Question 1

Table 29-8 
-Refer to Table 29-8. This bank's leverage ratio is

Accepted Answer

A)  2.
B)  50.
C)  13.3.
D)  7.5.E) B) and C)
F) A) and D)

Question 2

The reserve requirement is 12 percent. Lucy deposits $600 into a bank. By how much do excess reserves change?

Accepted Answer

A)  $600
B)  $528
C)  $72
D)  $12E) B) and C)
F) All of the above

Question 3

Economists use the term "money" to refer to

Accepted Answer

A)  all wealth.
B)  all assets, including real assets and financial assets.
C)  all financial assets, but not real assets.
D)  those types of wealth that are regularly accepted by sellers in exchange for goods and services.E) A) and D)
F) C) and D) D

Question 4

During a bank run, depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits.

Accepted Answer

A)  Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply increase.
B)  Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply decrease.
C)  The decision to hold relatively more currency would make the money supply increase. The decision to hold relatively more excess reserves would make the money supply decrease.
D)  the decision to hold relatively more currency would make the money supply increase. The decision to hold relatively more excess reserves would make the money supply decrease.E) A) and D)
F) None of the above

Question 5

When the federal funds rate is below the target rate, the Fed will _____ bonds. This action will _____ the money supply.

Accepted Answer

The answer of When the federal funds rate is below...

Question 6

Bottles of very fine wine are less liquid than demand deposits.

Accepted Answer

A) True 
 B)False

Question 7

Currency includes

Accepted Answer

A)  paper bills and coins.
B)  demand deposits.
C)  credit cards.
D)  Both (a)  and (b)  are correct.E) All of the above
F) B) and C)

Question 8

Which of the following is a liability of a bank and an asset of 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 of its customers but not the deposits of its customers
D)  neither the deposits of its customers nor the loans to its customersE) A) and B)
F) A) and D)

Question 9

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

Accepted Answer

A) True 
 B)False

Question 10

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

Accepted Answer

When the reserve requirement is less tha...

Question 11

Why is the Chairman of the Federal Reserve often referred to as the "second most powerful person in the United States?"

Accepted Answer

The Fed's policy decisions influence the...

Question 12

The Fed can directly protect a bank during a bank run by

Accepted Answer

A)  increasing reserve requirements.
B)  selling government bonds to the bank.
C)  lending reserves to the bank.
D)  doing any of the above.E) A) and B)
F) None of the above

Question 13

Which of the following is included in both M1 and M2?

Accepted Answer

A)  savings deposits
B)  demand deposits
C)  small time deposits
D)  money market mutual fundsE) B) and C)
F) A) and C)

Question 14

The Fed's primary tool to change the money supply is

Accepted Answer

A)  changing the interest rate on reserves.
B)  changing the reserve requirement.
C)  conducting open market operations.
D)  redeeming Federal Reserve notes.E) A) and B)
F) All of the above C

Question 15

Describe the role of bank leverage in bank insolvency during times of falling asset prices.

Accepted Answer

As bank asset values fall, the effect on...

Question 16

All Fed purchases and sales of

Accepted Answer

A)  corporate stocks and bonds are conducted at the New York Fed's trading desk.
B)  government bonds are conducted at the New York Fed's trading desk.
C)  real estate and other real assets are conducted by the Federal Open Market Committee.
D)  All of the above are correct.E) None of the above
F) B) and C)

Question 17

Consider five firms that produce different goods and services using different inputs.
​ 
​
Which of the following pairs of firms has a double coincidence of wants?

Accepted Answer

A)  ​Moo Farms and Burger Shack
B)  Corny Farms and Biomass Corp.
C)  ​Moo Farms and Corny Farms
D)  ​Carne Castle and Moo FarmsE) C) and D)
F) A) and B) C

Question 18

​Which of the following is NOT an example of monetary policy?

Accepted Answer

A)  ​The Federal Open Market Committee decides to sell bonds.
B)  ​​The Federal Open Market Committee decides to buy bonds.
C)  ​The Federal Reserve reduces the reserve requirements.
D)  ​The Federal Reserve facilitates bank transactions by clearing checks.E) All of the above
F) C) and D)

Question 19

In the United States, currency holdings per person average about

Accepted Answer

A)  $110; one explanation for this relatively small average is that many people use credit and debit cards to make transactions.
B)  $110; one explanation for this relatively small average is that U.S. citizens hold a lot of foreign currency.
C)  $4,490; one explanation for this relatively large amount is that criminals probably prefer currency as a medium of exchange.
D)  $4,490; one explanation for this relatively large average is that U.S. citizens hold a lot of foreign currency.E) C) and D)
F) B) and D)

Question 20

If the Fed sells government bonds to the public, then reserves

Accepted Answer

A)  increase and the money supply increases.
B)  increase and the money supply decreases.
C)  decrease and the money supply increases.
D)  decrease and the money supply decreases.E) All of the above
F) A) and B)

Exam 29: The Monetary System

Table 29-8 -Refer to Table 29-8. This bank's leverage ratio is

Correct AnswerverifiedShow Answer

The reserve requirement is 12 percent. Lucy deposits $600 into a bank. By how much do excess reserves change?

Correct AnswerverifiedShow Answer

Economists use the term "money" to refer to

Correct AnswerverifiedD

During a bank run, depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits.

Correct AnswerverifiedShow Answer

When the federal funds rate is below the target rate, the Fed will _____ bonds. This action will _____ the money supply.

Correct AnswerverifiedShow Answer

Bottles of very fine wine are less liquid than demand deposits.

Correct AnswerverifiedShow Answer

Currency includes

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

Correct AnswerverifiedShow Answer

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

Correct AnswerverifiedWhen the reserve requirement is less tha...View AnswerShow Answer

Why is the Chairman of the Federal Reserve often referred to as the "second most powerful person in the United States?"

Correct AnswerverifiedThe Fed's policy decisions influence the...View AnswerShow Answer

The Fed can directly protect a bank during a bank run by

Correct AnswerverifiedShow Answer

Which of the following is included in both M1 and M2?

Correct AnswerverifiedShow Answer

The Fed's primary tool to change the money supply is

Correct AnswerverifiedC

Describe the role of bank leverage in bank insolvency during times of falling asset prices.

Correct AnswerverifiedAs bank asset values fall, the effect on...View AnswerShow Answer

All Fed purchases and sales of

Correct AnswerverifiedShow Answer

Consider five firms that produce different goods and services using different inputs. ​ ​ Which of the following pairs of firms has a double coincidence of wants?

Correct AnswerverifiedC

​Which of the following is NOT an example of monetary policy?

Correct AnswerverifiedShow Answer

In the United States, currency holdings per person average about

Correct AnswerverifiedShow Answer

If the Fed sells government bonds to the public, then reserves

Correct AnswerverifiedShow Answer

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D

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When the federal funds rate is below the target rate, the Fed will _ bonds. This action will _ the money supply.

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When the reserve requirement is less tha...
View Answer

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The Fed's policy decisions influence the...
View Answer

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C

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As bank asset values fall, the effect on...
View Answer

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Consider five firms that produce different goods and services using different inputs. Which of the following pairs of firms has a double coincidence of wants?

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C

Which of the following is NOT an example of monetary policy?

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