Question 1

If the reserve ratio is 7.5 percent, the money multiplier is

Accepted Answer

A)  7.5.
B)  10.3.
C)  13.3.
D)  11.3.E) B) and C)
F) A) and D)

Question 2

M1 equals currency plus demand deposits plus

Accepted Answer

A)  nothing else.
B)  other checkable deposits.
C)  traveler's checks plus other checkable deposits.
D)  traveler's checks plus other checkable deposits plus savings deposits.E) A) and B)
F) A) and C)

Question 3

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 4

​Which of the following policies can the Fed follow to increase the money supply?

Accepted Answer

A)  ​Reduce the interest rate on reserves
B)  ​Increase reserve requirements for banks
C)  ​Reduce the quantity of funds available through the Term Auction Facility
D)  ​Sell government bondsE) C) and D)
F) A) and B)

Question 5

Which of the following is NOT required for paper dollars to work as a medium of exchange?

Accepted Answer

A)  An established and regulated system of fiat money
B)  ​Intrinsic value backed by gold
C)  ​Government prosecution of counterfeiters
D)  Acceptance as part of social conventionE) None of the above
F) B) and D)

Question 6

Which of the following statements is correct?

Accepted Answer

A)  All items that are included in M1 are included also in M2.
B)  All items that are included in M2 are included also in M1.
C)  Credit cards are included in both M1 and M2.
D)  Savings deposits are included in both M1 and M2.E) B) and D)
F) B) and C)

Question 7

Suppose the required reserve ratio is 20%. What is the maximum amount of total money supply that can be created from an initial deposit of $200? In general, why might the actual amount of total money creation be less than the maximum?

Accepted Answer

The money multiplier is the reciprocal o...

Question 8

The leverage ratio is calculated as

Accepted Answer

A)  assets minus liabilities.
B)  assets divided by bank capital
C)  the reciprocal of the required reserve ratio
D)  the required reserve ratio multiplied by bank capital.E) All of the above
F) B) and D)

Question 9

All of the presidents of the regional Federal Reserve banks

Accepted Answer

A)  attend each FOMC meeting.
B)  have voting rights at each FOMC meeting.
C)  are appointed by the president of the U.S. and confirmed by the U.S. Senate.
D)  All of the above are correct.E) C) and D)
F) A) and C)

Question 10

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 barter.E) C) and D)
F) All of the above

Question 11

Imagine an economy in which: (1)  pieces of paper called yollars are the only thing that buyers give to sellers when they buy goods and services, so it would be common to use, say, 50 yollars to buy a pair of shoes; (2)  prices are posted in terms of yardsticks, so you might walk into a grocery store and see that, today, an apple is worth 2 yardsticks; and (3)  yardsticks disintegrate overnight, so no yardstick has any value for more than 24 hours. In this economy,

Accepted Answer

A)  the yardstick is a medium of exchange but it cannot serve as a unit of account.
B)  the yardstick is a unit of account but it cannot serve as a store of value.
C)  the yardstick is a medium of exchange but it cannot serve as a store of value, and the yollar is a unit of account.
D)  the yollar is a unit of account, but it is not a medium of exchange and it is not a liquid asset.E) C) and D)
F) B) and D)

Question 12

Which of the following lists is included in what economists call "money"?

Accepted Answer

A)  cash
B)  cash and stocks and bonds
C)  cash and stocks and bonds and real estate
D)  cash and stocks and bonds and real estate and all other assetsE) C) and D)
F) A) and B)

Question 13

A bank has a 10 percent reserve requirement, $36,000 in loans, and has loaned out all it can given the reserve requirement.

Accepted Answer

A)  It has $3,600 in deposits.
B)  It has $32,400 in deposits.
C)  It has $39,600 in deposits.
D)  It has $40,000 in deposits.E) B) and C)
F) None of the above

Question 14

If the money multiplier decreased from 20 to 12.5, then

Accepted Answer

A)  the Fed increased the reserve ratio from 5 percent to 8 percent.
B)  the Fed increased the fed funds rate from 5 percent to 8 percent.
C)  the Fed decreased the reserve ratio from 8 percent to 5 percent.
D)  the Fed decreased the fed funds rate from 8 percent to 5 percent.E) All of the above
F) B) and C)

Question 15

The Fed ____ bonds when it conducts an open-market purchase. This action _____ the money supply.

Accepted Answer

The answer of The Fed ____ bonds when it conducts...

Question 16

What is bank insolvancy?

Accepted Answer

Bank insolvancy is when bank c...

