Question 1

One surprising thing about the U.S. money stock is that

Accepted Answer

A)   banks hold so much currency relative to the public.
B)   the public holds so much currency relative to banks.
C)   there is so little currency per person.
D)   there is so much currency per person.E) A) and D)
F) C) and D)

Question 2

All Fed purchases and sales of

Accepted Answer

A)   corporate stocks and bonds are conducted at the New York Fed's trading desk.
B)   government bonds are conducted at the New York Fed's trading desk.
C)   real estate and other real assets are conducted by the Federal Open Market Committee.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 3

The primary tool used by the Federal Reserve to change the money supply is .

Accepted Answer

open-marke...

Question 4

The "yardstick" people use to post prices and record debts is called

Accepted Answer

A)   a medium of exchange.
B)   a unit of account.
C)   a store of value.
D)   liquidity.E) B) and D)
F) A) and B)

Question 5

A bank's reserve ratio is 10 percent and the bank has $5,000 in deposits. Its reserves amount to

Accepted Answer

A)   $50.
B)   $500.
C)   $4,500.
D)   $4,950.E) B) and D)
F) None of the above

Question 6

As banks create money, they create wealth.

Accepted Answer

A) True 
 B)False

Question 7

If the reserve ratio is 8 percent, then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

Accepted Answer

A)   $48,000.
B)   $75,000.
C)   $55,200.
D)   $10,800.E) B) and D)
F) B) and C)

Question 8

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 regulatorE) B) and C)
F) A) and D)

Question 9

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 reservesE) A) and D)
F) None of the above

Question 10

Paper dollars

Accepted Answer

A)   are commodity money and gold coins are fiat money.
B)   are fiat money and gold coins are commodity money.
C)   and gold coins are both commodity monies.
D)   and gold coins are both fiat monies.E) B) and D)
F) B) and C)

Question 11

Which of the following is not correct?

Accepted Answer

A)   The president of the New York Federal Reserve bank is the only Federal Reserve Regional Bank President who gets to vote at every meeting of the Federal Open Market Committee.
B)   The Fed's policy decisions influence the economy's rate of inflation in the short run and the economy's employment and production in the long run.
C)   The Fed's primary monetary policy tool is open­market operations.
D)   All of the above are correct.E) A) and D)
F) All of the above

Question 12

A bank has $1000 in deposits and maintains a 12 percent reserve ratio. Its reserves are $ .

Accepted Answer

The answer of A bank has $1000 in deposits and...

Question 13

When conducting an open-market sale, the Fed

Accepted Answer

A)   buys government bonds, and in so doing increases the money supply.
B)   buys government bonds, and in so doing decreases the money supply.
C)   sells government bonds, and in so doing increases the money supply.
D)   sells government bonds, and in so doing decreases the money supply.E) B) and C)
F) A) and C)

Question 14

When the Fed makes open-market sales bank

Accepted Answer

A)   withdrawals and lending increase.
B)   withdrawals increase and lending decreases.
C)   deposits and lending increase.
D)   deposits increase and lending decreases.E) All of the above
F) A) and C)

Question 15

At one time, people in a certain country had no access to banks; they relied exclusively on currency. Then, a fractional-reserve banking system was created. As a result, the money supply

Accepted Answer

A)   increased. The central bank could have reduced the size of this increase by buying bonds.
B)   increased. The central bank could have reduced the size of this increase by selling bonds.
C)   decreased. The central bank could have reduced the size of this decrease by buying bonds.
D)   decreased. The central bank could have reduced the size of this decrease by selling bonds.E) A) and B)
F) B) and D)

Question 16

There is a

Accepted Answer

A)   short-run tradeoff between inflation and unemployment.
B)   short-run tradeoff between an increase in the money supply and inflation.
C)   long-run tradeoff between inflation and unemployment.
D)   long-run tradeoff between an increase in the money supply and inflation.E) C) and D)
F) A) and B)

Question 17

Suppose a bank has $3,000 in reserves, $25,000 of deposits, and a 10 percent reserve requirement. What is the amount of excess reserves?

Accepted Answer

The answer of Suppose a bank has $3,000 in reserves,...

Question 18

In the United States, currency holdings per person average about

Accepted Answer

A)   $110; one explanation for this relatively small average is that many people use credit and debit cards to make transactions.
B)   $110; one explanation for this relatively small average is that U.S. citizens hold a lot of foreign currency.
C)   $4,490; one explanation for this relatively large amount is that criminals probably prefer currency as a medium of exchange.
D)   $4,490; one explanation for this relatively large average is that U.S. citizens hold a lot of foreign currency.E) C) and D)
F) B) and C)

Question 19

Other things the same, if reserve requirements are increased, the reserve ratio

Accepted Answer

A)   increases, the money multiplier increases, and the money supply increases.
B)   increases, the money multiplier decreases, and the money supply decreases.
C)   decreases, the money multiplier increases, and the money supply increases.
D)   decreases, the money multiplier decreases, and the money supply increases.E) A) and D)
F) B) and C)

Question 20

During wars the public tends to hold relatively more currency and relatively fewer deposits. This decision makes reserves

Accepted Answer

A)   and the money supply increase.
B)   and the money supply decrease.
C)   increase, but leaves the money supply unchanged.
D)   decrease, but leaves the money supply unchanged.E) A) and B)
F) A) and C)

Exam 11: The Monetary System

Other things the same, if reserve requirements are increased, the reserve ratio

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Which of the following does the Federal Reserve not do?

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One surprising thing about the U.S. money stock is that

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During wars the public tends to hold relatively more currency and relatively fewer deposits. This decision makes reserves

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When the Fed makes open-market sales bank

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At one time, people in a certain country had no access to banks; they relied exclusively on currency. Then, a fractional-reserve banking system was created. As a result, the money supply

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The primary tool used by the Federal Reserve to change the money supply is .

Correct Answerverifiedopen-marke...View AnswerShow Answer

Paper dollars

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All Fed purchases and sales of

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There is a

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If the reserve ratio is 8 percent, then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

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The "yardstick" people use to post prices and record debts is called

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A bank has $1000 in deposits and maintains a 12 percent reserve ratio. Its reserves are $ .

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A bank's reserve ratio is 10 percent and the bank has $5,000 in deposits. Its reserves amount to

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In the United States, currency holdings per person average about

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Which of the following is not correct?

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As banks create money, they create wealth.

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When conducting an open-market sale, the Fed

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Which of the following both increase the money supply?

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Suppose a bank has $3,000 in reserves, $25,000 of deposits, and a 10 percent reserve requirement. What is the amount of excess reserves?

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