Question 1

The set of items that serve as media of exchange clearly includes

Accepted Answer

A)   balances that lie behind debit cards.
B)   demand deposits.
C)   other checkable deposits.
D)   All of the above are correct.E) A) and B)
F) All of the above

Question 2

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) A) and D)

Question 3

You believe the dollars you have today will be accepted in the future in exchange for goods and services. Which function of money does this illustrate?

Accepted Answer

The answer of You believe the dollars you have today...

Question 4

If the public decides to hold less currency and more deposits in banks, bank reserves

Accepted Answer

A)   decrease and the money supply eventually decreases.
B)   decrease but the money supply does not change.
C)   increase and the money supply eventually increases.
D)   increase but the money supply does not change.E) A) and C)
F) B) and D)

Question 5

Scenario 29-1.
The monetary policy of Namdian is determined by the Namdian Central Bank. The local currency is the dia. Namdian banks collectively hold 100 million dias of required reserves, 25 million dias of excess reserves, 250 million dias of Namdian Treasury Bonds, and their customers hold 1,000 million dias of deposits. Namdians prefer to use only demand deposits and so the money supply consists of demand deposits.
-Refer to Scenario 29-1. Assume that banks desire to continue holding the same ratio of excess reserves to deposits. What is the reserve requirement and what is the reserve ratio?

Accepted Answer

A)   2 percent, 8 percent
B)   8 percent, 10 percent
C)   10 percent, 12.5 percent
D)   None of the above is correct.E) None of the above
F) All of the above

Question 6

Currently, U.S. currency is

Accepted Answer

A)   fiat money with intrinsic value.
B)   fiat money with no intrinsic value.
C)   commodity money with intrinsic value.
D)   commodity money with no intrinsic value.E) B) and C)
F) A) and B)

Question 7

Table 29-7.
 
-Refer to Table 29-7. Assume the Fed's reserve requirement is 10 percent and that the Bank of Springfield makes new loans so as to make its new reserve ratio 10 percent. From then on, no bank holds any excess reserves. Assume also that people hold only deposits and no currency. Then by what amount does the economy's money supply increase?

Accepted Answer

A)   $37,800
B)   $18,000
C)   $2,000
D)   $16,300E) A) and B)
F) A) and D)

Question 8

You saved $500 in currency in your piggy bank to purchase a new laptop. The $500 you kept in your piggy bank illustrates money's function as a . The laptop's price is posted as $500. The $500 price illustrates money's function as a . You use the $500 to purchase the laptop. This transaction illustrates money's function as a
______.

Accepted Answer

A)   store of value, medium of exchange, unit of account
B)   store of value, unit of account, medium of exchange
C)   medium of exchange, unit of account, store of value
D)   medium of exchange, store of value, unit of accountE) A) and B)
F) A) and C)

Question 9

The Fed's policy decisions have an important influence on

Accepted Answer

A)   inflation in the long run and employment and production in the short run.
B)   inflation in the long run and employment and production in the long run.
C)   inflation in the short run and employment and production in the short run.
D)   inflation in the short run and employment and production in the long run.E) A) and D)
F) A) and C)

Question 10

Why is the Chairman of the Federal Reserve often referred to as the "second most powerful person in the United States?"

Accepted Answer

The Fed's policy decisions influence the...

Question 11

The primary difference between commodity money and fiat money is that

Accepted Answer

A)   commodity money is a medium of exchange but fiat money is not.
B)   fiat money is a medium of exchange but commodity money is not.
C)   commodity money has intrinsic value but fiat money does not.
D)   fiat money has intrinsic value but commodity money does not.E) C) and D)
F) A) and B)

Question 12

Bank runs

Accepted Answer

A)   will affect neither the money supply nor the money multiplier.
B)   increase the money supply.
C)   can be neither prevented nor mitigated by the Federal Reserve.
D)   are a problem because banks only hold a fraction of deposits as reserves.E) A) and B)
F) A) and C)

Question 13

Table 29-4.
 
-Refer to Table 29-4. If $800 is deposited into the First Bank of Fairfield, and the bank takes no other actions, its

Accepted Answer

A)   reserves will increase by $100.
B)   liabilities will increase by $800.
C)   assets will decrease by $800.
D)   loans will increase by $800.E) A) and D)
F) None of the above

Question 14

When the federal funds rate is below the target rate, the Fed will bonds.
This action will the money supply.

Accepted Answer

The answer of When the federal funds rate is below...

Question 15

Table 29-4.
 
