Question 1

If the discount rate is raised then banks borrow

Accepted Answer

A)   more from the Fed so reserves increase.
B)   more from the Fed so reserves decrease.
C)   less from the Fed so reserves increase.
D)   less from the Fed so reserves decrease.E) A) and B)
F) A) and C)

Question 2

The New York Federal Reserve Bank

Accepted Answer

A)   president always gets to vote at the FOMC meetings.
B)   conducts open market transactions.
C)   is one of 12 regional Federal Reserve Banks.
D)   All of the above are correct.E) None of the above
F) A) and D)

Question 3

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

Question 4

During the early 1930s there were a number of bank failures in the United States. What did this do to the money supply? The New York Federal Reserve Bank advocated open market purchases. Would these purchases have reversed the change in the money supply and helped banks? Explain.

Accepted Answer

Bank failures cause people to lose confi...

Question 5

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

Question 6

Which of the following can the Fed do to change the money supply?

Accepted Answer

A)   change reserves or change the reserve ratio
B)   change reserves but not change the reserve ratio
C)   change the reserve ratio but not change the reserve ratio
D)   neither change reserves nor change the reserve ratioE) All of the above
F) B) and C)

Question 7

Table 29-8 
-Refer to Table 29-8. The required reserve ratio is 12 percent and First National Bank sells $120 of its short-term securities to the Federal Reserve. This action will

Accepted Answer

A)   increase First National's reserves by $120. Its excess reserves are $240.
B)   decrease First National's reserves by $120. Its excess reserves are $0.
C)   increase First National's loans by $120. Its reserves decrease by $120.
D)   decrease First National's loans by $120. Its reserves increase by $120.E) A) and D)
F) B) and D)

Question 8

Money is the most liquid asset available because

Accepted Answer

A)   it is a store of value.
B)   it is a medium of exchange.
C)   it is a unit of account.
D)   it has intrinsic value.E) A) and C)
F) A) and B)

Question 9

Reserves increase if the Federal Reserve

Accepted Answer

A)   raises the discount rate or auctions more credit.
B)   raises the discount rate but not if it auctions more credit.
C)   lowers the discount rate or auctions more credit.
D)   lowers the discount rate but not if it auctions more credit.E) All of the above
F) A) and D)

Question 10

A bank has $500,000 in deposits and $475,000 in loans. It has loaned out all it can. It has a reserve ratio of

Accepted Answer

A)   2.5 percent.
B)   5 percent.
C)   9.5 percent.
D)   25 percent.E) All of the above
F) A) and B)

Question 11

If the reserve ratio is 5 percent, then $500 of additional reserves can create up to

Accepted Answer

A)   $10,500 of new money.
B)   $10,000 of new money.
C)   $9,500 of new money.
D)   $2,500 of new money.E) C) and D)
F) A) and B)

Question 12

The Soviet government in the 1980's never abandoned the ruble as the official currency. However, the people of Moscow preferred to accept

Accepted Answer

A)   cigarettes in exchange for goods and services, because they were convinced that cigarettes were going to soon become hard to come by.
B)   American dollars in exchange for goods and services, because rubles were extremely hard to come by.
C)   goods such as cigarettes or American dollars in exchange for goods and services, reminding us of the fact that government decree by itself is not sufficient for the success of a commodity money.
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 13

The manager of the bank where you work tells you that the bank has $400 million in deposits and $340 million dollars in loans. The Fed then raises the reserve requirement from 5 percent to 10 percent. Assuming everything else stays the same, how much is the bank holding in excess reserves after the increase in the reserve requirement?

Accepted Answer

A)   $0
B)   $20 million
C)   $40 million
D)   $60 millionE) A) and B)
F) A) and C)

Question 14

Consider four survivors on an island.  Which of the following pairs of survivors has a double-coincidence of wants?

Accepted Answer

A)   Ron with Alice, and Ron with Lee
B)   Alice with Lee
C)   Ron with Raymond
D)   None of the above are correct.E) A) and C)
F) A) and B)

Question 15

Economists call an institution designed to oversee the banking system and regulate the quantity of money in the economy

Accepted Answer

A)   a central bank.
B)   a charter bank.
C)   a national bank.
D)   a state bank.E) A) and D)
F) B) and C)

Question 16

The most common method employed by the Fed to increase the money supply is the

Accepted Answer

A)   sale of U.S. government bonds.
B)   purchase of U.S. government bonds.
C)   sale of gold.
D)   increase of the federal debt ceiling.E) A) and D)
F) A) and C)

Question 17

Credit card limits are included in

Accepted Answer

A)   M1 but not M2.
B)   M2 but not M1.
C)   M1 and M2.
D)   neither M1 nor M2.E) A) and D)
F) None of the above

Question 18

The series of bank failures in 1907 occurred despite the creation of the Federal Reserve many years earlier.

