Question 1

Which of the following will not help to prevent bank runs?

Accepted Answer

A)   government insurance of deposits
B)   fractional reserve banking
C)   100% reserve banking
D)   All of the above prevent bank runs.

Question 2

In a system of 100-percent-reserve banking,

Accepted Answer

A)   banks do not make loans.
B)   currency is the only form of money.
C)   deposits are banks' only assets.
D)   All of the above are correct.

Question 3

A bank operates with reserves of $100, loans of $300 and securities of $100. The bank's only liability is deposits of $400 since it has zero debt. Calculate the bank's leverage ratio.

Accepted Answer

Since Assets - Liabilities equals Bank C...

Question 4

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 Madoff

Question 5

When the Fed conducts open-market sales,

Accepted Answer

A)   it sells Treasury securities, which increases the money supply.
B)   it sells Treasury securities, which decreases the money supply.
C)   it auctions term loans, which increases the money supply.
D)   it auctions term loans, which decreases the money supply.

Question 6

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.

Question 7

Which of the following statements regarding the Federal Open Market Committee is correct?

Accepted Answer

A)   Only the five voting regional Fed presidents attend the meetings.
B)   All regional Fed presidents attend and vote at the meetings.
C)   All regional Fed presidents attend the meetings, but only five get to vote.
D)   Regional Fed presidents may neither attend nor vote the meetings.

Question 8

When the Fed makes open-market purchases bank

Accepted Answer

A)   withdrawals and lending increase.
B)   withdrawals increase and lending decreases.
C)   deposits and lending increase.
D)   deposits increase and lending decreases.

Question 9

Demand 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.

Question 10

The reserve ratio is 10 percent, banks do not hold excess reserves, and people hold only deposits and no currency. When the Fed sells $20 million worth of bonds to the public, bank reserves

Accepted Answer

A)   increase by $20 million and the money supply eventually increases by $20 million.
B)   increase by $20 million and the money supply eventually increases by $200 million.
C)   decrease by $2 million and the money supply eventually increases by $20 million.
D)   decrease by $20 million and the money supply eventually decreases by $200 million.

Question 11

Economists argue that the move from barter to money increased trade and production. How is this possible?

Accepted Answer

The use of money allows people...

Question 12

Other things the same if reserve requirements are decreased, the reserve ratio

Accepted Answer

A)   decreases, the money multiplier increases, and the money supply decreases.
B)   increases, the money multiplier increases, and the money supply increases.
C)   decreases, the money multiplier increases, and the money supply increases.
D)   increases, the money multiplier increases, and the money supply decreases.

Question 13

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.

Question 14

Table 29-5.
 
-Refer to Table 29-5. If the bank faces a reserve requirement of 20 percent, then it

Accepted Answer

A)   has $10,000 of excess reserves.
B)   needs $10,000 more reserves to meet its reserve requirements.
C)   needs $20,000 more reserves to meet its reserve requirements.
D)   just meets its reserve requirement.

Question 15

Sandra routinely uses currency to purchase her groceries. She is using money as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 16

In a fractional-reserve banking system, a decrease in reserve requirements

Accepted Answer

A)   increases both the money multiplier and the money supply.
B)   decreases both the money multiplier and the money supply.
C)   increases the money multiplier, but decreases the money supply.
D)   decreases the money multiplier, but increases the money supply.

Question 17

Table 29-1.
The information in the table pertains to an imaginary economy.
 
-Refer to Table 29-1. What is the value of M2 in billions of dollars?

Accepted Answer

A)   $9,815 billion
B)   $8,315 billion
C)   $7,565 billion
D)   $7,405 billion

Question 18

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150. If customers deposit $50 into the bank, what is the value of the money supply?

Accepted Answer

A)   $50
B)   $100
C)   $150
D)   $200

Question 19

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.

Question 20

The federal funds 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.

Exam 16: The Monetary System

When the Fed conducts open-market sales,

Correct AnswerverifiedShow Answer

A bank operates with reserves of $100, loans of $300 and securities of $100. The bank's only liability is deposits of $400 since it has zero debt. Calculate the bank's leverage ratio.

Correct AnswerverifiedSince Assets - Liabilities equals Bank C...View AnswerShow Answer

In a system of 100-percent-reserve banking,

Correct AnswerverifiedShow Answer

Table 29-1. The information in the table pertains to an imaginary economy. -Refer to Table 29-1. What is the value of M2 in billions of dollars?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements regarding the Federal Open Market Committee is correct?

Correct AnswerverifiedShow Answer

The federal funds rate is the interest rate that

Correct AnswerverifiedShow Answer

In a fractional-reserve banking system, a decrease in reserve requirements

Correct AnswerverifiedShow Answer

The reserve ratio is 10 percent, banks do not hold excess reserves, and people hold only deposits and no currency. When the Fed sells $20 million worth of bonds to the public, bank reserves

Correct AnswerverifiedShow Answer

Economists argue that the move from barter to money increased trade and production. How is this possible?

Correct AnswerverifiedThe use of money allows people...View AnswerShow Answer

Which of the following is correct concerning the FOMC?

Correct AnswerverifiedShow Answer

Sandra routinely uses currency to purchase her groceries. She is using money as a medium of exchange.

Correct AnswerverifiedShow Answer

Which of the following will not help to prevent bank runs?

Correct AnswerverifiedShow Answer

Other things the same if reserve requirements are decreased, the reserve ratio

Correct AnswerverifiedShow Answer

When the Fed makes open-market purchases bank

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Demand deposits are included in

Correct AnswerverifiedShow Answer

Traveler's checks are included in

Correct AnswerverifiedShow Answer

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150. If customers deposit $50 into the bank, what is the value of the money supply?

Correct AnswerverifiedShow Answer

Table 29-5. -Refer to Table 29-5. If the bank faces a reserve requirement of 20 percent, then it

Correct AnswerverifiedShow Answer

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Since Assets - Liabilities equals Bank C...
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The use of money allows people...
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