Question 1

Which of the following would be counted as part of M1?

Accepted Answer

A)   demand deposits
B)   small time deposits
C)   money market accounts
D)   large time depositsE) B) and C)
F) A) and C)

Question 2

The federal funds rate is a

Accepted Answer

A)   1-day rate.
B)   30-day rate.
C)   3-month rate.
D)   2-year rate.E) None of the above
F) C) and D)

Question 3

________ are used for interbank loans.

Accepted Answer

A)   Federal funds
B)   Open market operations
C)   Excess reserves
D)   Prime rate dollarsE) B) and C)
F) C) and D)

Question 4

Bank of Mt. Etna has $500 million in deposits. Bank of Mt. Etna is meeting its reserve requirement and has no excess reserves. It has $75 million in reserves. Bank of Mt. Etna faces a required reserve ratio of

Accepted Answer

A)   15%.
B)   25.5%.
C)   45%.
D)   47.2%.E) B) and C)
F) B) and D)

Question 5

Refer to the information provided in Table 10.1 below to answer the questions that follow.
Table 10.1 
-Refer to Table 10.1. First Charter Bank's total assets are

Accepted Answer

A)   $400.
B)   $800.
C)   $1,200.
D)   $2,400.E) A) and D)
F) A) and C)

Question 6

Refer to the information provided in Table 10.1 below to answer the questions that follow.
Table 10.1 
-Refer to Table 10.1. The required reserve ratio is 25%. If the First Charter Bank is meeting its reserve requirement and has no excess reserves, its reserves equal

Accepted Answer

A)   $100.
B)   $200.
C)   $300.
D)   $600.E) A) and B)
F) A) and C)

Question 7

The liquidity property of money is the property that makes money

Accepted Answer

A)   a good medium of exchange and a good unit of account.
B)   a good store of value and a good unit of account.
C)   a good medium of exchange and a good store of value.
D)   a good store of value and a good standard of deferred payment.E) B) and C)
F) All of the above

Question 8

Refer to the information provided in Scenario 10.2 below to answer the questions that follow.
SCENARIO 10.2: The following table shows the changes in deposits, reserves, and loans of 4 banks as a result of a $100,000 initial deposit in Bank No. 1. Assume all banks are loaned up. 
-Refer to Scenario 10.2. How much money will be created based on the initial $100,000 deposit?

Accepted Answer

A)   $1 million
B)   $2 million
C)   $16.67 million
D)   $50 millionE) A) and D)
F) A) and B)

Question 9

The Intracoastal Bank has $5 million in deposits and $500,000 in reserves. If the required reserve ratio is 5%, excess reserves are equal to

Accepted Answer

A)   zero.
B)   $125,000.
C)   $250,000.
D)   $500,000.E) C) and D)
F) A) and B)

Question 10

Which of the following activities is one of the responsibilities of the Federal Reserve?

Accepted Answer

A)   issuing new bonds to finance the federal budget deficit
B)   loaning money to other countries that are friendly to the United States
C)   assisting banks that are in a difficult financial position
D)   auditing the various agencies and departments of the federal governmentE) B) and C)
F) B) and D)

Question 11

Among the assets of commercial banks are demand deposits.

Accepted Answer

A) True 
 B)False

Question 12

The two-year interest rate is an average of the expected interest rate each of the two years.

Accepted Answer

A) True 
 B)False

Question 13

When banks hold a large amount of excess reserves, which of the following tools would the Fed most likely use to encourage banks to lend more of these excess reserves?

Accepted Answer

A)   lowering the reserve requirement
B)   lowering the interest rate it pays to banks on their reserves
C)   lowering the discount rate
D)   making an open market saleE) C) and D)
F) A) and B)

Question 14

Assume that in the country of Salmon, the government tripled the money supply overnight. As a result of this action, the price of a loaf of bread increased from 1 bill to 100 bills. This is an example of

Accepted Answer

A)   a change in the legal tender.
B)   a change from commodity money to fiat money.
C)   currency debasement.
D)   deflation.E) A) and B)
F) A) and C)

Question 15

Which of the following causes the quantity of money demanded to increase?

Accepted Answer

A)   an increase in nominal income
B)   a decrease in nominal income
C)   a decrease in the price level
D)   a decrease in the interest rateE) A) and B)
F) A) and C)

Question 16

Which of the following will most likely cause an increase in the quantity of money demanded?

Accepted Answer

A)   a decrease in nominal income
B)   a decrease in the interest rate
C)   an increase in nominal income
D)   an increase in the interest rateE) None of the above
F) A) and B)

Question 17

The required reserve ratio is 12.5%. The money multiplier is

Accepted Answer

A)   2.5.
B)   6.
C)   7.5.
D)   8.E) A) and B)
F) None of the above

Question 18

Target has 12-packs of Pepsi on sale and changes the price tag on the shelf from $6.00 to $2.99. This is an example of money serving as a(n)

Accepted Answer

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

Question 19

If the money multiplier is 4, the required reserve ratio is

Accepted Answer

A)   4%.
B)   20%.
C)   25%.
D)   50%.E) A) and B)
F) A) and C)

Question 20

The Chair of the Fed also serves as one of the Reserve Bank Presidents.