Question 17

Money is the most liquid asset available because

Accepted Answer

A)  it is a store of value.
B)  it is a medium of exchange.
C)  it is a unit of account.
D)  it has intrinsic value.E) All of the above
F) None of the above

Question 18

Monetary policy affects employment

Accepted Answer

A)  only in the long run.
B)  only in the short run.
C)  in both the long run and the short run.
D)  in neither the long run nor the short run.E) B) and C)
F) A) and D)

Question 19

David and Asher buy the same pair of sneakers, but each in the wrong size. David proposes a size swap with Asher. This is an example of

Accepted Answer

A)  ​barter, since the sneakers in the correct size represent a medium of exchange.
B)  ​barter, since the sneakers in the correct size have intrinsic value to both David and Asher.
C)  ​money, since the sneakers in the correct size do not have any intrinsic value.
D)  money, since the sneakers in the correct size represent a medium of exchange.E) B) and C)
F) B) and D)

Question 20

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)

Exam 29: The Monetary System

Suppose the required reserve ratio is 20%. What is the maximum amount of total money supply that can be created from an initial deposit of $200? In general, why might the actual amount of total money creation be less than the maximum?

Correct Answer
verified
The money multiplier is the reciprocal o...
View Answer

Money is the most liquid asset available because

Correct Answer
verified

If the reserve ratio is 7.5 percent, the money multiplier is

Correct Answer
verified

A bank has a 10 percent reserve requirement, $36,000 in loans, and has loaned out all it can given the reserve requirement.

Correct Answer
verified

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

David and Asher buy the same pair of sneakers, but each in the wrong size. David proposes a size swap with Asher. This is an example of

Correct Answer
verified

All of the presidents of the regional Federal Reserve banks

Correct Answer
verified

If the money multiplier decreased from 20 to 12.5, then

Correct Answer
verified

Which of the following lists is included in what economists call "money"?

Correct Answer
verified

M1 equals currency plus demand deposits plus

Correct Answer
verified

Monetary policy affects employment

Correct Answer
verified

A double coincidence of wants

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

The leverage ratio is calculated as

Correct Answer
verified

What is bank insolvancy?

Correct Answer
verified
Bank insolvancy is when bank c...
View Answer

Which of the following policies can the Fed follow to increase the money supply?

Correct Answer
verified

The Fed bonds when it conducts an open-market purchase. This action _ the money supply.

Correct Answer
verified

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

Correct Answer
verified

Which of the following is NOT required for paper dollars to work as a medium of exchange?

Correct Answer
verified

Exam 29: The Monetary System

Suppose the required reserve ratio is 20%. What is the maximum amount of total money supply that can be created from an initial deposit of $200? In general, why might the actual amount of total money creation be less than the maximum?

Correct AnswerverifiedThe money multiplier is the reciprocal o...View AnswerShow Answer

Money is the most liquid asset available because

Correct AnswerverifiedShow Answer

If the reserve ratio is 7.5 percent, the money multiplier is

Correct AnswerverifiedShow Answer

A bank has a 10 percent reserve requirement, $36,000 in loans, and has loaned out all it can given the reserve requirement.

Correct AnswerverifiedShow Answer

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

David and Asher buy the same pair of sneakers, but each in the wrong size. David proposes a size swap with Asher. This is an example of

Correct AnswerverifiedShow Answer

All of the presidents of the regional Federal Reserve banks

Correct AnswerverifiedShow Answer

If the money multiplier decreased from 20 to 12.5, then

Correct AnswerverifiedShow Answer

Which of the following lists is included in what economists call "money"?

Correct AnswerverifiedShow Answer

M1 equals currency plus demand deposits plus

Correct AnswerverifiedShow Answer

Monetary policy affects employment

Correct AnswerverifiedShow Answer

A double coincidence of wants

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The leverage ratio is calculated as

Correct AnswerverifiedShow Answer

What is bank insolvancy?

Correct AnswerverifiedBank insolvancy is when bank c...View AnswerShow Answer

​Which of the following policies can the Fed follow to increase the money supply?

Correct AnswerverifiedShow Answer

The Fed ____ bonds when it conducts an open-market purchase. This action _____ the money supply.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is NOT required for paper dollars to work as a medium of exchange?

Correct AnswerverifiedShow Answer

Correct Answer
verified
The money multiplier is the reciprocal o...
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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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
verified

Correct Answer
verified

Correct Answer
verified
Bank insolvancy is when bank c...
View Answer

Which of the following policies can the Fed follow to increase the money supply?

Correct Answer
verified

The Fed bonds when it conducts an open-market purchase. This action _ the money supply.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified