Question 1

Table 16-7
Metropolis National Bank is currently holding 2% of its deposits as excess reserves.
 
-Refer to Scenario 16-1.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 2

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) All of the above
F) A) and C)

Question 3

In a fractional reserve economy where the required reserve ratio is 10%,must it be the case that an initial deposit of $100 increases the total money supply by $1,000? Explain.

Accepted Answer

No,this is not necessarily the case.
It ...

Question 4

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

Question 5

If the central bank in some country lowered the reserve requirement,then the money multiplier for that country

Accepted Answer

A)   would increase.
B)   would not change.
C)   would decrease.
D)   could do any of the above.E) A) and B)
F) A) and C)

Question 6

What does it mean for the Fed to be the "lender of last resort?"

Accepted Answer

When banks can not borrow in the market ...

Question 7

Money

Accepted Answer

A)   is a perfect store of value.
B)   is the most liquid asset.
C)   has intrinsic value,regardless of which form it takes.
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 8

Fiat money

Accepted Answer

A)   is worthless.
B)   has no intrinsic value.
C)   may be used as a medium of exchange,but is not legal tender.
D)   refers to highly liquid assets that do not serve as a medium of exchange.E) None of the above
F) B) and D)

Question 9

The existence of money leads to

Accepted Answer

A)   greater specialization in production,but not to a higher standard of living.
B)   a higher standard of living,but not to greater specialization.
C)   greater specialization and to a higher standard of living.
D)   neither greater specialization nor to a higher standard of living.E) A) and B)
F) C) and D)

Question 10

What is the Term Auction Facility?

Accepted Answer

The Term Auction Facility is the market ...

Question 11

Which of the following is not a reason the New York Federal Reserve Bank president always gets to vote at the Federal Open Market Committee meetings?

Accepted Answer

A)   New York is the traditional financial center of the U.S.economy.
B)   All Fed purchases and sales of bonds go through the New York Fed's trading desk.
C)   New York has higher population than other cities in the U.S.
D)   All of the above are reasons.E) A) and C)
F) A) and B)

Question 12

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

Question 13

Table 16-6.
 
-Refer to Table 16-6.If the Fed requires a reserve ratio of 6 percent,then what quantity of excess reserves does the Bank of Springfield now hold?

Accepted Answer

A)   $1,200
B)   $2,400
C)   $2,880
D)   $4,800E) B) and D)
F) A) and B)

Question 14

Roundabout trade decreases production.

Accepted Answer

A) True 
 B)False

Question 15

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

Question 16

Which of the following is correct concerning the FOMC?

Accepted Answer

A)   the members of the Board of Governors have the majority of the votes
B)   the New York Federal Reserve Bank District President is always a voting member
C)   all Federal Reserve Bank presidents attend the meetings
D)   All of the above are correct.E) All of the above
F) B) and D)

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) All of the above
F) A) and C)

Question 18

If the federal funds rate were below the level the Federal Reserve had targeted,the Fed could move the rate back towards its target by

Accepted Answer

A)   buying bonds.This buying would increase the money supply.
B)   buying bonds.This buying would reduce the money supply.
C)   selling bonds.This selling would increase the money supply.
D)   selling bonds.This selling would reduce the money supply.E) B) and C)
F) None of the above

Question 19

Which of the following is not included in M1?

Accepted Answer

A)   currency
B)   demand deposits
C)   savings deposits
D)   traveler's checksE) A) and B)
F) A) and C)

Question 20

U.S.dollars are an example of commodity money and hides used to make trades are an example of fiat money.

Accepted Answer

A) True 
 B)False

Exam 29: The Monetary System

Which of the following is not a reason the New York Federal Reserve Bank president always gets to vote at the Federal Open Market Committee meetings?

Correct AnswerverifiedShow Answer

What is the Term Auction Facility?

Correct AnswerverifiedThe Term Auction Facility is the market ...View AnswerShow Answer

Money

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The existence of money leads to

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Credit card limits are included in

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Table 16-7 Metropolis National Bank is currently holding 2% of its deposits as excess reserves. -Refer to Scenario 16-1.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?

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Table 16-6. -Refer to Table 16-6.If the Fed requires a reserve ratio of 6 percent,then what quantity of excess reserves does the Bank of Springfield now hold?

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U.S.dollars are an example of commodity money and hides used to make trades are an example of fiat money.

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Roundabout trade decreases production.

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

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Which of the following is correct concerning the FOMC?

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In a fractional reserve economy where the required reserve ratio is 10%,must it be the case that an initial deposit of $100 increases the total money supply by $1,000? Explain.

Correct AnswerverifiedNo,this is not necessarily the case.It ...View AnswerShow Answer

Which of the following is not included in M1?

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

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

Correct AnswerverifiedShow Answer

If the federal funds rate were below the level the Federal Reserve had targeted,the Fed could move the rate back towards its target by

Correct AnswerverifiedShow Answer

What does it mean for the Fed to be the "lender of last resort?"

Correct AnswerverifiedWhen banks can not borrow in the market ...View AnswerShow Answer

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

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Fiat money

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If the central bank in some country lowered the reserve requirement,then the money multiplier for that country

Correct AnswerverifiedShow Answer

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The Term Auction Facility is the market ...
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No,this is not necessarily the case.
It ...
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When banks can not borrow in the market ...
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