Question 1

Currency includes

Accepted Answer

A)   paper bills and coins.
B)   demand deposits.
C)   credit cards.
D)   Both (a)  and (b)  are correct.E) B) and D)
F) None of the above

Question 2

You saved $500 in currency in your piggy bank to purchase a new laptop. The $500 you kept in your piggy bank illustrates money's function as a . The laptop's price is posted as $500. The $500 price illustrates money's function as a . You use the $500 to purchase the laptop. This transaction illustrates money's function as a ______.

Accepted Answer

A)   store of value, medium of exchange, unit of account
B)   store of value, unit of account, medium of exchange
C)   medium of exchange, unit of account, store of value
D)   medium of exchange, store of value, unit of accountE) None of the above
F) All of the above

Question 3

U.S. dollars are an example of commodity money and hides used to make trades are an example of fiat money.

Accepted Answer

A) True 
 B)False

Question 4

The is the interest rate at which banks make overnight loans to other banks.

Accepted Answer

The answer of The is the interest rate at which...

Question 5

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...

Question 6

When the Soviet Union began breaking up in the late 1980s, cigarettes began replacing the ruble as the medium of exchange even though the ruble was legal tender. The cigarettes provide an example of commodity money.

Accepted Answer

A) True 
 B)False

Question 7

When prisoners use cigarettes or some other good as money, cigarettes become

Accepted Answer

A)   commodity money, but do not function as a unit of account.
B)   commodity money and function as a unit of account.
C)   fiat money, but do not function as a unit of account.
D)   fiat money and function as a unit of account.E) B) and D)
F) B) and C)

Question 8

The reserve ratio is 10 percent, banks do not hold excess reserves, and people hold only deposits and no currency. When the Fed sells $20 million worth of bonds to the public, bank reserves

Accepted Answer

A)   increase by $20 million and the money supply eventually increases by $20 million.
B)   increase by $20 million and the money supply eventually increases by $200 million.
C)   decrease by $2 million and the money supply eventually increases by $20 million.
D)   decrease by $20 million and the money supply eventually decreases by $200 million.E) A) and D)
F) None of the above

Question 9

Money is

Accepted Answer

A)   the most liquid asset and a perfect store of value.
B)   the most liquid asset but an imperfect store of value.
C)   not the most liquid asset but a perfect store of value.
D)   neither the most liquid asset and nor a perfect store of value.E) B) and C)
F) A) and D)

Question 10

Which of the following is not correct?

Accepted Answer

A)   The regional Federal Reserve Banks play a role in regulating banks and ensuring the health of the banking system.
B)   The President of the New York Federal Reserve Regional Bank always gets to vote on the decisions made by the Federal Open Market Committee.
C)   U.S. monetary policy is made by the Federal Open Market Committee.
D)   The Federal Open Market Committee meets every 12 weeks.E) A) and B)
F) None of the above

Question 11

The banking system currently has $200 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 4 percent. If the Fed raises the reserve requirement to 10 percent and at the same time buys $50 billion worth of bonds, then by how much does the money supply change?

Accepted Answer

A)   It rises by $600 billion.
B)   It rises by $125 billion.
C)   It falls by $2,500 billion.
D)   None of the above is correct.E) C) and D)
F) None of the above

Question 12

The Federal Reserve

Accepted Answer

A)   is responsible for conducting the nation's monetary policy, and it plays a role in regulating banks.
B)   is responsible for conducing the nation's monetary policy, but it plays no role in regulating banks.
C)   is not responsible for conducting the nation's monetary policy, and it plays a role in regulating banks.
D)   is not responsible for conducing the nation's monetary policy, and it plays no role in regulating banks.E) A) and D)
F) All of the above

Question 13

If the Federal Open Market Committee decides to decrease the money supply, it will

Accepted Answer

A)   sell government bonds.
B)   purchase corporate bonds.
C)   purchase government bonds.
D)   reduce interest rates.E) B) and D)
F) All of the above

Question 14

Economists use the term "money" to refer to

Accepted Answer

A)   all wealth.
B)   all assets, including real assets and financial assets.
C)   all financial assets, but not real assets.
D)   those types of wealth that are regularly accepted by sellers in exchange for goods and services.E) All of the above
F) C) and D)

Question 15

Table 29-4. 
-Refer to Table 29-4. If $800 is deposited into the First Bank of Fairfield, and the bank takes no other actions, its

Accepted Answer

A)   reserves will increase by $100.
B)   liabilities will increase by $800.
C)   assets will decrease by $800.
D)   loans will increase by $800.E) A) and C)
F) All of the above

