Question 1

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

Accepted Answer

A)   Rupert with Amber,and Rob with Tom
B)   Amber with Tom
C)   Rupert with Rob
D)   None of the above are correct.E) B) and C)
F) A) and D)

Question 2

When the Federal Reserve sells assets from its portfolio to the public with the intent of changing the money supply,

Accepted Answer

A)   those assets are government bonds and the Fed's reason for selling them is to increase the money supply.
B)   those assets are government bonds and the Fed's reason for selling them is to decrease the money supply.
C)   those assets are items that are included in M2 and the Fed's reason for selling them is to increase the money supply.
D)   those assets are items that are included in M2 and the Fed's reason for selling them is to decrease the money supply.E) None of the above
F) A) and B)

Question 3

Which tool of monetary policy does the Federal Reserve use most often?

Accepted Answer

A)   term auctions
B)   open-market operations
C)   changes in reserve requirements
D)   changes in the discount rateE) C) and D)
F) B) and C)

Question 4

The money multiplier equals

Accepted Answer

A)   1/R,where R represents the quantity of reserves in the economy.
B)   1/R,where R represents the reserve ratio for all banks in the economy.
C)   1/(1+R) ,where R represents the quantity of reserves in the economy.
D)   1/(1+R) ,where R represents the reserve ratio for all banks in the economy.E) A) and B)
F) None of the above

Question 5

Money is the only asset that functions as a store of value.

Accepted Answer

A) True 
 B)False

Question 6

Demand deposits are balances in bank accounts that depositors can access by writing a check or using a debit card.

Accepted Answer

A) True 
 B)False

Question 7

The Fed can decrease 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) A) and B)
F) C) and D)

Question 8

As banks create money,they create wealth.

Accepted Answer

A) True 
 B)False

Question 9

The measure of the money stock called M1 includes

Accepted Answer

A)   wealth held by people in their checking accounts.
B)   wealth held by people in their savings accounts.
C)   wealth held by people in money market mutual funds.
D)   everything that is included in M2 plus some additional items.E) B) and D)
F) B) and C)

Question 10

Who was reappointed Chair of the Board of Governors in 2009 by President Barrack Obama?

Accepted Answer

A)   Ben Bernanke
B)   Christina Romer
C)   Timothy Geithner
D)   Bernie MadoffE) A) and D)
F) A) and B)

Question 11

Demand deposits are a type of

Accepted Answer

A)   checking account.
B)   time deposit.
C)   money market mutual fund.
D)   savings deposit.E) A) and B)
F) B) and C)

Question 12

If people decide to hold more currency relative to deposits,the money supply

Accepted Answer

A)   falls.The Fed could lessen the impact of this by buying Treasury bonds.
B)   falls.The Fed could lessen the impact of this by selling Treasury bonds.
C)   rises.The Fed could lessen the impact of this by buying Treasury bonds.
D)   rises.The Fed could lessen the impact of the by selling Treasury bonds.E) B) and C)
F) None of the above

Question 13

A bank has $10,000 in deposits and $8,000 in loans.It has loaned out all it can given the reserve requirement.It follows that the reserve requirement is

Accepted Answer

A)   2 percent.
B)   12.5 percent.
C)   20 percent.
D)   80 percent.E) A) and D)
F) None of the above

Question 14

Traveler's checks 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) B) and D)
F) All of the above

Question 15

If the reserve ratio is 8 percent,then $4,500 of additional reserves can create up to

Accepted Answer

A)   $4,500 of new money.
B)   $48,913 of new money.
C)   $56,250 of new money.
D)   $75,000 of new money.E) B) and C)
F) None of the above

Question 16

As the reserve ratio increases,the money multiplier

Accepted Answer

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

Question 17

Which of the following is not included in either M1 or M2?

Accepted Answer

A)   money market deposit accounts
B)   large time deposit
C)   demand deposits
D)   money market mutual fundsE) None of the above
F) A) and D)

Question 18

The discount rate is the interest rate that

Accepted Answer

A)   banks charge one another for loans.
B)   banks charge the Fed for loans.
C)   the Fed charges banks for loans.
D)   the Fed charges Congress for loans.E) B) and C)
F) A) and C)

Question 19

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 20

The reserve requirement is 10%.Lucy deposits $200 into a bank.By how much do excess reserves change?

Accepted Answer

A)   $200
B)   $180
C)   $20
D)   $10E) A) and C)
F) A) and B)

Exam 29: The Monetary System

The measure of the money stock called M1 includes

Correct AnswerverifiedShow Answer

Which tool of monetary policy does the Federal Reserve use most often?

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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

A bank has $10,000 in deposits and $8,000 in loans.It has loaned out all it can given the reserve requirement.It follows that the reserve requirement is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The reserve requirement is 10%.Lucy deposits $200 into a bank.By how much do excess reserves change?

Correct AnswerverifiedShow Answer

As the reserve ratio increases,the money multiplier

Correct AnswerverifiedShow Answer

As banks create money,they create wealth.

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

When the Federal Reserve sells assets from its portfolio to the public with the intent of changing the money supply,

Correct AnswerverifiedShow Answer

If people decide to hold more currency relative to deposits,the money supply

Correct AnswerverifiedShow Answer

Which of the following is not included in either M1 or M2?

Correct AnswerverifiedShow Answer

Demand deposits are balances in bank accounts that depositors can access by writing a check or using a debit card.

Correct AnswerverifiedShow Answer

Money is the only asset that functions as a store of value.

Correct AnswerverifiedShow Answer

Traveler's checks are included in

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The discount rate is the interest rate that

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Demand deposits are a type of

Correct AnswerverifiedShow Answer

Who was reappointed Chair of the Board of Governors in 2009 by President Barrack Obama?

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The money multiplier equals

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If the reserve ratio is 8 percent,then $4,500 of additional reserves can create up to

Correct AnswerverifiedShow Answer

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The Fed's policy decisions influence the...
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