Question 1

A double coincidence of wants

Accepted Answer

A)   is required when there is no item in an economy that is widely accepted in exchange for goods and services.
B)   is required in an economy that relies on barter.
C)   is a hindrance to the allocation of resources when it is required for trade.
D)   All of the above are correct.E) A) and D)
F) A) and B)

Question 2

The measure of the money stock called M1 includes

Accepted Answer

A)   wealth held by people in their checking accounts.
B)   wealth held by people in their savings accounts.
C)   wealth held by people in money market mutual funds.
D)   everything that is included in M2 plus some additional items.E) A) and C)
F) A) and D)

Question 3

You use U.S. currency to pay the owner of a restaurant for a delicious meal. The currency

Accepted Answer

A)   has no intrinsic value. The exchange is an example of barter.
B)   has no intrinsic value. The exchange is not an example of barter.
C)   has intrinsic value. The exchange is not an example of barter.
D)   has intrinsic value. The exchange is not an example of barterE) B) and D)
F) C) and D)

Question 4

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

Question 5

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.E) B) and C)
F) C) and D)

Question 6

During the early 1930s there were a number of bank failures in the United States. What did this do to the money supply? The New York Federal Reserve Bank advocated open market purchases. Would these purchases have reversed the change in the money supply and helped banks? Explain.

Accepted Answer

Bank failures cause people to lose confi...

Question 7

An open-market purchase

Accepted Answer

A)   increases the number of dollars and the number of bonds in the hands of the public.
B)   increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public.
C)   decreases the number of dollars and the number of bonds in the hands of the public.
D)   decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public.E) B) and C)
F) All of the above

Question 8

Which of the following best illustrates the concept of a store of value?

Accepted Answer

A)   You are a precious-metals dealer, and you are always aware of how many ounces of platinum trade for an ounce of gold.
B)   You sell items on eBay, and your prices are stated in terms of dollars.
C)   You keep 6 ounces of gold in your safe-deposit box at the bank for emergencies.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 9

The Fed increases the reserve requirement, but it wants to offset the effects on the money supply. Which of the following should it do?

Accepted Answer

A)   sell bonds to increase reserves
B)   sell bonds to decrease reserves
C)   buy bonds to increase reserves
D)   buy bonds to decrease reservesE) B) and C)
F) A) and C)

Question 10

Which of the following items is included in M2?

Accepted Answer

A)   credit cards
B)   money market mutual funds
C)   corporate bonds
D)   large time depositsE) A) and D)
F) None of the above

Question 11

If the reserve requirement is 12 percent and banks desire to hold no excess reserves, when a bank receives a new deposit of $1,000,

Accepted Answer

A)   it must increase its required reserves by more than $150.
B)   its total reserves initially increase by $120.
C)   it will be able to make new loans up to a maximum of $880.
D)   None of the above is correct.E) All of the above
F) B) and C)

Question 12

Which of the following is not included in M1?

Accepted Answer

A)   currency
B)   demand deposits
C)   savings deposits
D)   traveler's checksE) None of the above
F) All of the above

Question 13

Any item that people can use to transfer purchasing power from the present to the future is called

Accepted Answer

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

Question 14

Suppose the Federal Reserve increases bank reserves and banks lend out some of these reserves, but at some point banks still have $5 million more they wish to lend out. If the reserve requirement is 10 percent, how much more money can banks create if they lend out the remaining amount?

Accepted Answer

A)   $55 million
B)   $50 million
C)   $45 million
D)   $40 millionE) A) and B)
F) B) and C)

Question 15

Table 29-7.
 
-Refer to Table 29-7. 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)   $9,600
B)   $10,800
C)   $10,200
D)   $9,000E) C) and D)
F) A) and B)

Question 16

The existence of money

Accepted Answer

A)   reduces specialization.
B)   makes trade easier.
C)   allows for barter.
D)   hinders production.E) B) and C)
F) A) and B)

Question 17

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

Question 18

Which of the following is an asset of a bank and a liability for its customers?