Question 16

The leverage ratio is calculated as

Accepted Answer

A)   assets minus liabilities.
B)   assets divided by bank capital
C)   the reciprocal of the required reserve ratio
D)   the required reserve ratio multiplied by bank capital.E) A) and D)
F) A) and C)

Question 17

In a system of 100-percent-reserve banking,

Accepted Answer

A)   banks do not accept deposits.
B)   banks do not influence the supply of money.
C)   loans are the only asset item for banks.
D)   All of the above are correct.E) B) and D)
F) A) and B)

Question 18

Credit cards

Accepted Answer

A)   defer payments.
B)   are a store of value.
C)   have led to wider use of currency.
D)   are part of the money supply.E) C) and D)
F) None of the above

Question 19

When the Fed buys government bonds,

Accepted Answer

A)   the money supply increases and the federal funds rate increases.
B)   the money supply increases and the federal funds rate decreases.
C)   the money supply decreases and the federal funds rate increases.
D)   the money supply decreases and the federal funds rate decreases.E) B) and C)
F) All of the above

Question 20

The money supply increases when the Fed

Accepted Answer

A)   lowers the discount rate. The increase will be larger the smaller the reserve ratio is.
B)   lowers the discount rate. The increase will be larger the larger the reserve ratio is.
C)   raises the discount rate. The increase will be larger the smaller the reserve ratio is.
D)   raises the discount rate. The increase will be larger the larger the reserve ratio is.E) All of the above
F) A) and C)

Exam 29: The Monetary System

Economists use the term "money" to refer to

Correct Answer
verified

The reserve ratio is 10 percent, banks do not hold excess reserves, and people hold only deposits and no currency. When the Fed sells $20 million worth of bonds to the public, bank reserves

Correct Answer
verified

The money supply increases when the Fed

Correct Answer
verified

The Federal Reserve

Correct Answer
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Which of the following is not correct?

Correct Answer
verified

Correct Answer
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When the Fed buys government bonds,

Correct Answer
verified

The leverage ratio is calculated as

Correct Answer
verified

U.S. dollars are an example of commodity money and hides used to make trades are an example of fiat money.

Correct Answer
verified

Currency includes

Correct Answer
verified

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

Correct Answer
verified

The is the interest rate at which banks make overnight loans to other banks.

Correct Answer
verified

In a system of 100-percent-reserve banking,

Correct Answer
verified

Credit cards

Correct Answer
verified

Table 29-4. -Refer to Table 29-4. If $800 is deposited into the First Bank of Fairfield, and the bank takes no other actions, its

Correct Answer
verified

If the Federal Open Market Committee decides to decrease the money supply, it will

Correct Answer
verified

Correct Answer
verified

When the Soviet Union began breaking up in the late 1980s, cigarettes began replacing the ruble as the medium of exchange even though the ruble was legal tender. The cigarettes provide an example of commodity money.

Correct Answer
verified

When prisoners use cigarettes or some other good as money, cigarettes become

Correct Answer
verified

Money is

Correct Answer
verified

Exam 29: The Monetary System

Economists use the term "money" to refer to

Correct AnswerverifiedShow Answer

The reserve ratio is 10 percent, banks do not hold excess reserves, and people hold only deposits and no currency. When the Fed sells $20 million worth of bonds to the public, bank reserves

Correct AnswerverifiedShow Answer

The money supply increases when the Fed

Correct AnswerverifiedShow Answer

The Federal Reserve

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the Fed buys government bonds,

Correct AnswerverifiedShow Answer

The leverage ratio is calculated as

Correct AnswerverifiedShow Answer

U.S. dollars are an example of commodity money and hides used to make trades are an example of fiat money.

Correct AnswerverifiedShow Answer

Currency includes

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The is the interest rate at which banks make overnight loans to other banks.

Correct AnswerverifiedShow Answer

In a system of 100-percent-reserve banking,

Correct AnswerverifiedShow Answer

Credit cards

Correct AnswerverifiedShow Answer

Table 29-4. -Refer to Table 29-4. If $800 is deposited into the First Bank of Fairfield, and the bank takes no other actions, its

Correct AnswerverifiedShow Answer

If the Federal Open Market Committee decides to decrease the money supply, it will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the Soviet Union began breaking up in the late 1980s, cigarettes began replacing the ruble as the medium of exchange even though the ruble was legal tender. The cigarettes provide an example of commodity money.

Correct AnswerverifiedShow Answer

When prisoners use cigarettes or some other good as money, cigarettes become

Correct AnswerverifiedShow Answer

Money is

Correct AnswerverifiedShow Answer

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