-Refer to Table 29-4. Starting from the situation as depicted by the T-account, if someone deposits $500 into the First Bank of Fairfield, 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)   $40.
B)   $437.50.
C)   $71.42.
D)   $428.57.E) B) and C)
F) All of the above

Question 16

In measuring the stock of money in the U.S., M1 includes

Accepted Answer

A)   traveler's checks.
B)   savings deposits.
C)   credit cards
D)   none of the above.E) A) and C)
F) A) and D)

Question 17

John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account to purchase $2,500 worth of traveler's checks. As a result of these changes,

Accepted Answer

A)   M1 increases by $2,500 and M2 decrease by $2,500.
B)   M1 increases by $2,500 and M2 stays the same.
C)   M1 and M2 stay the same.
D)   M1 decreases by $2,500 and M2 increases by $2,500.E) All of the above
F) B) and C)

Question 18

The ease with which an asset can be

Accepted Answer

A)   traded for another asset determines whether or not that asset is a unit of account.
B)   transported from one place to another determines whether or not that asset could serve as fiat money.
C)   converted into a store of value determines the liquidity of that asset.
D)   converted into the economy's medium of exchange determines the liquidity of that asset.E) A) and D)
F) B) and C)

Question 19

What makes the New York Federal Reserve regional bank so important?

Accepted Answer

The president of the New York Federal Re...

Question 20

A bank's assets equal its liabilities under

Accepted Answer

A)   both 100-percent-reserve banking and fractional-reserve banking.
B)   100-percent-reserve banking but not under fractional-reserve banking.
C)   fractional-reserve banking but not under 100-percent-reserve banking.
D)   neither 100-percent-reserve banking nor fractional-reserve banking.E) B) and C)
F) A) and D)

Exam 11: The Monetary System

The Fed's policy decisions have an important influence on

Correct Answer
verified

The set of items that serve as media of exchange clearly includes

Correct Answer
verified

Bank runs

Correct Answer
verified

Why is the Chairman of the Federal Reserve often referred to as the "second most powerful person in the United States?"

Correct Answer
verified
The Fed's policy decisions influence the...
View Answer

If the public decides to hold less currency and more deposits in banks, bank reserves

Correct Answer
verified

Currently, U.S. currency is

Correct Answer
verified

The primary difference between commodity money and fiat money is that

Correct Answer
verified

Correct Answer
verified

The ease with which an asset can be

Correct Answer
verified

Table 29-4. -Refer to Table 29-4. Starting from the situation as depicted by the T-account, if someone deposits $500 into the First Bank of Fairfield, 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

Correct Answer
verified

A bank's assets equal its liabilities under

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

What makes the New York Federal Reserve regional bank so important?

Correct Answer
verified
The president of the New York Federal Re...
View Answer

Table 29-4. -Refer to Table 29-4. If $800 is deposited into the First Bank of Fairfield, and the bank takes no other actions, its

Correct Answer
verified

When the federal funds rate is below the target rate, the Fed will bonds. This action will the money supply.

Correct Answer
verified

John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account to purchase $2,500 worth of traveler's checks. As a result of these changes,

Correct Answer
verified

You believe the dollars you have today will be accepted in the future in exchange for goods and services. Which function of money does this illustrate?

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

In measuring the stock of money in the U.S., M1 includes

Correct Answer
verified

Exam 11: The Monetary System

The Fed's policy decisions have an important influence on

Correct AnswerverifiedShow Answer

The set of items that serve as media of exchange clearly includes

Correct AnswerverifiedShow Answer

Bank runs

Correct AnswerverifiedShow Answer

Why is the Chairman of the Federal Reserve often referred to as the "second most powerful person in the United States?"

Correct AnswerverifiedThe Fed's policy decisions influence the...View AnswerShow Answer

If the public decides to hold less currency and more deposits in banks, bank reserves

Correct AnswerverifiedShow Answer

Currently, U.S. currency is

Correct AnswerverifiedShow Answer

The primary difference between commodity money and fiat money is that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The ease with which an asset can be

Correct AnswerverifiedShow Answer

Table 29-4. -Refer to Table 29-4. Starting from the situation as depicted by the T-account, if someone deposits $500 into the First Bank of Fairfield, 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

Correct AnswerverifiedShow Answer

A bank's assets equal its liabilities under

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What makes the New York Federal Reserve regional bank so important?

Correct AnswerverifiedThe president of the New York Federal Re...View AnswerShow Answer

Table 29-4. -Refer to Table 29-4. If $800 is deposited into the First Bank of Fairfield, and the bank takes no other actions, its

Correct AnswerverifiedShow Answer

When the federal funds rate is below the target rate, the Fed will bonds. This action will the money supply.

Correct AnswerverifiedShow Answer

John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account to purchase $2,500 worth of traveler's checks. As a result of these changes,

Correct AnswerverifiedShow Answer

You believe the dollars you have today will be accepted in the future in exchange for goods and services. Which function of money does this illustrate?

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

In measuring the stock of money in the U.S., M1 includes

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified
The Fed's policy decisions influence the...
View 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
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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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The president of the New York Federal Re...
View Answer

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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Correct Answer
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