Accepted Answer

A) True 
 B)False

Exam 10: Money, the Federal Reserve, and the Interest Rate

When banks hold a large amount of excess reserves, which of the following tools would the Fed most likely use to encourage banks to lend more of these excess reserves?

Correct Answer
verified

The federal funds rate is a

Correct Answer
verified

Which of the following causes the quantity of money demanded to increase?

Correct Answer
verified

Which of the following would be counted as part of M1?

Correct Answer
verified

The two-year interest rate is an average of the expected interest rate each of the two years.

Correct Answer
verified

Bank of Mt. Etna has $500 million in deposits. Bank of Mt. Etna is meeting its reserve requirement and has no excess reserves. It has $75 million in reserves. Bank of Mt. Etna faces a required reserve ratio of

Correct Answer
verified

Refer to the information provided in Table 10.1 below to answer the questions that follow. Table 10.1 -Refer to Table 10.1. The required reserve ratio is 25%. If the First Charter Bank is meeting its reserve requirement and has no excess reserves, its reserves equal

Correct Answer
verified

Assume that in the country of Salmon, the government tripled the money supply overnight. As a result of this action, the price of a loaf of bread increased from 1 bill to 100 bills. This is an example of

Correct Answer
verified

________ are used for interbank loans.

Correct Answer
verified

The Intracoastal Bank has $5 million in deposits and $500,000 in reserves. If the required reserve ratio is 5%, excess reserves are equal to

Correct Answer
verified

Which of the following activities is one of the responsibilities of the Federal Reserve?

Correct Answer
verified

Refer to the information provided in Table 10.1 below to answer the questions that follow. Table 10.1 -Refer to Table 10.1. First Charter Bank's total assets are

Correct Answer
verified

The required reserve ratio is 12.5%. The money multiplier is

Correct Answer
verified

Target has 12-packs of Pepsi on sale and changes the price tag on the shelf from $6.00 to $2.99. This is an example of money serving as a(n)

Correct Answer
verified

If the money multiplier is 4, the required reserve ratio is

Correct Answer
verified

The liquidity property of money is the property that makes money

Correct Answer
verified

The Chair of the Fed also serves as one of the Reserve Bank Presidents.

Correct Answer
verified

Which of the following will most likely cause an increase in the quantity of money demanded?

Correct Answer
verified

Correct Answer
verified

Among the assets of commercial banks are demand deposits.

Correct Answer
verified

Exam 10: Money, the Federal Reserve, and the Interest Rate

When banks hold a large amount of excess reserves, which of the following tools would the Fed most likely use to encourage banks to lend more of these excess reserves?

Correct AnswerverifiedShow Answer

The federal funds rate is a

Correct AnswerverifiedShow Answer

Which of the following causes the quantity of money demanded to increase?

Correct AnswerverifiedShow Answer

Which of the following would be counted as part of M1?

Correct AnswerverifiedShow Answer

The two-year interest rate is an average of the expected interest rate each of the two years.

Correct AnswerverifiedShow Answer

Bank of Mt. Etna has $500 million in deposits. Bank of Mt. Etna is meeting its reserve requirement and has no excess reserves. It has $75 million in reserves. Bank of Mt. Etna faces a required reserve ratio of

Correct AnswerverifiedShow Answer

Refer to the information provided in Table 10.1 below to answer the questions that follow. Table 10.1 -Refer to Table 10.1. The required reserve ratio is 25%. If the First Charter Bank is meeting its reserve requirement and has no excess reserves, its reserves equal

Correct AnswerverifiedShow Answer

Assume that in the country of Salmon, the government tripled the money supply overnight. As a result of this action, the price of a loaf of bread increased from 1 bill to 100 bills. This is an example of

Correct AnswerverifiedShow Answer

________ are used for interbank loans.

Correct AnswerverifiedShow Answer

The Intracoastal Bank has $5 million in deposits and $500,000 in reserves. If the required reserve ratio is 5%, excess reserves are equal to

Correct AnswerverifiedShow Answer

Which of the following activities is one of the responsibilities of the Federal Reserve?

Correct AnswerverifiedShow Answer

Refer to the information provided in Table 10.1 below to answer the questions that follow. Table 10.1 -Refer to Table 10.1. First Charter Bank's total assets are

Correct AnswerverifiedShow Answer

The required reserve ratio is 12.5%. The money multiplier is

Correct AnswerverifiedShow Answer

Target has 12-packs of Pepsi on sale and changes the price tag on the shelf from $6.00 to $2.99. This is an example of money serving as a(n)

Correct AnswerverifiedShow Answer

If the money multiplier is 4, the required reserve ratio is

Correct AnswerverifiedShow Answer

The liquidity property of money is the property that makes money

Correct AnswerverifiedShow Answer

The Chair of the Fed also serves as one of the Reserve Bank Presidents.

Correct AnswerverifiedShow Answer

Which of the following will most likely cause an increase in the quantity of money demanded?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Among the assets of commercial banks are demand deposits.

Correct AnswerverifiedShow Answer

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