Question 1

Along with currency not in banks and deposits in checking accounts, what is another component of the M1 measure of money?

Accepted Answer

A)   credit cards
B)   debit cards
C)   traveler's checks
D)   prepaid accountsE) B) and C)
F) A) and C)

Question 2

An increase in the required reserve ratio

Accepted Answer

A)   will increase the money supply.
B)   will decrease the money supply.
C)   will not change the money supply.
D)   will decrease the discount rate.E) A) and B)
F) None of the above

Question 3

The Argon Bank has $8 million in deposits and $1,600,000 in reserves. If the required reserve ratio is 20%, excess reserves are equal to

Accepted Answer

A)   zero.
B)   $80,000.
C)   $320,000.
D)   $640,000.E) A) and B)
F) A) and C)

Question 4

A decrease in the discount rate will most likely

Accepted Answer

A)   decrease the money supply.
B)   not effect the money supply.
C)   increase the money supply.
D)   have an unclear affect on the money supply.E) B) and D)
F) A) and B)

Question 5

Refer to the information provided in Scenario 25.2 below to answer the question(s)  that follow.
SCENARIO 25.2: The following table shows the changes in deposits, reserves, and loans of 4 banks as a result of a $100,000 initial deposit in Bank No. 1. Assume all banks are loaned up. 
-Refer to Scenario 25.2. If the required reserve ratio were changed to 20%, total loans of Bank No. 2 will change to

Accepted Answer

A)   $64,000.
B)   $72,000.
C)   $74,250.
D)   $80,000.E) None of the above
F) All of the above

Question 6

Money is anything that generally is accepted as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 7

Treasury bills are government securities that

Accepted Answer

A)   mature in more than five years.
B)   have an infinite maturity date.
C)   mature in less than one year.
D)   have no maturity date.E) C) and D)
F) A) and B)

Question 8

Banks are legally required to hold a percentage of all deposits as reserves.

Accepted Answer

A) True 
 B)False

Question 9

The President of the NY Federal Reserve Bank is always a member of the Federal Open Market Committee.

Accepted Answer

A) True 
 B)False

Question 10

Bank of Roseland has $700 million in deposits. The required reserve ratio is 15%. Bank of Roseland must keep ________ in reserves.

Accepted Answer

A)   $55 million
B)   $85 million
C)   $105 million
D)   $140 millionE) A) and D)
F) C) and D)

Question 11

A currency that is not backed by gold, silver, or any other precious commodity equal to the face value of the money is known as

Accepted Answer

A)   fake money.
B)   weak money.
C)   token money.
D)   commodity money.E) B) and C)
F) C) and D)

Question 12

The demand for money and the interest rate are

Accepted Answer

A)   positively related.
B)   negatively related.
C)   sometimes positively related and other times negatively related, depending on the condition of the economy.
D)   not related.E) A) and C)
F) B) and D)

Question 13

Things that a firm owns that have ________ are classified as assets.

Accepted Answer

A)   worth
B)   no value
C)   negative value
D)   any of the aboveE) C) and D)
F) None of the above

Question 14

Which of the following causes the quantity of money demanded to increase?

Accepted Answer

A)   an increase in nominal income
B)   a decrease in nominal income
C)   a decrease in the price level
D)   a decrease in the interest rateE) A) and B)
F) B) and D)

Question 15

The members of the Board of Governors of the Fed make up a majority of the Federal Open Market Committee.

Accepted Answer

A) True 
 B)False

Question 16

Close substitutes for transactions money are known as

Accepted Answer

A)   fiat monies.
B)   near monies.
C)   commodity monies.
D)   token monies.E) None of the above
F) All of the above

Question 17

The Bank of Red Oak has $2 million in deposits and $400,000 in reserves. If excess reserves are equal to $100,000, the required reserve ratio is

Accepted Answer

A)   5%.
B)   10%.
C)   15%.
D)   20%.E) B) and C)
F) A) and B)

Question 18

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

Accepted Answer

A)   currency held outside banks
B)   travelers checks
C)   demand deposits
D)   savings accountsE) A) and B)
F) None of the above

Question 19

What is the most widely followed short-term interest rate?

