Question 1

The Fed can increase the money supply by conducting open-market

Accepted Answer

A)   sales or by raising the discount rate.
B)   sales or by lowering the discount rate.
C)   purchases or by raising the discount rate.
D)   purchases or by lowering the discount rate.E) C) and D)
F) All of the above

Question 2

Roundabout trade is beneficial for an economy.

Accepted Answer

A) True 
 B)False

Question 3

The Fed can influence unemployment in

Accepted Answer

A)   the short run and in the long run.
B)   the short run,but not in the long run.
C)   the long run,but not in the short run.
D)   neither the short nor the long run.E) A) and C)
F) A) and B)

Question 4

A decrease 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 D)
F) A) and B)

Question 5

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) C) and D)

Question 6

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

Question 7

M1 includes savings deposits.

Accepted Answer

A) True 
 B)False

Question 8

During wars the public tends to hold relatively more currency and relatively fewer deposits.This decision makes reserves

Accepted Answer

A)   and the money supply increase.
B)   and the money supply decrease.
C)   increase,but leaves the money supply unchanged.
D)   decrease,but leaves the money supply unchanged.E) A) and B)
F) A) and C)

Question 9

Table 29-4.
The First Bank of Wahooton
 
-Refer to Table 29-4.If the bank faces a reserve requirement of 10 percent,then the bank

Accepted Answer

A)   is in a position to make a new loan of $10,000.
B)   has fewer reserves than are required.
C)   has excess reserves of $12,500.
D)   None of the above is correct.E) A) and B)
F) None of the above

Question 10

If the discount rate is lowered,banks choose to borrow

Accepted Answer

A)   less from the Fed so reserves increase.
B)   less from the Fed so reserves decrease.
C)   more from the Fed so reserves increase.
D)   more from the Fed so reserves decrease.E) None of the above
F) A) and B)

Question 11

Gary's wealth is $1 million.Economists would say that Gary has $1 million worth of money.

Accepted Answer

A) True 
 B)False

Question 12

Table 29-3.
The First Bank of Johnson City
 
-Refer to Table 29-3.Starting from the situation as depicted by the T-account,if someone deposits $500 into the First Bank of Johnson City,and if the bank makes new loans so as to keep its reserve ratio unchanged,then the amount of new loans that it makes will be

Accepted Answer

A)   $320.
B)   $400.
C)   $680.
D)   $750.E) A) and B)
F) A) and C)

Question 13

Which of the following might explain why the United States has so much currency per person?

Accepted Answer

A)   U.S.citizens are holding a lot of foreign currency.
B)   Currency may be a preferable store of wealth for criminals.
C)   People use credit and debit cards more frequently.
D)   All of the above help explain the abundance of currency.E) A) and D)
F) None of the above

Question 14

What is the difference between money and wealth?

Accepted Answer

Money is defined as the set of...

Question 15

At one time,people in a certain country had no access to banks;they relied exclusively on currency.Then,a fractional-reserve banking system was created.As a result,the money supply

Accepted Answer

A)   increased.The central bank could have reduced the size of this increase by buying bonds.
B)   increased.The central bank could have reduced the size of this increase by selling bonds.
C)   decreased.The central bank could have reduced the size of this decrease by buying bonds.
D)   decreased.The central bank could have reduced the size of this decrease by selling bonds.E) A) and B)
F) A) and C)

Question 16

Imagine that the federal funds rate was above the level the Federal Reserve had targeted.To move the rate back towards it's target the Federal Reserve could

Accepted Answer

A)   buy bonds.This buying would reduce reserves.
B)   buy bonds.This buying would increase reserves.
C)   sell bonds.This selling would reduce reserves.
D)   sell bonds.This selling would increase reserves.E) All of the above
F) B) and C)

Question 17

If the Fed makes open market purchases of bonds,

Accepted Answer

A)   the money supply increases by more than the amount of bonds purchased.
B)   the money supply increases by less than the amount of bonds purchased.
C)   the money supply decreases by more than the amount of bonds purchased.
D)   the money supply decreases by less than the amount of bonds purchased.E) A) and C)
F) None of the above

