Question 1

In Wellville,the money supply is $80,000 and reserves are $18,000.Assuming that people hold only deposits and no currency,and that banks hold only required reserves,the required reserve ratio is

Accepted Answer

A)  29 percent.
B)  22.5 percent.
C)  16 percent.
D)  None of the above is correct.E) None of the above
F) A) and C)

Question 2

The Fed can directly protect a bank during a bank run by

Accepted Answer

A)  increasing reserve requirements.
B)  selling government bonds to the bank.
C)  lending reserves to the bank.
D)  Doing any of the above.E) A) and C)
F) A) and B)

Question 3

Which two of the Ten Principles of Economics imply that the Fed can profoundly affect the economy?

Accepted Answer

The answer of Which two of the Ten Principles of...

Question 4

A bank's liabilities include

Accepted Answer

A)  both its reserves and the deposits of its customers.
B)  neither its reserves nor the deposits of its customers.
C)  its reserves, but not the deposits of its customers.
D)  the deposits of its customers, but not its reserves.E) B) and C)
F) None of the above

Question 5

When the Federal Reserve conducts open-market operations to increase the money supply,it

Accepted Answer

A)  redeems Federal Reserve notes.
B)  buys government bonds from the public.
C)  raises the discount rate.
D)  decreases its lending to member banks.E) A) and B)
F) B) and C)

Question 6

The money multiplier equals 1 divided by (1 - the reserve ratio).

Accepted Answer

A) True 
 B)False

Question 7

Mia puts money into a piggy bank so she can spend it later.What function of money does this illustrate?

Accepted Answer

A)  store of value
B)  medium of exchange
C)  unit of account
D)  None of the above is correct.E) All of the above
F) B) and D)

Question 8

If the reserve ratio increased from 10 percent to 20 percent,the money multiplier would

Accepted Answer

A)  rise from 10 to 20.
B)  rise from 5 to 10.
C)  fall from 10 to 5.
D)  not change.E) C) and D)
F) A) and B)

Question 9

Use the balance sheet for the following questions.
Table 29-3
 
-Refer to Table 29-3.If the reserve requirement is 20 percent,this bank

Accepted Answer

A)  has $10,000 of excess reserves.
B)  needs $10,000 more reserves to meet its reserve requirements.
C)  needs $5,000 more reserves to meet its reserve requirements.
D)  just meets its reserve requirement.E) C) and D)
F) A) and B)

Question 10

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 11

Debit cards

Accepted Answer

A)  defer payments.
B)  are equivalent to credit cards.
C)  are included in M2.
D)  are used as a method of payment.E) All of the above
F) A) and B)

Question 12

If the Fed wanted to increase the money supply,it would make open market

Accepted Answer

A)  purchases and lower the discount rate.
B)  sales and lower the discount rate.
C)  purchases and raise the discount rate.
D)  sales and raise the discount rate.E) A) and C)
F) None of the above

Question 13

Table 29-4
 
-Refer to Table 29-4.Assume that the Bank of Tampa is holding the required percent of deposits as reserves.Also,assume all other banks hold only the required percent of deposits as reserves and that people hold only deposits and no currency.What is the money multiplier?

Accepted Answer

A)  5
B)  10
C)  15
D)  20E) B) and D)
F) A) and B)

Question 14

The banking system currently has $200 billion of reserves,none of which are excess.People hold only deposits and no currency,and the reserve requirement is 4%.If the Fed raises the reserve requirement to 5% and at the same time buys $50 billion dollars of bonds,then by how much does the money supply change?

Accepted Answer

A)  It rises by $1000 billion.
B)  It rises by $1250 billion.
C)  It falls by $950 billion.
D)  None of the above is correct.E) A) and B)
F) None of the above

Question 15

In the US there is about $3,100 of

Accepted Answer

A)  currency per person.
B)  demand deposits per person.
C)  M1 per person.
D)  M2 per person.E) B) and C)
F) A) and D)

Question 16

M1 includes savings deposits.

