Question 1

The manager of the bank where you work tells you that the bank has $300 million in deposits and $255 million dollars in loans. If the reserve requirement is 8.5 percent, how much is the bank holding in excess reserves?

Accepted Answer

A)   $15 million
B)   $19.5 million
C)   $25.5 million
D)   $0 millionE) A) and B)
F) A) and C)

Question 2

If the reserve ratio is 5 percent, then $1,000 of additional reserves can create up to

Accepted Answer

A)   $5,500 of new money.
B)   $5,000 of new money.
C)   $4,000 of new money.
D)   None of the above is correct.E) C) and D)
F) B) and C)

Question 3

If a bank desires to hold no excess reserves, the reserve requirement is 8 percent, and it receives a new deposit of $500,

Accepted Answer

A)   its required reserves increase by $40.
B)   its total reserves initially increase by $460.
C)   it will be able to make a new loan of up to $492.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 4

Which of the following might explain why the United States has so much currency per person?

Accepted Answer

A)   U.S. citizens are holding a lot of foreign currency.
B)   Currency may be a preferable store of wealth for criminals.
C)   People use credit and debit cards more frequently.
D)   All of the above help explain the abundance of currency.E) A) and D)
F) C) and D)

Question 5

In the special case of the 100 percent-reserve banking, the money multiplier is

Accepted Answer

A)   1 and banks create money.
B)   1 and banks do not create money.
C)   2 and banks create money
D)   2 and banks do not create money.E) A) and D)
F) None of the above

Question 6

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.E) None of the above
F) B) and D)

Question 7

In a fractional reserve economy where the required reserve ratio is 10%, must it be the case that an initial deposit of $100 increases the total money supply by $1,000? Explain.

Accepted Answer

No, this is not necessarily the case.
It...

Question 8

If $300 of new reserves generates $800 of new money in the economy, then the reserve ratio is

Accepted Answer

A)   2.7 percent.
B)   12.5 percent.
C)   37.5 percent.
D)   40 percent.E) A) and B)
F) None of the above

Question 9

Which of the following statements is correct? In the special case of the 100-percent reserve banking the money multiplier is

Accepted Answer

A)   0 and banks create money.
B)   0 and banks do not create money.
C)   1 and banks create money
D)   1 and banks do not create money.E) All of the above
F) A) and B)

Question 10

How are Federal Reserve Board Governors selected?

Accepted Answer

The Fed Governors are appointed by the p...

Question 11

The money supply decreases if the Fed

Accepted Answer

A)   sells Treasury bonds. The larger the reserve requirement, the larger the decrease will be.
B)   sells Treasury bonds. The smaller the reserve requirement, the larger the decrease will be.
C)   buys Treasury bonds. The larger the reserve requirement, the larger the decrease will be.
D)   buys Treasury bonds. The smaller the reserve requirement, the larger the decrease will be.E) B) and C)
F) A) and B)

Question 12

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 C)
F) A) and B)

Question 13

In the U.S., the average adult holds about $4,490 in

Accepted Answer

A)   currency.
B)   wealth.
C)   M1.
D)   M2.E) A) and B)
F) B) and D)

Question 14

Why is the president of the New York Fed always a voting member of the FOMC?

Accepted Answer

New York is the financial capitol of the...

Question 15

The series of bank failures in 1907 occurred despite the creation of the Federal Reserve many years earlier.

Accepted Answer

A) True 
 B)False

Question 16

A bank has $30,000 in deposits and has $5,400 in reserves. What is its reserve ratio?

Accepted Answer

The answer of A bank has $30,000 in deposits and...

Question 17

Currently, U.S. currency is

Accepted Answer

A)   fiat money with intrinsic value.
B)   fiat money with no intrinsic value.
C)   commodity money with intrinsic value.
D)   commodity money with no intrinsic value.E) C) and D)
F) B) and D)

Question 18

In a fractional-reserve banking system, a bank

Accepted Answer

A)   does not make loans.
B)   does not accept deposits.
C)   keeps only a fraction of its deposits in reserve.
D)   None of the above is correct.E) B) and C)
F) A) and D)

Question 19

There is a

Accepted Answer

A)   short-run tradeoff between inflation and unemployment.
B)   short-run tradeoff between an increase in the money supply and inflation.
C)   long-run tradeoff between inflation and unemployment.
D)   long-run tradeoff between an increase in the money supply and inflation.E) None of the above
F) A) and D)

Question 20

If a bank uses $200 of excess reserves to make a new loan when the reserve ratio is 15 percent, this action by itself initially makes the money supply

Accepted Answer

A)   and wealth increase by $200.
B)   and wealth decrease by $200.
C)   increase by $200 while wealth does not change.
D)   decrease by $200 while wealth decreases by $200.E) A) and B)
F) A) and C)

Exam 21: The Monetary System

If $300 of new reserves generates $800 of new money in the economy, then the reserve ratio is

Correct AnswerverifiedShow Answer

How are Federal Reserve Board Governors selected?

Correct AnswerverifiedThe Fed Governors are appointed by the p...View AnswerShow Answer

Why is the president of the New York Fed always a voting member of the FOMC?

Correct AnswerverifiedNew York is the financial capitol of the...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

In a fractional-reserve banking system, a bank

Correct AnswerverifiedShow Answer

If a bank uses $200 of excess reserves to make a new loan when the reserve ratio is 15 percent, this action by itself initially makes the money supply

Correct AnswerverifiedShow Answer

In the U.S., the average adult holds about $4,490 in

Correct AnswerverifiedShow Answer

In the special case of the 100 percent-reserve banking, the money multiplier is

Correct AnswerverifiedShow Answer

There is a

Correct AnswerverifiedShow Answer

If a bank desires to hold no excess reserves, the reserve requirement is 8 percent, and it receives a new deposit of $500,

Correct AnswerverifiedShow Answer

The series of bank failures in 1907 occurred despite the creation of the Federal Reserve many years earlier.

Correct AnswerverifiedShow Answer

The money supply decreases if the Fed

Correct AnswerverifiedShow Answer

A bank has $30,000 in deposits and has $5,400 in reserves. What is its reserve ratio?

Correct AnswerverifiedShow Answer

Which of the following might explain why the United States has so much currency per person?

Correct AnswerverifiedShow Answer

Which of the following statements is correct? In the special case of the 100-percent reserve banking the money multiplier is

Correct AnswerverifiedShow Answer

The manager of the bank where you work tells you that the bank has $300 million in deposits and $255 million dollars in loans. If the reserve requirement is 8.5 percent, how much is the bank holding in excess reserves?

Correct AnswerverifiedShow Answer

If the reserve ratio is 5 percent, then $1,000 of additional reserves can create up to

Correct AnswerverifiedShow Answer

In a fractional reserve economy where the required reserve ratio is 10%, must it be the case that an initial deposit of $100 increases the total money supply by $1,000? Explain.

Correct AnswerverifiedNo, this is not necessarily the case.It...View AnswerShow Answer

Which of the following items is included in M2?

Correct AnswerverifiedShow Answer

Currently, U.S. currency is

Correct AnswerverifiedShow Answer

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The Fed Governors are appointed by the p...
View Answer

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New York is the financial capitol of the...
View Answer

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No, this is not necessarily the case.
It...
View Answer

Correct Answer
verified

Correct Answer
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