswerverifiedShow Answer

In a fractional reserve economy where the required reserve ratio is 10%, must it be the case that an initial deposit of $100 increases the total money supply by $1,000? Explain.

Correct AnswerverifiedNo, this is not necessarily the case.It...View AnswerShow Answer

The manager of the bank where you work tells you that your bank has $10 million in excess reserves. She also tells you that the bank has $400 million in deposits and $375 million dollars in loans. Given this information you find that the reserve requirement must be

Correct AnswerverifiedShow Answer

Banks are able to create money only when

Correct AnswerverifiedShow Answer

The Federal Open Market Committee meets approximately

Correct AnswerverifiedShow Answer

Commodity money is

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Commodity money has "intrinsic value," o...
View Answer

Correct Answer
verified

On a bank's Taccount, which are part of the bank's assets?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
No, this is not necessarily the case.
It...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified