Question 1

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 2

Which of the following is an example of barter?

Accepted Answer

A)   A parent gives a teenager a $10 bill in exchange for her babysitting services.
B)   A homeowner gives an exterminator a check for $50 in exchange for extermination services.
C)   A barber gives a plumber a haircut in exchange for the plumber fixing the barber's leaky faucet.
D)   All of the above are examples of barter.E) A) and B)
F) B) and D)

Question 3

If the reserve requirement is 15 percent a bank desires to hold no excess reserves and it receives a new deposit of $10,then this bank

Accepted Answer

A)   must increase its required reserves by $10.
B)   will initially see its total reserves increase by $15.
C)   will be able to make new loans up to a maximum of $8.50.
D)   All of the above are correct.E) None of the above
F) All of the above

Question 4

The primary difference between commodity money and fiat money is that

Accepted Answer

A)   commodity money is a medium of exchange but fiat money is not.
B)   fiat money is a medium of exchange but commodity money is not.
C)   commodity money has intrinsic value but fiat money does not.
D)   fiat money has intrinsic value but commodity money does not.E) B) and C)
F) A) and D)

Question 5

The chair of the Board of Governors regularly testifies to Congress about Fed policy.

Accepted Answer

A) True 
 B)False

Question 6

Treasury Bonds are

Accepted Answer

A)   both a store of value and a medium of exchange.
B)   a store of value,but not a medium of exchange
C)   a medium of exchange,but not a store of value.
D)   neither a store of value nor a medium of exchange.E) B) and C)
F) A) and D)

Question 7

Given the following information,what are the values of M1 and M2? Small time deposits
$650 billion
Demand deposits and other checkable deposits
$300 billion
Savings deposits
$750 billion
Money market mutual funds
$600 billion
Traveler's checks
$25 billion
Large time deposits
$600 billion
Currency
$100 billion
Miscellaneous categories in M2
$25 billion

Accepted Answer

A)   M1 = $400 billion,M2 = $2,475 billion.
B)   M1 = $125 billion,M2 = $3,025 billion.
C)   M1 = $425 billion,M2 = $2,450 billion.
D)   M1 = $425 billion,M2 = $1,875 billion.E) A) and B)
F) C) and D)

Question 8

If the central bank in some country lowered the reserve requirement,then the money multiplier for that country

Accepted Answer

A)   would increase.
B)   would not change.
C)   would decrease.
D)   could do any of the above.E) C) and D)
F) A) and C)

Question 9

Table 21-5.
 
-Refer to Table 21-5.Assume the Fed's reserve requirement is 9 percent and all banks besides the Bank of Pleasantville are exactly in compliance with the 9 percent requirement.Further assume that people hold only deposits and no currency.Starting from the situation as depicted by the T-account,if the Bank of Pleasantville decides to make new loans so as to end up with no excess reserves,then by how much does the money supply eventually increase?

Accepted Answer

A)   $555.00.
B)   $1,200.00.
C)   $1,777.78.
D)   $2,222.22.E) A) and B)
F) B) and D)

Question 10

If the federal funds rate were above 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) A) and C)
F) B) and D)

Question 11

Which of the following functions of money is also a common function of most other financial assets?

Accepted Answer

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

Question 12

Table 21-7
Metropolis National Bank is currently holding 2% of its deposits as excess reserves.
 
-Refer to Balance Sheet of Metropolis National Bank.Metropolis National Bank is currently holding 2% of deposits as excess reserves.Assuming that all banks have the same required reserve ratio,and then none want to hold excess reserves what is the value of the money multiplier?

Accepted Answer

A)   8.25
B)   10
C)   12
D)   20E) A) and B)
F) A) and D)

Question 13

The existence of money leads to

Accepted Answer

A)   greater specialization in production,but not to a higher standard of living.
B)   a higher standard of living,but not to greater specialization.
C)   greater specialization and to a higher standard of living.
D)   neither greater specialization nor to a higher standard of living.E) A) and C)
F) A) and B)

Question 14

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

Question 15

The money multiplier equals 1/(1 - R),where R represents the reserve ratio.

Accepted Answer

A) True 
 B)False

Question 16

Reserves decrease if the Federal Reserve

Accepted Answer

A)   raises the discount rate or auctions more credit.
B)   raises the discount rate but not if it auctions more credit.
C)   lowers the discount rate or auctions more credit.
D)   lowers the discount rate but not if it auctions more credit.E) B) and C)
F) A) and B)

Question 17

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 D)
F) None of the above

Question 18

In order for currency to be widely used as a medium of exchange,it is sufficient for the government to designate it as legal tender.

Accepted Answer

A) True 
 B)False

Question 19

Credit card limits are included in

Accepted Answer

A)   M1 but not M2.
B)   M2 but not M1.
C)   M1 and M2.
D)   neither M1 nor M2.E) A) and B)
F) B) and C)

Question 20

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

Exam 21: The Monetary System

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

In order for currency to be widely used as a medium of exchange,it is sufficient for the government to designate it as legal tender.

Correct Answer
verified

Correct Answer
verified

Treasury Bonds are

Correct Answer
verified

The primary difference between commodity money and fiat money is that

Correct Answer
verified

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

The chair of the Board of Governors regularly testifies to Congress about Fed policy.

Correct Answer
verified

The existence of money leads to

Correct Answer
verified

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

Correct Answer
verified
The use of money allows people...
View Answer

Which of the following is an example of barter?

Correct Answer
verified

Reserves decrease if the Federal Reserve

Correct Answer
verified

The money multiplier equals 1/(1 - R),where R represents the reserve ratio.

Correct Answer
verified

If the federal funds rate were above the level the Federal Reserve had targeted,the Fed could move the rate back towards its target by

Correct Answer
verified

Correct Answer
verified

Credit card limits are included in

Correct Answer
verified

When the Fed decreases the discount rate,banks will

Correct Answer
verified

If the central bank in some country lowered the reserve requirement,then the money multiplier for that country

Correct Answer
verified

Which of the following functions of money is also a common function of most other financial assets?

Correct Answer
verified

Correct Answer
verified

If the reserve requirement is 15 percent a bank desires to hold no excess reserves and it receives a new deposit of $10,then this bank

Correct Answer
verified

Exam 21: The Monetary System

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

In order for currency to be widely used as a medium of exchange,it is sufficient for the government to designate it as legal tender.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Treasury Bonds are

Correct AnswerverifiedShow Answer

The primary difference between commodity money and fiat money is that

Correct AnswerverifiedShow Answer

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

The chair of the Board of Governors regularly testifies to Congress about Fed policy.

Correct AnswerverifiedShow Answer

The existence of money leads to

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 an example of barter?

Correct AnswerverifiedShow Answer

Reserves decrease if the Federal Reserve

Correct AnswerverifiedShow Answer

The money multiplier equals 1/(1 - R),where R represents the reserve ratio.

Correct AnswerverifiedShow Answer

If the federal funds rate were above the level the Federal Reserve had targeted,the Fed could move the rate back towards its target by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Credit card limits are included in

Correct AnswerverifiedShow Answer

When the Fed decreases the discount rate,banks will

Correct AnswerverifiedShow Answer

If the central bank in some country lowered the reserve requirement,then the money multiplier for that country

Correct AnswerverifiedShow Answer

Which of the following functions of money is also a common function of most other financial assets?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the reserve requirement is 15 percent a bank desires to hold no excess reserves and it receives a new deposit of $10,then this bank

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
The use of money allows people...
View 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
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Correct Answer
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