Question 18

One surprising thing about the U.S.money stock is that

Accepted Answer

A)   banks hold so much currency relative to the public.
B)   the public holds so much currency relative to banks.
C)   there is so little currency per person.
D)   there is so much currency per person.E) B) and C)
F) C) and D)

Question 19

Suppose that in a country the total holdings of banks were as follows:
required reserves = $45 million
excess reserves = $15 million
deposits = $750 million
loans = $600 million
Treasury bonds = $90 million
Show that the balance sheet balances if these are the only assets and liabilities.
Assuming that people hold no currency,what happens to each of these values if the central bank changes the reserve requirement ratio to 3%,banks still want to hold the same percentage of excess reserves,and banks don't change their holdings of Treasury bonds? How much does the money supply change by?

Accepted Answer

The only liability is deposits which equ...

Question 20

What does the text mean by the question,"Where Is All the Currency?" How does it answer the question?

Accepted Answer

The amount of currency per person is nea...

Exam 29: The Monetary System

One surprising thing about the U.S.money stock is that

Correct Answer
verified

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

Correct Answer
verified

During wars the public tends to hold relatively more currency and relatively fewer deposits.This decision makes reserves

Correct Answer
verified

Which of the following might explain why the United States has so much currency per person?

Correct Answer
verified

If the discount rate is lowered,banks choose to borrow

Correct Answer
verified

What does the text mean by the question,"Where Is All the Currency?" How does it answer the question?

Correct Answer
verified
The amount of currency per person is nea...
View Answer

Gary's wealth is $1 million.Economists would say that Gary has $1 million worth of money.

Correct Answer
verified

Correct Answer
verified

At one time,people in a certain country had no access to banks;they relied exclusively on currency.Then,a fractional-reserve banking system was created.As a result,the money supply

Correct Answer
verified

Imagine that the federal funds rate was above the level the Federal Reserve had targeted.To move the rate back towards it's target the Federal Reserve could

Correct Answer
verified

Correct Answer
verified
The only liability is deposits which equ...
View Answer

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

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

Table 29-4. The First Bank of Wahooton -Refer to Table 29-4.If the bank faces a reserve requirement of 10 percent,then the bank

Correct Answer
verified

The Fed can influence unemployment in

Correct Answer
verified

What is the difference between money and wealth?

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

M1 includes savings deposits.

Correct Answer
verified

The Fed can increase the money supply by conducting open-market

Correct Answer
verified

Roundabout trade is beneficial for an economy.

Correct Answer
verified

If the Fed makes open market purchases of bonds,

Correct Answer
verified

Exam 29: The Monetary System

One surprising thing about the U.S.money stock is that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

During wars the public tends to hold relatively more currency and relatively fewer deposits.This decision makes reserves

Correct AnswerverifiedShow Answer

Which of the following might explain why the United States has so much currency per person?

Correct AnswerverifiedShow Answer

If the discount rate is lowered,banks choose to borrow

Correct AnswerverifiedShow Answer

What does the text mean by the question,"Where Is All the Currency?" How does it answer the question?

Correct AnswerverifiedThe amount of currency per person is nea...View AnswerShow Answer

Gary's wealth is $1 million.Economists would say that Gary has $1 million worth of money.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

At one time,people in a certain country had no access to banks;they relied exclusively on currency.Then,a fractional-reserve banking system was created.As a result,the money supply

Correct AnswerverifiedShow Answer

Imagine that the federal funds rate was above the level the Federal Reserve had targeted.To move the rate back towards it's target the Federal Reserve could

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe only liability is deposits which equ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Table 29-4. The First Bank of Wahooton -Refer to Table 29-4.If the bank faces a reserve requirement of 10 percent,then the bank

Correct AnswerverifiedShow Answer

The Fed can influence unemployment in

Correct AnswerverifiedShow Answer

What is the difference between money and wealth?

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

M1 includes savings deposits.

Correct AnswerverifiedShow Answer

The Fed can increase the money supply by conducting open-market

Correct AnswerverifiedShow Answer

Roundabout trade is beneficial for an economy.

Correct AnswerverifiedShow Answer

If the Fed makes open market purchases of bonds,

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
verified
The amount of currency per person is nea...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The only liability is deposits which equ...
View Answer

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

Correct Answer
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