Question 1

Bank capital is

Accepted Answer

A)   the machinery, structures, and equipment of the bank.
B)   the resources that owners have put into the bank.
C)   the reserves of the bank.
D)   the bank's total assets.

Question 2

Which of the following does the Federal Reserve not do?

Accepted Answer

A)   conduct monetary policy
B)   act as a lender of last resort
C)   convert Federal Reserve Notes into gold
D)   serve as a bank regulator

Question 3

Which of the following will not help to prevent bank runs?

Accepted Answer

A)   government insurance of deposits
B)   fractional reserve banking
C)   100% reserve banking
D)   All of the above prevent bank runs.

Question 4

Which of the following statements regarding the Federal Open Market Committee is correct?

Accepted Answer

A)   Only the five voting regional Fed presidents attend the meetings.
B)   All regional Fed presidents attend and vote at the meetings.
C)   All regional Fed presidents attend the meetings, but only five get to vote.
D)   Regional Fed presidents may neither attend nor vote the meetings.

Question 5

Gary's wealth is $1 million. Economists would say that Gary has $1 million worth of money.

Accepted Answer

A) True 
 B)False

Question 6

If the reserve ratio is 12.5 percent, then $1,000 of additional reserves can create up to

Accepted Answer

A)   $7,000 of new money.
B)   $8,000 of new money.
C)   $11,500 of new money.
D)   $12,500 of new money.

Question 7

Table 29-4.
 
-Refer to Table 29-4. The reserve ratio for this bank is

Accepted Answer

A)   8 percent.
B)   12.5 percent.
C)   87.5 percent.
D)   25 percent.

Question 8

A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve. Its deposits amount to

Accepted Answer

A)   $114.
B)   $2,166.
C)   $2,400.
D)   $45,600.

Question 9

The banking system currently has $10 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the Fed raises the reserve requirement to 12.5 percent and at the same time buys $1 billion worth of bonds, then by how much does the money supply change?

Accepted Answer

A)   It falls by $12 billion.
B)   It falls by $19 billion.
C)   It falls by $21 billion.
D)   None of the above is correct.

Question 10

M1 includes savings deposits.

Accepted Answer

A) True 
 B)False

Question 11

The discount rate is the rate the Federal Reserve charges banks for loans. By lowering this rate, the Fed provides banks with a greater incentive to borrow from it.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is both a store of value and regularly used as a medium of exchange?

Accepted Answer

A)   cash and stocks
B)   cash but not stocks
C)   stocks but not cash
D)   neither cash nor stocks

Question 13

Compare the Board of Governors and the Federal Open Market Committee.

Accepted Answer

The Board of Governors runs the Federal ...

Question 14

Which of the following both increase the money supply?

Accepted Answer

A)   an increase in the discount rate and an increase in the interest rate on reserves
B)   an increase in the discount rate and a decrease in the interest rate on reserves
C)   a decrease in the discount rate and an increase in the interest rate on reserves
D)   a decrease in the discount rate and a decrease in the interest rate on reserves

Question 15

In December 1999 people feared that there might be computer problems at banks as the century changed. Consequently, people wanted to hold relatively more in currency and relatively less in deposits. In anticipation banks raised their reserve ratios to have enough cash on hand to meet depositors' demands. These actions by the public

Accepted Answer

A)   would increase the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds.
B)   would increase the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds.
C)   would reduce the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds.
D)   would reduce the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds.

Question 16

List two reasons why the Fed cannot control the exact size of the money supply.

Accepted Answer

1) The Fed cannot control how much money...

Question 17

Jim transfers money from his money market account to his savings account. This action

Accepted Answer

A)   reduced M1 and increases M2.
B)   increases M1 and reduces M2.
C)   has no effect on M1 or M2.
D)   increases M1 and M2.

Question 18

In a fractional-reserve banking system, an increase in reserve requirements

Accepted Answer

A)   increases both the money multiplier and the money supply.
B)   decreases both the money multiplier and the money supply.
C)   increases the money multiplier, but decreases the money supply.
D)   decreases the money multiplier, but increases the money supply.