Accepted Answer

A) True 
 B)False

Question 17

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

Question 18

If the reserve ratio is 2.5 percent,the money multiplier is

Accepted Answer

A)  40.
B)  25.
C)  2.5.
D)  1.25.E) A) and D)
F) A) and B)

Question 19

Savings deposits 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 C)
F) A) and B)

Question 20

If the reserve ratio is 20 percent,how much money can be created from $100 of reserves? Show your work.

Accepted Answer

(1/.20)× $...

Exam 29: The Monetary System

When the Federal Reserve conducts open-market operations to increase the money supply,it

Correct Answer
verified

Use the balance sheet for the following questions. Table 29-3 -Refer to Table 29-3.If the reserve requirement is 20 percent,this bank

Correct Answer
verified

If the reserve ratio increased from 10 percent to 20 percent,the money multiplier would

Correct Answer
verified

Debit cards

Correct Answer
verified

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

Correct Answer
verified

Savings deposits are included in

Correct Answer
verified

M1 includes savings deposits.

Correct Answer
verified

The money multiplier equals 1 divided by (1 - the reserve ratio).

Correct Answer
verified

In the US there is about $3,100 of

Correct Answer
verified

In Wellville,the money supply is $80,000 and reserves are $18,000.Assuming that people hold only deposits and no currency,and that banks hold only required reserves,the required reserve ratio is

Correct Answer
verified

A bank's liabilities include

Correct Answer
verified

Which two of the Ten Principles of Economics imply that the Fed can profoundly affect the economy?

Correct Answer
verified

Correct Answer
verified

If the Fed wanted to increase the money supply,it would make open market

Correct Answer
verified

Table 29-4 -Refer to Table 29-4.Assume that the Bank of Tampa is holding the required percent of deposits as reserves.Also,assume all other banks hold only the required percent of deposits as reserves and that people hold only deposits and no currency.What is the money multiplier?

Correct Answer
verified

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

Correct Answer
verified

If the reserve ratio is 20 percent,how much money can be created from $100 of reserves? Show your work.

Correct Answer
verified
(1/.20)× $...
View Answer

The Fed can directly protect a bank during a bank run by

Correct Answer
verified

Mia puts money into a piggy bank so she can spend it later.What function of money does this illustrate?

Correct Answer
verified

If the reserve ratio is 2.5 percent,the money multiplier is

Correct Answer
verified

Exam 29: The Monetary System

When the Federal Reserve conducts open-market operations to increase the money supply,it

Correct AnswerverifiedShow Answer

Use the balance sheet for the following questions. Table 29-3 -Refer to Table 29-3.If the reserve requirement is 20 percent,this bank

Correct AnswerverifiedShow Answer

If the reserve ratio increased from 10 percent to 20 percent,the money multiplier would

Correct AnswerverifiedShow Answer

Debit cards

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Savings deposits are included in

Correct AnswerverifiedShow Answer

M1 includes savings deposits.

Correct AnswerverifiedShow Answer

The money multiplier equals 1 divided by (1 - the reserve ratio).

Correct AnswerverifiedShow Answer

In the US there is about $3,100 of

Correct AnswerverifiedShow Answer

In Wellville,the money supply is $80,000 and reserves are $18,000.Assuming that people hold only deposits and no currency,and that banks hold only required reserves,the required reserve ratio is

Correct AnswerverifiedShow Answer

A bank's liabilities include

Correct AnswerverifiedShow Answer

Which two of the Ten Principles of Economics imply that the Fed can profoundly affect the economy?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the Fed wanted to increase the money supply,it would make open market

Correct AnswerverifiedShow Answer

Table 29-4 -Refer to Table 29-4.Assume that the Bank of Tampa is holding the required percent of deposits as reserves.Also,assume all other banks hold only the required percent of deposits as reserves and that people hold only deposits and no currency.What is the money multiplier?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the reserve ratio is 20 percent,how much money can be created from $100 of reserves? Show your work.

Correct Answerverified(1/.20)× $...View AnswerShow Answer

The Fed can directly protect a bank during a bank run by

Correct AnswerverifiedShow Answer

Mia puts money into a piggy bank so she can spend it later.What function of money does this illustrate?

Correct AnswerverifiedShow Answer

If the reserve ratio is 2.5 percent,the money multiplier is

Correct AnswerverifiedShow Answer

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(1/.20)× $...
View Answer

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