Question 1

The banking system in the U.S. is based on:

Accepted Answer

A)   100 percent reserve banking.
B)   fractional reserve banking.
C)   0 percent reserve banking.
D)   none of the above.

Question 2

The opportunity cost of hold real money balances is the:

Accepted Answer

A)   interest rate.
B)   price level.
C)   all of the above.
D)   none of the above.

Question 3

If $1000 was deposited in a bank and the reserve requirement is 0.20, how much is available for loans?

Accepted Answer

A)   $900
B)   $910
C)   $800
D)   $930

Question 4

Open market purchase of government securities by the Fed increases the federal funds rate.

Accepted Answer

A) True 
 B)False

Question 5

Expansionary monetary policy decreases the federal funds rate.

Accepted Answer

A) True 
 B)False

Question 6

The equilibrium price in the money market is the:

Accepted Answer

A)   inflation rate.
B)   exchange rate.
C)   interest rate.
D)   none of the above.

Question 7

You are given the following information on the banking system.
Reserve requirement rr = 0.08 Currency-deposit ratio c = 0.10 Excess reserve ratio e = 0.05
Compute the simple deposit and money multipliers.

Accepted Answer

Simple dep...

Question 8

The money supply consists of:

Accepted Answer

A)   currency plus reserves.
B)   currency plus required reserves.
C)   currency plus excess reserves.
D)   currency plus demand deposits.

Question 9

A decrease in the real money supply can result from:

Accepted Answer

A)   increase in the nominal money supply or an increase in the price level.
B)   increase in the nominal money supply or a decrease in the price level.
C)   decrease in the nominal money supply or an increase in the price level.
D)   decrease in the nominal money supply or a decrease in the price level.

Question 10

The interest rate the Federal Reserve charges banks which borrow reserves at the Federal Reserve's discount window is called the:

Accepted Answer

A)   federal funds rate.
B)   discount rate.
C)   prime interest rate.
D)   mortgage interest rate.

Question 11

Open market sale of government securities results in:

Accepted Answer

A)   an increase in bank reserves.
B)   a decrease in bank reserves.
C)   a decrease in interest rates.
D)   none of the above.

Question 12

A subway token does not fulfill the three functions of money.

Accepted Answer

A) True 
 B)False

Question 13

The simple deposit multiplier is larger than the money multiplier.

Accepted Answer

A) True 
 B)False

Question 14

Define the three functions of money.

Accepted Answer

The medium of exchange enables one to un...

Question 15

The currency deposit ratio, c, is 0.10. The reserve requirement, rr, is 0.08. The excess reserve ratio, e, is 0.05. What is the size of the money multiplier?

Accepted Answer

A)   4.70
B)   4.78
C)   4.75
D)   4.00

Question 16

Deposits held by commercial banks are insured by the:

Accepted Answer

A)   Federal Trade Commission.
B)   Federal Deposit Insurance Corporation.
C)   Federal Communications Commission.
D)   Resolution Trust Corporation.

Question 17

Expansionary monetary policy is achieved by:

Accepted Answer

A)   decreasing the amount of bank reserves and lowering the federal funds rate.
B)   decreasing the amount of bank reserves and raising the federal funds rate.
C)   increasing the amount of bank reserves and lowering the federal funds rate.
D)   increasing the amount of bank reserves and raising the federal funds rate.

Question 18

The barter system requires the double coincidence of wants to be fulfilled.

Accepted Answer

A) True 
 B)False

Question 19

An increase in the discount rate would:

Accepted Answer

A)   decrease bank borrowing of reserves and reflect an expansionary monetary policy.
B)   decrease bank borrowing of reserves and reflect a contractionary monetary policy.
C)   increase bank borrowing of reserves and reflect an expansionary monetary policy.
D)   increase bank borrowing of reserves and reflect a contractionary monetary policy.

Question 20

There are voting members on the FOMC.

Accepted Answer

A)   4
B)   7
C)   12
D)   15

Exam 13: The Role of Money in the Macro Economy

The currency deposit ratio, c, is 0.10. The reserve requirement, rr, is 0.08. The excess reserve ratio, e, is 0.05. What is the size of the money multiplier?

Correct AnswerverifiedShow Answer

Expansionary monetary policy is achieved by:

Correct AnswerverifiedShow Answer

You are given the following information on the banking system. Reserve requirement rr = 0.08 Currency-deposit ratio c = 0.10 Excess reserve ratio e = 0.05 Compute the simple deposit and money multipliers.

Correct AnswerverifiedSimple dep...View AnswerShow Answer

The interest rate the Federal Reserve charges banks which borrow reserves at the Federal Reserve's discount window is called the:

Correct AnswerverifiedShow Answer

Deposits held by commercial banks are insured by the:

Correct AnswerverifiedShow Answer

The simple deposit multiplier is larger than the money multiplier.

Correct AnswerverifiedShow Answer

If $1000 was deposited in a bank and the reserve requirement is 0.20, how much is available for loans?

Correct AnswerverifiedShow Answer

Expansionary monetary policy decreases the federal funds rate.

Correct AnswerverifiedShow Answer

The opportunity cost of hold real money balances is the:

Correct AnswerverifiedShow Answer

Open market purchase of government securities by the Fed increases the federal funds rate.

Correct AnswerverifiedShow Answer

An increase in the discount rate would:

Correct AnswerverifiedShow Answer

The equilibrium price in the money market is the:

Correct AnswerverifiedShow Answer

The banking system in the U.S. is based on:

Correct AnswerverifiedShow Answer

There are voting members on the FOMC.

Correct AnswerverifiedShow Answer

A subway token does not fulfill the three functions of money.

Correct AnswerverifiedShow Answer

The barter system requires the double coincidence of wants to be fulfilled.

Correct AnswerverifiedShow Answer

A decrease in the real money supply can result from:

Correct AnswerverifiedShow Answer

Define the three functions of money.

Correct AnswerverifiedThe medium of exchange enables one to un...View AnswerShow Answer

Open market sale of government securities results in:

Correct AnswerverifiedShow Answer

The money supply consists of:

Correct AnswerverifiedShow Answer

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Simple dep...
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The medium of exchange enables one to un...
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