Accepted Answer

A) True 
 B)False

Question 19

Suppose the banking system currently has $300 billion in reserves, the reserve requirement is 5 percent, and excess reserves are $30 billion. What is the level of loans?

Accepted Answer

A)   $270 billion
B)   $5,400 billion
C)   $6,000 billion
D)   $5,100 billionE) A) and D)
F) B) and D)

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

The most common method employed by the Fed to increase the money supply is the

Correct Answer
verified

Consider four survivors on an island. Which of the following pairs of survivors has a double-coincidence of wants?

Correct Answer
verified

If the reserve ratio is 5 percent, then $500 of additional reserves can create up to

Correct Answer
verified

If the discount rate is raised then banks borrow

Correct Answer
verified

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

Correct Answer
verified

A bank has $500,000 in deposits and $475,000 in loans. It has loaned out all it can. It has a reserve ratio of

Correct Answer
verified

Correct Answer
verified

The New York Federal Reserve Bank

Correct Answer
verified

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

Correct Answer
verified

Economists call an institution designed to oversee the banking system and regulate the quantity of money in the economy

Correct Answer
verified

Credit card limits are included in

Correct Answer
verified

Table 29-8 -Refer to Table 29-8. The required reserve ratio is 12 percent and First National Bank sells $120 of its short-term securities to the Federal Reserve. This action will

Correct Answer
verified

Which of the following can the Fed do to change the money supply?

Correct Answer
verified

Money is the most liquid asset available because

Correct Answer
verified

The Soviet government in the 1980's never abandoned the ruble as the official currency. However, the people of Moscow preferred to accept

Correct Answer
verified

Reserves increase if the Federal Reserve

Correct Answer
verified

During the early 1930s there were a number of bank failures in the United States. What did this do to the money supply? The New York Federal Reserve Bank advocated open market purchases. Would these purchases have reversed the change in the money supply and helped banks? Explain.

Correct Answer
verified
Bank failures cause people to lose confi...
View Answer

The series of bank failures in 1907 occurred despite the creation of the Federal Reserve many years earlier.

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

Suppose the banking system currently has $300 billion in reserves, the reserve requirement is 5 percent, and excess reserves are $30 billion. What is the level of loans?

Correct Answer
verified

Exam 29: The Monetary System

The most common method employed by the Fed to increase the money supply is the

Correct AnswerverifiedShow Answer

Consider four survivors on an island. Which of the following pairs of survivors has a double-coincidence of wants?

Correct AnswerverifiedShow Answer

If the reserve ratio is 5 percent, then $500 of additional reserves can create up to

Correct AnswerverifiedShow Answer

If the discount rate is raised then banks borrow

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A bank has $500,000 in deposits and $475,000 in loans. It has loaned out all it can. It has a reserve ratio of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The New York Federal Reserve Bank

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Economists call an institution designed to oversee the banking system and regulate the quantity of money in the economy

Correct AnswerverifiedShow Answer

Credit card limits are included in

Correct AnswerverifiedShow Answer

Table 29-8 -Refer to Table 29-8. The required reserve ratio is 12 percent and First National Bank sells $120 of its short-term securities to the Federal Reserve. This action will

Correct AnswerverifiedShow Answer

Which of the following can the Fed do to change the money supply?

Correct AnswerverifiedShow Answer

Money is the most liquid asset available because

Correct AnswerverifiedShow Answer

The Soviet government in the 1980's never abandoned the ruble as the official currency. However, the people of Moscow preferred to accept

Correct AnswerverifiedShow Answer

Reserves increase if the Federal Reserve

Correct AnswerverifiedShow Answer

During the early 1930s there were a number of bank failures in the United States. What did this do to the money supply? The New York Federal Reserve Bank advocated open market purchases. Would these purchases have reversed the change in the money supply and helped banks? Explain.

Correct AnswerverifiedBank failures cause people to lose confi...View AnswerShow Answer

The series of bank failures in 1907 occurred despite the creation of the Federal Reserve many years earlier.

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

Suppose the banking system currently has $300 billion in reserves, the reserve requirement is 5 percent, and excess reserves are $30 billion. What is the level of loans?

Correct AnswerverifiedShow Answer

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verified
Bank failures cause people to lose confi...
View Answer

Correct Answer
verified

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

Correct Answer
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