Question 1

All of the presidents of the regional Federal Reserve banks

Accepted Answer

A)   attend each FOMC meeting.
B)   have voting rights at each FOMC meeting.
C)   are appointed by the president of the U.S.and confirmed by the U.S.Senate.
D)   All of the above are correct.E) A) and D)
F) A) and B)

Question 2

As opposed to a payments system based on barter,a payments system based on money

Accepted Answer

A)   requires a double coincidence of wants.
B)   leads to less specialization.
C)   makes trades less costly.
D)   None of the above is correct.E) B) and C)
F) B) and D)

Question 3

Table 16-7
Metropolis National Bank is currently holding 2% of its deposits as excess reserves.
 
-Refer to Scenario 16-2.Suppose that the Bank of Tazi changes the reserve requirement to 3 percent.Assuming that the banks still want to hold the same percentage of excess reserves what is the value of the money supply after the change in the reserve requirement?

Accepted Answer

A)   9,375 million tazes
B)   10,000 million tazes
C)   12,500 million tazes
D)   None of the above is correct to the nearest million tazes.E) C) and D)
F) None of the above

Question 4

The money supply decreases if the Fed

Accepted Answer

A)   sells Treasury bonds.The larger the reserve requirement,the larger the decrease will be.
B)   sells Treasury bonds.The smaller the reserve requirement,the larger the decrease will be.
C)   buys Treasury bonds.The larger the reserve requirement,the larger the decrease will be.
D)   buys Treasury bonds.The smaller the reserve requirement,the larger the decrease will be.E) A) and B)
F) A) and C)

Question 5

Consider five individuals with different occupations.  Which of the following pairs of individuals has a double coincidence of wants?

Accepted Answer

A)   Mary and Clark
B)   Clark and Nathan
C)   Nathan and Polly
D)   Polly and PaulE) None of the above
F) A) and B)

Question 6

To increase the money supply,the Fed could

Accepted Answer

A)   sell government bonds.
B)   auction more loans to banks.
C)   increase the reserve requirement.
D)   None of the above is correct.E) B) and D)
F) A) and B)

Question 7

To decrease the money supply,the Fed could

Accepted Answer

A)   sell government bonds.
B)   increase the discount rate.
C)   increase the reserve requirement.
D)   All of the above are correct.E) A) and C)
F) A) and B)

Question 8

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.E) None of the above
F) A) and B)

Question 9

Imagine an economy in which: (1) pieces of paper called yollars are the only thing that buyers give to sellers when they buy goods and services,so it would be common to use,say,50 yollars to buy a pair of shoes; (2) prices are posted in terms of yardsticks,so you might walk into a grocery store and see that,today,an apple is worth 2 yardsticks;and (3) yardsticks disintegrate overnight,so no yardstick has any value for more than 24 hours.In this economy,

Accepted Answer

A)   the yardstick is a medium of exchange but it cannot serve as a unit of account.
B)   the yardstick is a unit of account but it cannot serve as a store of value.
C)   the yardstick is a medium of exchange but it cannot serve as a store of value,and the yollar is a unit of account.
D)   the yollar is a unit of account,but it is not a medium of exchange and it is not a liquid asset.E) C) and D)
F) A) and D)

Question 10

When the Fed decreases the discount rate,banks will

Accepted Answer

A)   borrow more from the Fed and lend more to the public.The money supply increases.
B)   borrow more from the Fed and lend less to the public.The money supply decreases.
C)   borrow less from the Fed and lend more to the public.The money supply increases.
D)   borrow less from the Fed and lend less to the public.The money supply decreases.E) B) and D)
F) B) and C)

Question 11

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Accepted Answer

Commodity money has "intrinsic value," o...

Question 12

Table 16-5.
 
-Refer to Table 16-5.If the Fed's reserve requirement is 9 percent,then what quantity of excess reserves does the Bank of Pleasantville now hold?

Accepted Answer

A)   $200
B)   $250
C)   $400
D)   $1,000E) B) and C)
F) A) and D)

Question 13

The legal tender requirement means that

Accepted Answer

A)   people are more likely to accept the dollar as a medium of exchange.
B)   the government must hold enough gold to redeem all currency.
C)   people may not make trades with anything else.
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 14

Which of the following items is not included in the most narrow definition of money,M1?

Accepted Answer

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

Question 15

At the Federal Reserve,

Accepted Answer

A)   the nation's monetary and fiscal policies are made by the Federal Open Market Committee,which meets about every six weeks.
B)   the nation's monetary and fiscal policies are made by the Federal Open Market Committee,which meets twice a year.
C)   the nation's monetary policy is made by the Federal Open Market Committee,which meets about every six weeks.
D)   the nation's monetary policy is made by the Federal Open Market Committee,which meets twice a year.E) A) and D)
F) C) and D)

Question 16

The Fed decreases reserves if it conducts open market

Accepted Answer

A)   purchases or auctions term credit.
B)   purchases but not if it auctions term credit
C)   sales or auctions term credit
D)   sales but not if it auctions term creditE) A) and B)
F) C) and D)

Question 17

Suppose the Fed requires banks to hold 10 percent of their deposits as reserves.A bank has $20,000 of excess reserves and then sells the Fed a Treasury bill for $9,000.How much does this bank now have to lend out if it decides to hold only required reserves?

Accepted Answer

A)   $29,000
B)   $28,100
C)   $19,100
D)   $11,000E) A) and B)
F) None of the above

Question 18

Table 16-5.
 
-Refer to Table 16-5.From the table it follows that the Bank of Pleasantville operates in a

Accepted Answer

A)   fractional-reserve banking system,since its reserves are less than its deposits.
B)   fractional-reserve banking system,since its reserves are less than its loans.
C)   100-percent-reserve banking system,since its assets are equal to its liabilities.
D)   100-percent-reserve banking system if the Fed's reserve requirement is 10 percent;otherwise,it operates in a fractional-reserve banking system.E) B) and D)
F) B) and C)

Question 19

One plausible explanation for the large amount of U.S.currency outstanding is that many dollars are held abroad.

Accepted Answer

A) True 
 B)False

Question 20

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 10 percent to 15 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 D)
F) None of the above

Exam 29: The Monetary System

One plausible explanation for the large amount of U.S.currency outstanding is that many dollars are held abroad.

Correct Answer
verified

Suppose the Fed requires banks to hold 10 percent of their deposits as reserves.A bank has $20,000 of excess reserves and then sells the Fed a Treasury bill for $9,000.How much does this bank now have to lend out if it decides to hold only required reserves?

Correct Answer
verified

At the Federal Reserve,

Correct Answer
verified

Correct Answer
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Consider five individuals with different occupations. Which of the following pairs of individuals has a double coincidence of wants?

Correct Answer
verified

All of the presidents of the regional Federal Reserve banks

Correct Answer
verified

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Correct Answer
verified
Commodity money has "intrinsic value," o...
View Answer

The Fed decreases reserves if it conducts open market

Correct Answer
verified

The legal tender requirement means that

Correct Answer
verified

Correct Answer
verified

To increase the money supply,the Fed could

Correct Answer
verified

When the Fed decreases the discount rate,banks will

Correct Answer
verified

Correct Answer
verified

The federal funds rate is the interest rate that

Correct Answer
verified

Table 16-5. -Refer to Table 16-5.If the Fed's reserve requirement is 9 percent,then what quantity of excess reserves does the Bank of Pleasantville now hold?

Correct Answer
verified

Correct Answer
verified

Which of the following items is not included in the most narrow definition of money,M1?

Correct Answer
verified

As opposed to a payments system based on barter,a payments system based on money

Correct Answer
verified

The money supply decreases if the Fed

Correct Answer
verified

To decrease the money supply,the Fed could

Correct Answer
verified

Exam 29: The Monetary System

One plausible explanation for the large amount of U.S.currency outstanding is that many dollars are held abroad.

Correct AnswerverifiedShow Answer

Suppose the Fed requires banks to hold 10 percent of their deposits as reserves.A bank has $20,000 of excess reserves and then sells the Fed a Treasury bill for $9,000.How much does this bank now have to lend out if it decides to hold only required reserves?

Correct AnswerverifiedShow Answer

At the Federal Reserve,

Correct AnswerverifiedShow Answer

Table 16-5. -Refer to Table 16-5.From the table it follows that the Bank of Pleasantville operates in a

Correct AnswerverifiedShow Answer

Consider five individuals with different occupations. Which of the following pairs of individuals has a double coincidence of wants?

Correct AnswerverifiedShow Answer

All of the presidents of the regional Federal Reserve banks

Correct AnswerverifiedShow Answer

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Correct AnswerverifiedCommodity money has "intrinsic value," o...View AnswerShow Answer

The Fed decreases reserves if it conducts open market

Correct AnswerverifiedShow Answer

The legal tender requirement means that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

To increase the money supply,the Fed could

Correct AnswerverifiedShow Answer

When the Fed decreases the discount rate,banks will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The federal funds rate is the interest rate that

Correct AnswerverifiedShow Answer

Table 16-5. -Refer to Table 16-5.If the Fed's reserve requirement is 9 percent,then what quantity of excess reserves does the Bank of Pleasantville now hold?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following items is not included in the most narrow definition of money,M1?

Correct AnswerverifiedShow Answer

As opposed to a payments system based on barter,a payments system based on money

Correct AnswerverifiedShow Answer

The money supply decreases if the Fed

Correct AnswerverifiedShow Answer

To decrease the money supply,the Fed could

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
Commodity money has "intrinsic value," o...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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