Question 1

Which of the following is correct concerning the FOMC?

Accepted Answer

A)  the members of the Board of Governors have the majority of the votes
B)  the New York Federal Reserve Bank District President is always a voting member
C)  all Federal Reserve Bank presidents attend the meetings
D)  All of the above are correct.E) A) and D)
F) None of the above

Question 2

If you deposit $100 of currency into a demand deposit at a bank, this action by itself

Accepted Answer

A)  does not change the money supply.
B)  increases the money supply.
C)  decreases the money supply.
D)  has an indeterminate effect on the money supply.E) B) and D)
F) C) and D)

Question 3

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold

Accepted Answer

A)  fewer reserves, so the reserve ratio will fall.
B)  fewer reserves, so the reserve ratio will rise.
C)  more reserves, so the reserve ratio will fall.
D)  more reserves, so the reserve ratio will rise.E) A) and D)
F) None of the above

Question 4

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

Question 5

The Federal Reserve

Accepted Answer

A)  is responsible for conducting the nation's monetary policy, and it plays a role in regulating banks.
B)  is responsible for conducing the nation's monetary policy, but it plays no role in regulating banks.
C)  is not responsible for conducting the nation's monetary policy, and it plays a role in regulating banks.
D)  is not responsible for conducing the nation's monetary policy, and it plays no role in regulating banks.E) A) and C)
F) A) and D)

Question 6

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

Accepted Answer

When the reserve requirement is less tha...

Question 7

In a system of 100-percent-reserve banking,

Accepted Answer

A)  banks do not make loans.
B)  currency is the only form of money.
C)  deposits are banks' only assets.
D)  All of the above are correct.E) A) and B)
F) None of the above

Question 8

Table 16-4. 
-Refer to Table 16-4. If the bank is holding $4,000 in excess reserves, then the reserve requirement with which it must comply is

Accepted Answer

A)  4 percent.
B)  6 percent.
C)  12 percent.
D)  14 percent.E) None of the above
F) A) and D)

Question 9

Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the

Accepted Answer

A)  money supply to fall. To reduce the impact of this the Fed could lower the discount rate.
B)  money supply to fall. To reduce the impact of this the Fed could raise the discount rate.
C)  money supply to rise. To reduce the impact of this the Fed could lower the discount rate.
D)  money supply to rise. To reduce the impact of this the Fed could raise the discount rate.E) C) and D)
F) All of the above

Question 10

In the 19th century, when crop failures often led to bank runs, banks would make relatively fewer loans and hold relatively more excess reserves. By itself, these actions by the banks should have

Accepted Answer

A)  increased the money multiplier and the money supply.
B)  decreased the money multiplier and increased the money supply.
C)  increased the money multiplier and decreased the money supply.
D)  decreased both the money multiplier and the money supply.E) B) and C)
F) None of the above

Question 11

Table 16-2. An economy starts with $10,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $9,250. The T-account of the bank is shown below. 
-Refer to Table 16-2. The bank's reserve ratio is

Accepted Answer

A)  7.50 percent.
B)  8.12 percent.
C)  92.50 percent.
D)  100 percent.E) A) and B)
F) None of the above

Question 12

What is the difference between money and wealth?

Accepted Answer

Money is defined as the set of...

Question 13

If an economy used gold as money, its money would be

Accepted Answer

A)  commodity money, but not fiat money.
B)  fiat money, but not commodity money.
C)  both fiat and commodity money.
D)  functioning as a store of value and as a unit of account, but not as a medium of exchange.E) B) and C)
F) C) and D)

Question 14

An increase in the money supply might indicate that the Fed had

Accepted Answer

A)  purchased bonds in an attempt to increase the federal funds rate.
B)  purchased bonds in an attempt to reduce the federal funds rate.
C)  sold bonds in an attempt to increase the federal funds rate.
D)  sold bonds in an attempt to reduce the federal funds rate.E) A) and B)
F) None of the above

Question 15

Table 16-7
Metropolis National Bank is currently holding 2% of its deposits as excess reserves. 
-Refer to Balance Sheet of Metropolis National Bank. Metropolis National Bank is currently holding 2% of deposits as excess reserves. Assume that no banks in the economy want to hold excess reserves and that people only hold deposits and no currency. How much does the money supply ultimately increase when Metropolis National Bank lends out its excess reserves?

Accepted Answer

A)  $100,000
B)  $110,000
C)  $120,000
D)  None of the above are correct.E) B) and D)
F) B) and C)

Question 16

Which of the following is correct?