Accepted Answer

A)   the federal funds rate
B)   the three-month Treasury bill rate
C)   the commercial paper rate
D)   the government bond rateE) A) and D)
F) None of the above

Question 20

The money multiplier is calculated as (1 ÷ required reserve ratio).

Accepted Answer

A) True 
 B)False

Exam 25: Money, the Federal Reserve, and the Interest Rate

The President of the NY Federal Reserve Bank is always a member of the Federal Open Market Committee.

Correct Answer
verified

Money is anything that generally is accepted as a medium of exchange.

Correct Answer
verified

What is the most widely followed short-term interest rate?

Correct Answer
verified

Which of the following causes the quantity of money demanded to increase?

Correct Answer
verified

A currency that is not backed by gold, silver, or any other precious commodity equal to the face value of the money is known as

Correct Answer
verified

A decrease in the discount rate will most likely

Correct Answer
verified

Banks are legally required to hold a percentage of all deposits as reserves.

Correct Answer
verified

Treasury bills are government securities that

Correct Answer
verified

Things that a firm owns that have ________ are classified as assets.

Correct Answer
verified

Correct Answer
verified

Bank of Roseland has $700 million in deposits. The required reserve ratio is 15%. Bank of Roseland must keep ________ in reserves.

Correct Answer
verified

The demand for money and the interest rate are

Correct Answer
verified

The Bank of Red Oak has $2 million in deposits and $400,000 in reserves. If excess reserves are equal to $100,000, the required reserve ratio is

Correct Answer
verified

An increase in the required reserve ratio

Correct Answer
verified

Close substitutes for transactions money are known as

Correct Answer
verified

Along with currency not in banks and deposits in checking accounts, what is another component of the M1 measure of money?

Correct Answer
verified

The Argon Bank has $8 million in deposits and $1,600,000 in reserves. If the required reserve ratio is 20%, excess reserves are equal to

Correct Answer
verified

The money multiplier is calculated as (1 ÷ required reserve ratio).

Correct Answer
verified

The members of the Board of Governors of the Fed make up a majority of the Federal Open Market Committee.

Correct Answer
verified

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

Correct Answer
verified

Exam 25: Money, the Federal Reserve, and the Interest Rate

The President of the NY Federal Reserve Bank is always a member of the Federal Open Market Committee.

Correct AnswerverifiedShow Answer

Money is anything that generally is accepted as a medium of exchange.

Correct AnswerverifiedShow Answer

What is the most widely followed short-term interest rate?

Correct AnswerverifiedShow Answer

Which of the following causes the quantity of money demanded to increase?

Correct AnswerverifiedShow Answer

A currency that is not backed by gold, silver, or any other precious commodity equal to the face value of the money is known as

Correct AnswerverifiedShow Answer

A decrease in the discount rate will most likely

Correct AnswerverifiedShow Answer

Banks are legally required to hold a percentage of all deposits as reserves.

Correct AnswerverifiedShow Answer

Treasury bills are government securities that

Correct AnswerverifiedShow Answer

Things that a firm owns that have ________ are classified as assets.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Bank of Roseland has $700 million in deposits. The required reserve ratio is 15%. Bank of Roseland must keep ________ in reserves.

Correct AnswerverifiedShow Answer

The demand for money and the interest rate are

Correct AnswerverifiedShow Answer

The Bank of Red Oak has $2 million in deposits and $400,000 in reserves. If excess reserves are equal to $100,000, the required reserve ratio is

Correct AnswerverifiedShow Answer

An increase in the required reserve ratio

Correct AnswerverifiedShow Answer

Close substitutes for transactions money are known as

Correct AnswerverifiedShow Answer

Along with currency not in banks and deposits in checking accounts, what is another component of the M1 measure of money?

Correct AnswerverifiedShow Answer

The Argon Bank has $8 million in deposits and $1,600,000 in reserves. If the required reserve ratio is 20%, excess reserves are equal to

Correct AnswerverifiedShow Answer

The money multiplier is calculated as (1 ÷ required reserve ratio).

Correct AnswerverifiedShow Answer

The members of the Board of Governors of the Fed make up a majority of the Federal Open Market Committee.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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