Question 19

A decrease in the money supply might indicate that the Fed had

Accepted Answer

A)   purchased bonds in an attempt to increase the federal funds rate.
B)   purchased bonds in an attempt to reduce the federal funds rate.
C)   sold bonds in an attempt to increase the federal funds rate.
D)   sold bonds in an attempt to reduce the federal funds rate.

Question 20

The interest rate charged by the Fed to member banks is called the .

Accepted Answer

The answer of The interest rate charged by the Fed...

Exam 21: The Monetary System

Which of the following is both a store of value and regularly used as a medium of exchange?

Correct Answer
verified

Which of the following both increase the money supply?

Correct Answer
verified

In a fractional-reserve banking system, an increase in reserve requirements

Correct Answer
verified

Table 29-4. -Refer to Table 29-4. The reserve ratio for this bank is

Correct Answer
verified

A decrease in the money supply might indicate that the Fed had

Correct Answer
verified

The interest rate charged by the Fed to member banks is called the .

Correct Answer
verified

Correct Answer
verified

Jim transfers money from his money market account to his savings account. This action

Correct Answer
verified

A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve. Its deposits amount to

Correct Answer
verified

Bank capital is

Correct Answer
verified

List two reasons why the Fed cannot control the exact size of the money supply.

Correct Answer
verified
1) The Fed cannot control how much money...
View Answer

If the reserve ratio is 12.5 percent, then $1,000 of additional reserves can create up to

Correct Answer
verified

Which of the following will not help to prevent bank runs?

Correct Answer
verified

Correct Answer
verified

Which of the following statements regarding the Federal Open Market Committee is correct?

Correct Answer
verified

M1 includes savings deposits.

Correct Answer
verified

Which of the following does the Federal Reserve not do?

Correct Answer
verified

Gary's wealth is $1 million. Economists would say that Gary has $1 million worth of money.

Correct Answer
verified

Compare the Board of Governors and the Federal Open Market Committee.

Correct Answer
verified
The Board of Governors runs the Federal ...
View Answer

The discount rate is the rate the Federal Reserve charges banks for loans. By lowering this rate, the Fed provides banks with a greater incentive to borrow from it.

Correct Answer
verified

Exam 21: The Monetary System

Which of the following is both a store of value and regularly used as a medium of exchange?

Correct AnswerverifiedShow Answer

Which of the following both increase the money supply?

Correct AnswerverifiedShow Answer

In a fractional-reserve banking system, an increase in reserve requirements

Correct AnswerverifiedShow Answer

Table 29-4. -Refer to Table 29-4. The reserve ratio for this bank is

Correct AnswerverifiedShow Answer

A decrease in the money supply might indicate that the Fed had

Correct AnswerverifiedShow Answer

The interest rate charged by the Fed to member banks is called the .

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Jim transfers money from his money market account to his savings account. This action

Correct AnswerverifiedShow Answer

A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve. Its deposits amount to

Correct AnswerverifiedShow Answer

Bank capital is

Correct AnswerverifiedShow Answer

List two reasons why the Fed cannot control the exact size of the money supply.

Correct Answerverified1) The Fed cannot control how much money...View AnswerShow Answer

If the reserve ratio is 12.5 percent, then $1,000 of additional reserves can create up to

Correct AnswerverifiedShow Answer

Which of the following will not help to prevent bank runs?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements regarding the Federal Open Market Committee is correct?

Correct AnswerverifiedShow Answer

M1 includes savings deposits.

Correct AnswerverifiedShow Answer

Which of the following does the Federal Reserve not do?

Correct AnswerverifiedShow Answer

Gary's wealth is $1 million. Economists would say that Gary has $1 million worth of money.

Correct AnswerverifiedShow Answer

Compare the Board of Governors and the Federal Open Market Committee.

Correct AnswerverifiedThe Board of Governors runs the Federal ...View AnswerShow Answer

The discount rate is the rate the Federal Reserve charges banks for loans. By lowering this rate, the Fed provides banks with a greater incentive to borrow from it.

Correct AnswerverifiedShow 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
verified

Correct Answer
verified
1) The Fed cannot control how much money...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The Board of Governors runs the Federal ...
View Answer

Correct Answer
verified