Accepted Answer

A)   deposits of its customers and loans to its customers
B)   deposits of its customers but not loans to its customers
C)   loans to its customers but not the deposits of its customers
D)   neither the deposits of its customers nor the loans to its customersE) A) and D)
F) None of the above

Question 19

An increase in the money supply might indicate that the Fed had

Accepted Answer

A)   purchased bonds to increase banks reserves.
B)   purchased bonds to decrease banks reserves.
C)   sold bonds to increase banks reserves.
D)   sold bonds to decrease banks reserves.E) B) and C)
F) A) and D)

Question 20

Scenario 29-1.
The monetary policy of Namdian is determined by the Namdian Central Bank. The local currency is the dia. Namdian banks collectively hold 100 million dias of required reserves, 25 million dias of excess reserves, 250 million dias of Namdian Treasury Bonds, and their customers hold 1,000 million dias of deposits. Namdians prefer to use only demand deposits and so the money supply consists of demand deposits.
-Refer to Scenario 29-1. Suppose the Central Bank of Namdia loaned the banks of Namdia 5 million dias. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply of Namdia change?

Accepted Answer

A)   60 million dias
B)   50 million dias
C)   40 million dias
D)   None of the above is correct.E) None of the above
F) B) and D)

Exam 11: The Monetary System

The Fed increases the reserve requirement, but it wants to offset the effects on the money supply. Which of the following should it do?

Correct Answer
verified

Any item that people can use to transfer purchasing power from the present to the future is called

Correct Answer
verified

Which of the following items is included in M2?

Correct Answer
verified

In a system of 100-percent-reserve banking,

Correct Answer
verified

The measure of the money stock called M1 includes

Correct Answer
verified

Which of the following is an asset of a bank and a liability for its customers?

Correct Answer
verified

The existence of money

Correct Answer
verified

An increase in the money supply might indicate that the Fed had

Correct Answer
verified

You use U.S. currency to pay the owner of a restaurant for a delicious meal. The currency

Correct Answer
verified

An open-market purchase

Correct Answer
verified

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

Correct Answer
verified

Suppose the Federal Reserve increases bank reserves and banks lend out some of these reserves, but at some point banks still have $5 million more they wish to lend out. If the reserve requirement is 10 percent, how much more money can banks create if they lend out the remaining amount?

Correct Answer
verified

Which of the following best illustrates the concept of a store of value?

Correct Answer
verified

A double coincidence of wants

Correct Answer
verified

During the early 1930s there were a number of bank failures in the United States. What did this do to the money supply? The New York Federal Reserve Bank advocated open market purchases. Would these purchases have reversed the change in the money supply and helped banks? Explain.

Correct Answer
verified
Bank failures cause people to lose confi...
View 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 Answer
verified

If the reserve requirement is 12 percent and banks desire to hold no excess reserves, when a bank receives a new deposit of $1,000,

Correct Answer
verified

Which of the following is not included in M1?

Correct Answer
verified

Correct Answer
verified

Table 29-7. -Refer to Table 29-7. 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

Exam 11: The Monetary System

The Fed increases the reserve requirement, but it wants to offset the effects on the money supply. Which of the following should it do?

Correct AnswerverifiedShow Answer

Any item that people can use to transfer purchasing power from the present to the future is called

Correct AnswerverifiedShow Answer

Which of the following items is included in M2?

Correct AnswerverifiedShow Answer

In a system of 100-percent-reserve banking,

Correct AnswerverifiedShow Answer

The measure of the money stock called M1 includes

Correct AnswerverifiedShow Answer

Which of the following is an asset of a bank and a liability for its customers?

Correct AnswerverifiedShow Answer

The existence of money

Correct AnswerverifiedShow Answer

An increase in the money supply might indicate that the Fed had

Correct AnswerverifiedShow Answer

You use U.S. currency to pay the owner of a restaurant for a delicious meal. The currency

Correct AnswerverifiedShow Answer

An open-market purchase

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the Federal Reserve increases bank reserves and banks lend out some of these reserves, but at some point banks still have $5 million more they wish to lend out. If the reserve requirement is 10 percent, how much more money can banks create if they lend out the remaining amount?

Correct AnswerverifiedShow Answer

Which of the following best illustrates the concept of a store of value?

Correct AnswerverifiedShow Answer

A double coincidence of wants

Correct AnswerverifiedShow Answer

During the early 1930s there were a number of bank failures in the United States. What did this do to the money supply? The New York Federal Reserve Bank advocated open market purchases. Would these purchases have reversed the change in the money supply and helped banks? Explain.

Correct AnswerverifiedBank failures cause people to lose confi...View AnswerShow 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

If the reserve requirement is 12 percent and banks desire to hold no excess reserves, when a bank receives a new deposit of $1,000,

Correct AnswerverifiedShow Answer

Which of the following is not included in M1?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 29-7. -Refer to Table 29-7. 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

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Bank failures cause people to lose confi...
View Answer

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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