Question 1

If the reserve ratio is 9 percent,then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

Accepted Answer

A)   $60,000.00.
B)   $66,666.67.
C)   $90,900.00.
D)   $100,555.56.

Question 2

The Board of Governors

Accepted Answer

A)   is chaired by the U.S.Secretary of the Treasury.
B)   members are elected by the U.S.public.
C)   has 7 members.
D)   All of the above are correct.

Question 3

Table 21-3.
 
-Refer to Table 21-3.If $1,000 is deposited into the First Bank of Fairfield,and the bank takes no other actions,its

Accepted Answer

A)   reserves will increase by $200.
B)   liabilities will decrease by $1,000.
C)   assets will increase by $1,000.
D)   reserves will increase by $800.

Question 4

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 5

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.

Question 6

Scenario 21-1.
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 21-1 .Suppose the Central Bank of Namdia purchases 25 million dias of Namdian Treasury Bonds from banks.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)   200 million dias
B)   150 million dias
C)   100 million dias
D)   None of the above is correct.

Question 7

Table 21-6.
 
-Refer to Table 21-6.If the Bank of Springfield has lent out all the money it can given its level of deposits,then what is the reserve requirement?

Accepted Answer

A)   5.00 percent
B)   8.00 percent
C)   8.42 percent
D)   95.00 percent

Question 8

At one time,people in a certain country had no access to banks; they relied exclusively on currency.Then,a fractional-reserve banking system was created.As a result,the money supply

Accepted Answer

A)   increased.The central bank could have reduced the size of this increase by buying bonds.
B)   increased.The central bank could have reduced the size of this increase by selling bonds.
C)   decreased.The central bank could have reduced the size of this decrease by buying bonds.
D)   decreased.The central bank could have reduced the size of this decrease by selling bonds.

Question 9

During wars the public tends to hold relatively more currency and relatively fewer deposits.This decision makes reserves

Accepted Answer

A)   and the money supply increase.
B)   and the money supply decrease.
C)   increase,but leaves the money supply unchanged.
D)   decrease,but leaves the money supply unchanged.

Question 10

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.

Question 11

Which of the following is included in M2 but not in M1?

Accepted Answer

A)   demand deposits
B)   corporate bonds
C)   large time deposits
D)   money market mutual funds

Question 12

Who can vote on Federal Open Market Committee decisions?

Accepted Answer

A)   all of the members of the Board of Governors and all of the Federal Reserve Bank presidents
B)   all of the members of the Board of Governors and some of the Federal Reserve Bank presidents
C)   some of the members of the Board of Governors and all of the Federal Reserve Bank presidents
D)   some of the members of the Board of Governors and some of the Federal Reserve Bank presidents

Question 13

The agency responsible for regulating the money supply in the United States is

Accepted Answer

A)   the Comptroller of the Currency.
B)   the U.S.Treasury.
C)   the Federal Reserve.
D)   the U.S.Bank.

Question 14

Which of the following does the U.S.president appoint and the U.S.Senate confirm?

Accepted Answer

A)   members of the Board of Governors and regional Federal Reserve Bank Presidents.
B)   members of the Board of Governors but not the regional Federal Reserve Bank Presidents.
C)   the regional Federal Reserve Bank Presidents,but not members of the Board of Governors.
D)   neither members of the Board of Governors nor regional Federal Reserve Bank Presidents.

Question 15

The Soviet government in the 1980's never abandoned the ruble as the official currency.However,the people of Moscow preferred to accept

Accepted Answer

A)   cigarettes in exchange for goods and services,because they were convinced that cigarettes were going to soon become hard to come by.
B)   American dollars in exchange for goods and services,because rubles were extremely hard to come by.
C)   goods such as cigarettes or American dollars in exchange for goods and services,reminding us of the fact that government decree by itself is not sufficient for the success of a commodity money.
D)   All of the above are correct.

Question 16

Table 21-4.
 
-Refer to Table 21-4.If the bank is holding $4,000 in excess reserves,then the reserve requirement with which it must comply is

Accepted Answer

A)   4 percent.
B)   6 percent.
C)   12 percent.
D)   14 percent.

Question 17

Which of the following institutions is a central bank?

Accepted Answer

A)   the Bank of Japan
B)   the Bank of England
C)   the Federal Reserve System
D)   All of the above are correct.

Question 18

Scenario 21-2.
The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi.The local unit of currency is the taz.Aggregate banking statistics show that collectively the banks of Tazi hold 300 million tazes of required reserves,75 million tazes of excess reserves,have issued 7,500 million tazes of deposits,and hold 225 million tazes of Tazian Treasury bonds.Tazians prefer to use only demand deposits and so all money is on deposit at the bank.
-Refer to Scenario 21-2.Assume that banks desire to continue holding the same ratio of excess reserves to deposits.What is the reserve requirement and the reserve ratio for Tazian Banks?

Accepted Answer

A)   5 percent,8 percent
B)   4 percent,8 percent
C)   4 percent,5 percent
D)   None of the above is correct.

Question 19

Which of the following is correct?

Accepted Answer

A)   The Fed can control the money supply precisely.
B)   The amount of money in the economy does not depend on the behavior of depositors.
C)   The amount of money in the economy depends in part on the behavior of banks.
D)   None of the above is correct.

Question 20

The discount rate is the rate the Federal Reserve charges banks for loans.By lowering this rate,the Fed provides banks with a greater incentive to borrow from it.

Accepted Answer

A) True 
 B)False

Exam 21: The Monetary System

Who can vote on Federal Open Market Committee decisions?

Correct Answer
verified

The discount rate is the rate the Federal Reserve charges banks for loans.By lowering this rate,the Fed provides banks with a greater incentive to borrow from it.

Correct Answer
verified

Which of the following institutions is a central bank?

Correct Answer
verified

Correct Answer
verified

Table 21-3. -Refer to Table 21-3.If $1,000 is deposited into the First Bank of Fairfield,and the bank takes no other actions,its

Correct Answer
verified

Which of the following does the U.S.president appoint and the U.S.Senate confirm?

Correct Answer
verified

Table 21-4. -Refer to Table 21-4.If the bank is holding $4,000 in excess reserves,then the reserve requirement with which it must comply is

Correct Answer
verified

The Board of Governors

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

At one time,people in a certain country had no access to banks; they relied exclusively on currency.Then,a fractional-reserve banking system was created.As a result,the money supply

Correct Answer
verified

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

Correct Answer
verified

The Soviet government in the 1980's never abandoned the ruble as the official currency.However,the people of Moscow preferred to accept

Correct Answer
verified

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

Correct Answer
verified

Which of the following is included in M2 but not in M1?

Correct Answer
verified

The agency responsible for regulating the money supply in the United States is

Correct Answer
verified

If the reserve ratio is 9 percent,then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

Correct Answer
verified

During wars the public tends to hold relatively more currency and relatively fewer deposits.This decision makes reserves

Correct Answer
verified

Correct Answer
verified

Table 21-6. -Refer to Table 21-6.If the Bank of Springfield has lent out all the money it can given its level of deposits,then what is the reserve requirement?

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

Exam 21: The Monetary System

Who can vote on Federal Open Market Committee decisions?

Correct AnswerverifiedShow Answer

The discount rate is the rate the Federal Reserve charges banks for loans.By lowering this rate,the Fed provides banks with a greater incentive to borrow from it.

Correct AnswerverifiedShow Answer

Which of the following institutions is a central bank?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 21-3. -Refer to Table 21-3.If $1,000 is deposited into the First Bank of Fairfield,and the bank takes no other actions,its

Correct AnswerverifiedShow Answer

Which of the following does the U.S.president appoint and the U.S.Senate confirm?

Correct AnswerverifiedShow Answer

Table 21-4. -Refer to Table 21-4.If the bank is holding $4,000 in excess reserves,then the reserve requirement with which it must comply is

Correct AnswerverifiedShow Answer

The Board of Governors

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

At one time,people in a certain country had no access to banks; they relied exclusively on currency.Then,a fractional-reserve banking system was created.As a result,the money supply

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Soviet government in the 1980's never abandoned the ruble as the official currency.However,the people of Moscow preferred to accept

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is included in M2 but not in M1?

Correct AnswerverifiedShow Answer

The agency responsible for regulating the money supply in the United States is

Correct AnswerverifiedShow Answer

If the reserve ratio is 9 percent,then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

Correct AnswerverifiedShow Answer

During wars the public tends to hold relatively more currency and relatively fewer deposits.This decision makes reserves

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 21-6. -Refer to Table 21-6.If the Bank of Springfield has lent out all the money it can given its level of deposits,then what is the reserve requirement?

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

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