Question 1

Treasury bills purchased from commercial banks by the Fed are assets for the Federal Reserve.

Accepted Answer

A) True 
 B)False

Question 2

The monetary base is currency in circulation plus bank reserves.

Accepted Answer

A) True 
 B)False

Question 3

The store-of-value function of money is:

Accepted Answer

A)   necessary and distinctive.
B)   not necessary but distinctive.
C)   necessary but not distinctive.
D)   not necessary and not distinctive.

Question 4

The purpose of the local clearinghouses established by banks in the early 1900s was to:

Accepted Answer

A)   merge failing banks with healthy ones.
B)   facilitate the transfer of electronic funds between member banks.
C)   pool resources of several local banks so that the clearinghouse could guarantee a member's deposits in case of a bank run.
D)   help people who were unemployed find jobs.

Question 5

What will happen to the money supply if Jamie withdraws $400 from her checking account and the required reserve ratio is 5%?

Accepted Answer

The money supply wil...

Question 6

If a bank has deposits of $10,000 and reserves of $5,000 and if the reserve requirement is 20%, its excess reserves are $3,000.

Accepted Answer

A) True 
 B)False

Question 7

The U.S. dollar in your pocket today is best described as:

Accepted Answer

A)   commodity money.
B)   near-money.
C)   fiat money.
D)   commodity-backed money.

Question 8

Suppose that the money supply increases by $150 million after the Federal Reserve engages in an open market purchase of $50 million. Then the reserve ratio is:

Accepted Answer

A)   0.1.
B)   0.5.
C)   0.33.
D)   0.2.

Question 9

In the structure of the Federal Reserve, which of the following is part of the government? I. the Board of Governors
II)  the 12 regional Federal Reserve Banks

Accepted Answer

A)   I only
B)   II only
C)   I and II
D)   neither I nor II

Question 10

Use the following to answer questions : 
-(Scenario: Assets and Liabilities of the Banking System)  Look at the scenario Assets and Liabilities of the Banking System. If the reserve ratio is 6% and the banking system does NOT want to hold excess reserves, how much more can be added to the money supply?

Accepted Answer

A)   about $667,000
B)   about $111,000
C)   $250,000
D)   $1 million

Question 11

The largest monetary aggregate is:

Accepted Answer

A)   M1, because it contains all of the currency in circulation.
B)   M2, because it contains currency in circulation, all bank deposits, other deposits, and deposit-like assets.
C)   the reserves in the vaults of Federal Reserve banks, because they are the money multiplier.
D)   the total volume of stocks and bonds, because they store most of the national wealth.

Question 12

The primary difference between M1 and M2 is that:

Accepted Answer

A)   the dollar amount of M1 is much larger than the dollar amount of M2.
B)   M1 includes checkable deposits, but M2 does not.
C)   M2 includes checkable deposits, but M1 does not.
D)   M2 includes savings deposits and time deposits, but M1 does not.

Question 13

The U.S. dollar is an example of:

Accepted Answer

A)   commodity-backed money.
B)   fiat money.
C)   commodity money.
D)   near-money.

Question 14

The purpose of Regulation Q was to:

Accepted Answer

A)   prevent commercial banks from trading stocks and bonds.
B)   require investment banks to purchase deposit insurance.
C)   prevent unhealthy competition between banks by limiting the number of customers each bank could serve.
D)   prevent banks from paying interest on checking accounts.

Question 15

The European Central Bank was established:

Accepted Answer

A)   during the French Revolution at the end of the eighteenth century.
B)   in 1913, at the same time as the U.S. Federal Reserve System.
C)   as part of the treaty ending World War II.
D)   in 1999, when the euro was adopted.

Question 16

When we put a price on a meal, money is playing the role primarily of:

Accepted Answer

A)   medium of exchange.
B)   unit of account.
C)   barter token.
D)   store of value.

Question 17

Use the following to answer questions 
Scenario: Money Supply Changes
The reserve requirement is 10% and Jack withdraws $5,000 travel money from his checkable deposit. Assume that banks do not hold any excess reserves and that the public holds no currency, only checkable bank deposits.
-(Scenario: Money Supply Changes)  Look at the scenario Money Supply Changes. As a result of the withdrawal, required reserves _____ by _____.

Accepted Answer

A)   increase; $5,000
B)   increase; $500
C)   decrease; $5,000
D)   decrease; $500

Question 18

Changing the reserve requirement is the main tool of monetary policy.

Accepted Answer

A) True 
 B)False

Question 19

The double coincidence of wants problem can be solved by:

Accepted Answer

A)   more resources.
B)   more production.
C)   money.
D)   economic growth.