Accepted Answer

A)  The Fed can control the money supply precisely.
B)  The amount of money in the economy does not depend on the behavior of depositors.
C)  The amount of money in the economy depends in part on the behavior of banks.
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 17

Monetary policy affects employment

Accepted Answer

A)  only in the long run.
B)  only in the short run.
C)  in both the long run and the short run.
D)  in neither the long run nor the short run.E) A) and B)
F) All of the above

Question 18

As opposed to a payments system based on barter, a payments system based on money

Accepted Answer

A)  requires a double coincidence of wants.
B)  leads to less specialization.
C)  makes trades less costly.
D)  None of the above is correct.E) B) and C)
F) A) and D)

Question 19

When a bank loans out $1,000, the money supply

Accepted Answer

A)  does not change.
B)  decreases.
C)  increases.
D)  may do any of the above.E) B) and D)
F) A) and C)

Question 20

The discount rate is the rate the Federal Reserve charges banks for loans. By lowering this rate, the Fed provides banks with a greater incentive to borrow from it.

Accepted Answer

A) True 
 B)False

Exam 16: The Monetary System

Which of the following is correct?

Correct Answer
verified

The Federal Reserve

Correct Answer
verified

Correct Answer
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Table 16-4. -Refer to Table 16-4. If the bank is holding $4,000 in excess reserves, then the reserve requirement with which it must comply is

Correct Answer
verified

As opposed to a payments system based on barter, a payments system based on money

Correct Answer
verified

What is the difference between money and wealth?

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

Monetary policy affects employment

Correct Answer
verified

In a system of 100-percent-reserve banking,

Correct Answer
verified

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

Correct Answer
verified
When the reserve requirement is less tha...
View Answer

An increase in the money supply might indicate that the Fed had

Correct Answer
verified

Table 16-2. An economy starts with $10,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $9,250. The T-account of the bank is shown below. -Refer to Table 16-2. The bank's reserve ratio is

Correct Answer
verified

If an economy used gold as money, its money would be

Correct Answer
verified

If you deposit $100 of currency into a demand deposit at a bank, this action by itself

Correct Answer
verified

The discount rate is the rate the Federal Reserve charges banks for loans. By lowering this rate, the Fed provides banks with a greater incentive to borrow from it.

Correct Answer
verified

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold

Correct Answer
verified

Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the

Correct Answer
verified

Which of the following is correct concerning the FOMC?

Correct Answer
verified

When a bank loans out $1,000, the money supply

Correct Answer
verified

In the 19th century, when crop failures often led to bank runs, banks would make relatively fewer loans and hold relatively more excess reserves. By itself, these actions by the banks should have

Correct Answer
verified

Money

Correct Answer
verified

Exam 16: The Monetary System

Which of the following is correct?

Correct AnswerverifiedShow Answer

The Federal Reserve

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 16-4. -Refer to Table 16-4. If the bank is holding $4,000 in excess reserves, then the reserve requirement with which it must comply is

Correct AnswerverifiedShow Answer

As opposed to a payments system based on barter, a payments system based on money

Correct AnswerverifiedShow Answer

What is the difference between money and wealth?

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

Monetary policy affects employment

Correct AnswerverifiedShow Answer

In a system of 100-percent-reserve banking,

Correct AnswerverifiedShow Answer

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

Correct AnswerverifiedWhen the reserve requirement is less tha...View AnswerShow Answer

An increase in the money supply might indicate that the Fed had

Correct AnswerverifiedShow Answer

Table 16-2. An economy starts with $10,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $9,250. The T-account of the bank is shown below. -Refer to Table 16-2. The bank's reserve ratio is

Correct AnswerverifiedShow Answer

If an economy used gold as money, its money would be

Correct AnswerverifiedShow Answer

If you deposit $100 of currency into a demand deposit at a bank, this action by itself

Correct AnswerverifiedShow Answer

The discount rate is the rate the Federal Reserve charges banks for loans. By lowering this rate, the Fed provides banks with a greater incentive to borrow from it.

Correct AnswerverifiedShow Answer

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold

Correct AnswerverifiedShow Answer

Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the

Correct AnswerverifiedShow Answer

Which of the following is correct concerning the FOMC?

Correct AnswerverifiedShow Answer

When a bank loans out $1,000, the money supply

Correct AnswerverifiedShow Answer

In the 19th century, when crop failures often led to bank runs, banks would make relatively fewer loans and hold relatively more excess reserves. By itself, these actions by the banks should have

Correct AnswerverifiedShow Answer

Money

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
When the reserve requirement is less tha...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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