Question 1

When we measure and record economic value, we use money as the

Accepted Answer

A)   liquid asset.
B)   medium of exchange.
C)   unit of account.
D)   store of value.

Question 2

If a bank has a reserve ratio of 8 percent, then

Accepted Answer

A)   government regulation requires the bank to use at least 8 percent of its deposits to make loans.
B)   the bank's ratio of loans to deposits is 8 percent.
C)   the bank keeps 8 percent of its deposits as reserves and loans out the rest.
D)   the bank keeps 8 percent of its assets as reserves and loans out the rest.

Question 3

A bank operates with reserves of $100, loans of $300 and securities of $100. The bank's only liability is deposits of $400 since it has zero debt. Calculate the bank's leverage ratio.

Accepted Answer

Since Assets - Liabilities equals Bank C...

Question 4

The manager of the bank where you work tells you that your bank has $6 million in excess reserves. She also tells you that the bank has $400 million in deposits and $362 million dollars in loans. Given this information you find that the reserve requirement must be

Accepted Answer

A)   44/400.
B)   6/362.
C)   38/400.
D)   32/400.

Question 5

Which of the following functions of money is also a common function of most other financial assets?

Accepted Answer

A)   a unit of account
B)   a store of value
C)   medium of exchange
D)   None of the above is correct.

Question 6

Table 29-9
Metropolis National Bank is currently holding 2% of its deposits as excess reserves.
 
-Refer to Table 29-9. Metropolis National Bank is currently holding 2% of deposits as excess reserves. What is the reserve requirement?

Accepted Answer

A)   12 percent
B)   10 percent
C)   8 percent
D)   6 percent

Question 7

Which of the following is not a tool of monetary policy?

Accepted Answer

A)   open market operations
B)   reserve requirements
C)   changing the discount rate
D)   increasing the government budget deficit

Question 8

When the Fed conducts open-market purchases,

Accepted Answer

A)   banks buy Treasury securities from Fed, which increases the money supply.
B)   banks buy Treasury securities from the Fed, which decreases the money supply.
C)   it buys Treasury securities, which increases the money supply.
D)   it buys Treasury securities, which decreases the money supply.

Question 9

When the Fed purchases government bonds the money supply and the federal funds rate .

Accepted Answer

increases,...

Question 10

Sandra routinely uses currency to purchase her groceries. She is using money as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 11

The members of the Federal Reserve's Board of Governors

Accepted Answer

A)   are elected to office by the public every fourteen years.
B)   are nominated by the U.S. Senate banking committee and confirmed by the U.S. house of representatives.
C)   are elected by bankers in each Federal Reserve Region.
D)   are appointed by the president of the U.S. and confirmed by the U.S. Senate.

Question 12

The money multiplier equals

Accepted Answer

A)   1/R, where R represents the quantity of reserves in the economy.
B)   1/R, where R represents the reserve ratio for all banks in the economy.
C)   1/1+R) , where R represents the quantity of reserves in the economy.
D)   1/1+R) , where R represents the reserve ratio for all banks in the economy.

Question 13

Which type of money has intrinsic value?

Accepted Answer

A)   commodity money
B)   fiat money
C)   both commodity money and fiat money
D)   neither commodity money nor fiat money

Question 14

If the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Accepted Answer

A)   buying bonds. This buying would reduce reserves.
B)   buying bonds. This buying would increase reserves.
C)   selling bonds. This selling would reduce reserves.
D)   selling bonds. This selling would increase reserves.

Question 15

The primary difference between commodity money and fiat money is that

Accepted Answer

A)   commodity money is a medium of exchange but fiat money is not.
B)   fiat money is a medium of exchange but commodity money is not.
C)   commodity money has intrinsic value but fiat money does not.
D)   fiat money has intrinsic value but commodity money does not.

Question 16

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 an...

Question 17

The federal funds rate is a long-term interest rate banks charge one another for loans.

Accepted Answer

A) True 
 B)False

Question 18

Credit cards are

Accepted Answer

A)   a medium of exchange.
B)   counted as part of M2 but not as part of M1.
C)   important for analyzing the monetary system.
D)   All of the above are correct.

Question 19

Which of the following entities actually executes open-market operations?

Accepted Answer

A)   the Board of Governors
B)   the New York Federal Reserve Bank
C)   the Federal Open Market Committee
D)   the Open Market Committees of the regional Federal Reserve Banks

Question 20

People can write checks against

Accepted Answer

A)   demand deposits and money market mutual funds
B)   demand deposits but not money market mutual funds
C)   money market mutual funds but not demand deposits
D)   neither demand deposits nor money market mutual funds

Exam 21: The Monetary System

Sandra routinely uses currency to purchase her groceries. She is using money as a medium of exchange.

Correct AnswerverifiedShow Answer

The federal funds rate is a long-term interest rate banks charge one another for loans.

Correct AnswerverifiedShow Answer

Which type of money has intrinsic value?

Correct AnswerverifiedShow Answer

When the Fed purchases government bonds the money supply and the federal funds rate .

Correct Answerverifiedincreases,...View AnswerShow Answer

If the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a bank has a reserve ratio of 8 percent, then

Correct AnswerverifiedShow Answer

The members of the Federal Reserve's Board of Governors

Correct AnswerverifiedShow Answer

Which of the following functions of money is also a common function of most other financial assets?

Correct AnswerverifiedShow Answer

The money multiplier equals

Correct AnswerverifiedShow Answer

When we measure and record economic value, we use money as the

Correct AnswerverifiedShow Answer

A bank operates with reserves of $100, loans of $300 and securities of $100. The bank's only liability is deposits of $400 since it has zero debt. Calculate the bank's leverage ratio.

Correct AnswerverifiedSince Assets - Liabilities equals Bank C...View AnswerShow Answer

The manager of the bank where you work tells you that your bank has $6 million in excess reserves. She also tells you that the bank has $400 million in deposits and $362 million dollars in loans. Given this information you find that the reserve requirement must be

Correct AnswerverifiedShow Answer

Which of the following entities actually executes open-market operations?

Correct AnswerverifiedShow Answer

Credit cards are

Correct AnswerverifiedShow Answer

The primary difference between commodity money and fiat money is that

Correct AnswerverifiedShow Answer

Which of the following is not a tool of monetary policy?

Correct AnswerverifiedShow Answer

Table 29-9 Metropolis National Bank is currently holding 2% of its deposits as excess reserves. -Refer to Table 29-9. Metropolis National Bank is currently holding 2% of deposits as excess reserves. What is the reserve requirement?

Correct AnswerverifiedShow Answer

People can write checks against

Correct AnswerverifiedShow Answer

When the Fed conducts open-market purchases,

Correct AnswerverifiedShow Answer

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Since Assets - Liabilities equals Bank C...
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