Question 20

Suppose an economy uses a monetary system of checkable deposits only and it has a required reserve ratio of 20%. If the central bank in this economy conducts an open market purchase of $5 million of Treasury bills, this will potentially _____ the money supply by _____.

Accepted Answer

A)   increase; $25 million
B)   decrease; $25 million
C)   increase; $10 million
D)   decrease; $10 millionAnswer Key

Exam 26: Money, Banking, and the Federal Reserve System

The double coincidence of wants problem can be solved by:

Correct Answer
verified

The primary difference between M1 and M2 is that:

Correct Answer
verified

What will happen to the money supply if Jamie withdraws $400 from her checking account and the required reserve ratio is 5%?

Correct Answer
verified
The money supply wil...
View Answer

The monetary base is currency in circulation plus bank reserves.

Correct Answer
verified

The U.S. dollar in your pocket today is best described as:

Correct Answer
verified

Changing the reserve requirement is the main tool of monetary policy.

Correct Answer
verified

Treasury bills purchased from commercial banks by the Fed are assets for the Federal Reserve.

Correct Answer
verified

The U.S. dollar is an example of:

Correct Answer
verified

Correct Answer
verified

The purpose of Regulation Q was to:

Correct Answer
verified

When we put a price on a meal, money is playing the role primarily of:

Correct Answer
verified

In the structure of the Federal Reserve, which of the following is part of the government? I. the Board of Governors II) the 12 regional Federal Reserve Banks

Correct Answer
verified

If a bank has deposits of $10,000 and reserves of $5,000 and if the reserve requirement is 20%, its excess reserves are $3,000.

Correct Answer
verified

The largest monetary aggregate is:

Correct Answer
verified

The store-of-value function of money is:

Correct Answer
verified

Suppose an economy uses a monetary system of checkable deposits only and it has a required reserve ratio of 20%. If the central bank in this economy conducts an open market purchase of $5 million of Treasury bills, this will potentially _ the money supply by _.

Correct Answer
verified

The purpose of the local clearinghouses established by banks in the early 1900s was to:

Correct Answer
verified

The European Central Bank was established:

Correct Answer
verified

Suppose that the money supply increases by $150 million after the Federal Reserve engages in an open market purchase of $50 million. Then the reserve ratio is:

Correct Answer
verified

Correct Answer
verified

Exam 26: Money, Banking, and the Federal Reserve System

The double coincidence of wants problem can be solved by:

Correct AnswerverifiedShow Answer

The primary difference between M1 and M2 is that:

Correct AnswerverifiedShow Answer

What will happen to the money supply if Jamie withdraws $400 from her checking account and the required reserve ratio is 5%?

Correct AnswerverifiedThe money supply wil...View AnswerShow Answer

The monetary base is currency in circulation plus bank reserves.

Correct AnswerverifiedShow Answer

The U.S. dollar in your pocket today is best described as:

Correct AnswerverifiedShow Answer

Changing the reserve requirement is the main tool of monetary policy.

Correct AnswerverifiedShow Answer

Treasury bills purchased from commercial banks by the Fed are assets for the Federal Reserve.

Correct AnswerverifiedShow Answer

The U.S. dollar is an example of:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The purpose of Regulation Q was to:

Correct AnswerverifiedShow Answer

When we put a price on a meal, money is playing the role primarily of:

Correct AnswerverifiedShow Answer

In the structure of the Federal Reserve, which of the following is part of the government? I. the Board of Governors II) the 12 regional Federal Reserve Banks

Correct AnswerverifiedShow Answer

If a bank has deposits of $10,000 and reserves of $5,000 and if the reserve requirement is 20%, its excess reserves are $3,000.

Correct AnswerverifiedShow Answer

The largest monetary aggregate is:

Correct AnswerverifiedShow Answer

The store-of-value function of money is:

Correct AnswerverifiedShow Answer

Suppose an economy uses a monetary system of checkable deposits only and it has a required reserve ratio of 20%. If the central bank in this economy conducts an open market purchase of $5 million of Treasury bills, this will potentially _____ the money supply by _____.

Correct AnswerverifiedShow Answer

The purpose of the local clearinghouses established by banks in the early 1900s was to:

Correct AnswerverifiedShow Answer

The European Central Bank was established:

Correct AnswerverifiedShow Answer

Suppose that the money supply increases by $150 million after the Federal Reserve engages in an open market purchase of $50 million. Then the reserve ratio is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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verified
The money supply wil...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
verified

Suppose an economy uses a monetary system of checkable deposits only and it has a required reserve ratio of 20%. If the central bank in this economy conducts an open market purchase of $5 million of Treasury bills, this will potentially _ the money supply by _.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified