Question 1

Prisoners sometimes determine a single good to be used as money. This good becomes

Accepted Answer

A)   a medium of exchange and a unit of account.
B)   a medium of exchange, but not a unit of account.
C)   a unit of account, but not a medium of exchange.
D)   neitehr a unit of account nor a medium of exchange.E) A) and B)
F) A) and C)

Question 2

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

Question 3

Assume that when $100 of new reserves enter the banking system, the money supply ultimately increases by $625. Assume also that no banks hold excess reserves and that the entire money supply consists of bank deposits. If, at a point in time, reserves for all banks amount to $500, then at that same point in time, loans for all banks amount to $2,625.

Accepted Answer

A) True 
 B)False

Question 4

In a fractional-reserve banking system, an increase 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.E) None of the above
F) All of the above

Question 5

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) A) and D)
F) B) and D)

Question 6

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

Question 7

The Federal Open Market Committee meets approximately

Accepted Answer

A)   every three weeks
B)   every six weeks
C)   every 3 months
D)   every 6 months.E) A) and B)
F) B) and D)

Question 8

You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money?

Accepted Answer

A)   medium of exchange
B)   unit of account
C)   store of value
D)   liquidityE) A) and C)
F) None of the above

Question 9

The Federal Reserve

Accepted Answer

A)   was created in 1913.
B)   is the U.S.'s central bank.
C)   has other duties in addition to controlling the money supply.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 10

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.E) B) and C)
F) A) and C)

Question 11

Table 11-3.
 
-Refer to Table 11-3. The reserve ratio for this bank is

Accepted Answer

A)   0 percent.
B)   20 percent.
C)   80 percent.
D)   100 percent.E) None of the above
F) A) and B)

Question 12

Table 11-6.
 
-Refer to Table 11-6. 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) None of the above
F) A) and D)

Question 13

If the reserve ratio is 8 percent, then an additional $1,000 of reserves can increase the money supply by as much as

Accepted Answer

A)   $6,400.
B)   $8,000.
C)   $12,500.
D)   $20,000.E) B) and C)
F) All of the above

Question 14

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) All of the above
F) B) and D)

Question 15

Today, bank runs are not a major problem for the U.S. banking system because

Accepted Answer

A)   bank runs are now illegal.
B)   banks now hold 100 percent of their deposits in reserve.
C)   banks are now all government-operated.
D)   the federal government now guarantees the safety of deposits at most banks.E) None of the above
F) A) and C)

Question 16

If the money multiplier is 2 and the Fed wants to increase the money supply by $900,000, it could

Accepted Answer

A)   buy $300,000 worth of bonds.
B)   buy $450,000 worth of bonds.
C)   sell $300,000 worth of bonds.
D)   sell $450,000 worth of bonds.E) None of the above
F) All of the above

Question 17

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

Question 18

In the months of November and December, people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays. As a result, other things the same, the money supply increases.

Accepted Answer

A) True 
 B)False

Question 19

The members of the Federal Reserve's Board of Governors

Accepted Answer

A)   are appointed by the president of the U.S. and confirmed by the U.S. Senate.
B)   serve six-year terms.
C)   are also the presidents of the regional Federal Reserve banks.
D)   share power equally, with no governor having any more influence or power than any other governor.E) A) and B)
F) A) and C)

Question 20

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

Exam 11: The Monetary System

Table 11-6. -Refer to Table 11-6. If the Fed requires a reserve ratio of 6 percent, then what quantity of excess reserves does the Bank of Springfield now hold?

Correct Answer
verified

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

Correct Answer
verified

In the months of November and December, people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays. As a result, other things the same, the money supply increases.

Correct Answer
verified

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

Correct Answer
verified

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 Answer
verified

Which of the following is correct concerning the FOMC?

Correct Answer
verified

The Federal Reserve

Correct Answer
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Correct Answer
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You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money?

Correct Answer
verified

Table 11-3. -Refer to Table 11-3. The reserve ratio for this bank is

Correct Answer
verified

The Federal Open Market Committee meets approximately

Correct Answer
verified

If the reserve ratio is 8 percent, then an additional $1,000 of reserves can increase the money supply by as much as

Correct Answer
verified

The members of the Federal Reserve's Board of Governors

Correct Answer
verified

If the money multiplier is 2 and the Fed wants to increase the money supply by $900,000, it could

Correct Answer
verified

Prisoners sometimes determine a single good to be used as money. This good becomes

Correct Answer
verified

Today, bank runs are not a major problem for the U.S. banking system because

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

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

Correct Answer
verified

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

Correct Answer
verified

In a fractional-reserve banking system, an increase in reserve requirements

Correct Answer
verified

Exam 11: The Monetary System

Table 11-6. -Refer to Table 11-6. If the Fed requires a reserve ratio of 6 percent, then what quantity of excess reserves does the Bank of Springfield now hold?

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

In the months of November and December, people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays. As a result, other things the same, the money supply increases.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow 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

Which of the following is correct concerning the FOMC?

Correct AnswerverifiedShow Answer

The Federal Reserve

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money?

Correct AnswerverifiedShow Answer

Table 11-3. -Refer to Table 11-3. The reserve ratio for this bank is

Correct AnswerverifiedShow Answer

The Federal Open Market Committee meets approximately

Correct AnswerverifiedShow Answer

If the reserve ratio is 8 percent, then an additional $1,000 of reserves can increase the money supply by as much as

Correct AnswerverifiedShow Answer

The members of the Federal Reserve's Board of Governors

Correct AnswerverifiedShow Answer

If the money multiplier is 2 and the Fed wants to increase the money supply by $900,000, it could

Correct AnswerverifiedShow Answer

Prisoners sometimes determine a single good to be used as money. This good becomes

Correct AnswerverifiedShow Answer

Today, bank runs are not a major problem for the U.S. banking system because

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

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

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

In a fractional-reserve banking system, an increase in reserve requirements

Correct AnswerverifiedShow Answer

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