Question 1

In an economy that relies upon barter,

Accepted Answer

A)  trade does not require a double coincidence of wants.
B)  scarce resources are allocated just as easily as they are in economies that do not rely upon barter.
C)  there is no item in the economy that is widely accepted in exchange for goods and services.
D)  All of the above are correct.E) None of the above
F) A) and D)

Question 2

The discount rate is

Accepted Answer

A)  the interest rate the Fed charges banks.
B)  one divided by the difference between one and the reserve ratio.
C)  the interest rate banks receive on reserve deposits with the Fed.
D)  the interest rate that banks charge on overnight loans to other banks.E) B) and C)
F) None of the above

Question 3

Currently, bank runs are a major problem for the U.S. banking system and the Fed.

Accepted Answer

A) True 
 B)False

Question 4

If the reserve ratio is 10 percent, the money multiplier is

Accepted Answer

A)  100.
B)  10.
C)  9/10.
D)  1/10.E) A) and B)
F) C) and D)

Question 5

Money allows people to specialize in what they do best, thereby raising everyone's standard of living.

Accepted Answer

A) True 
 B)False

Question 6

If the reserve ratio is 20 percent, how much money can be created from $100 of reserves? Show your work.

Accepted Answer

(1/.20) <img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> $...

Question 7

In the nation of Wiknam, the money supply is $80,000 and reserves are $18,000. Assuming that people hold only deposits and no currency, and that banks hold no excess reserves, then the reserve requirement is

Accepted Answer

A)  29 percent.
B)  22.5 percent.
C)  16 percent.
D)  None of the above is correct.E) B) and C)
F) None of the above

Question 8

A bank's assets equal its liabilities under

Accepted Answer

A)  both 100-percent-reserve banking and fractional-reserve banking.
B)  100-percent-reserve banking but not under fractional-reserve banking.
C)  fractional-reserve banking but not under 100-percent-reserve banking.
D)  neither 100-percent-reserve banking nor fractional-reserve banking.E) A) and C)
F) All of the above

Question 9

How are Federal Reserve Board Governors selected?

Accepted Answer

The Fed Governors are appointed by the p...

Question 10

On a bank's T-account, which are part of the bank's assets?

Accepted Answer

A)  both deposits made by its customers and reserves
B)  deposits made by its customers but not reserves
C)  reserves but not deposits made by its customers
D)  neither deposits made by its customers nor reservesE) C) and D)
F) All of the above

Question 11

Other things the same, if banks decide to hold a smaller part of their deposits as excess reserves, the money supply will fall.

Accepted Answer

A) True 
 B)False

Question 12

Scenario 29-2.
The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the taz. Aggregate banking statistics show that collectively the banks of Tazi hold 300 million tazes of required reserves, 75 million tazes of excess reserves, have issued 7,500 million tazes of deposits, and hold 225 million tazes of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank.
-Refer to Scenario 29-2. Suppose the Bank of Tazi purchased 50 million tazes of Tazian Treasury Bonds from the banks. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much does the money supply change?

Accepted Answer

A)  625 million tazes
B)  1,000 million tazes
C)  1,250 million tazes
D)  None of the above is correct.E) All of the above
F) A) and B)

Question 13

Scenario 29-1.
The monetary policy of Namdian is determined by the Namdian Central Bank. The local currency is the dia. Namdian banks collectively hold 100 million dias of required reserves, 25 million dias of excess reserves, 250 million dias of Namdian Treasury Bonds, and their customers hold 1,000 million dias of deposits. Namdians prefer to use only demand deposits and so the money supply consists of demand deposits.
-Refer to Scenario 29-1 . Suppose the Central Bank of Namdia purchases 25 million dias of Namdian Treasury Bonds from banks. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply of Namdia change?

Accepted Answer

A)  200 million dias
B)  150 million dias
C)  100 million dias
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 14

Money

Accepted Answer

A)  is a perfect store of value.
B)  is the most liquid asset.
C)  has intrinsic value, regardless of which form it takes.
D)  All of the above are correct.E) A) and B)
F) C) and D)

Question 15

The interest rate that the Fed charges banks that borrow reserves from it is the

Accepted Answer

A)  federal funds rate.
B)  discount rate.
C)  reserve requirement.
D)  prime rate.E) A) and B)
F) B) and C)

Question 16

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.E) A) and B)
F) A) and D)

Question 17

Which of the following best illustrates the medium of exchange function of money?

Accepted Answer

A)  You keep some money hidden in your shoe.
B)  You keep track of the value of your assets in terms of currency.
C)  You pay for your oil change using currency.
D)  None of the above is correct.E) A) and D)
F) A) and C)

Question 18

The set of items that serve as media of exchange clearly includes

Accepted Answer

A)  demand deposits.
B)  short-term bonds.
C)  credit cards.
D)  All of the above are correct.E) All of the above
F) A) and C)

Question 19

The Soviet government in the 1980's never abandoned the ruble as the official currency. However, the people of Moscow preferred to accept

Accepted Answer

A)  cigarettes in exchange for goods and services, because they were convinced that cigarettes were going to soon become hard to come by.
B)  American dollars in exchange for goods and services, because rubles were extremely hard to come by.
C)  goods such as cigarettes or American dollars in exchange for goods and services, reminding us of the fact that government decree by itself is not sufficient for the success of a commodity money.
D)  All of the above are correct.E) None of the above
F) A) and B)

Question 20

The Fed's policy decisions have an important influence on

Accepted Answer

A)  inflation in the long run and employment and production in the short run.
B)  inflation in the long run and employment and production in the long run.
C)  inflation in the short run and employment and production in the short run.
D)  inflation in the short run and employment and production in the long run.E) C) and D)
F) B) and C)

Exam 29: The Monetary System

If the reserve ratio is 20 percent, how much money can be created from $100 of reserves? Show your work.

Correct Answer
verified
(1/.20) $...
View Answer

On a bank's T-account, which are part of the bank's assets?

Correct Answer
verified

Other things the same, if banks decide to hold a smaller part of their deposits as excess reserves, the money supply will fall.

Correct Answer
verified

The discount rate is

Correct Answer
verified

The interest rate that the Fed charges banks that borrow reserves from it is the

Correct Answer
verified

A bank's assets equal its liabilities under

Correct Answer
verified

In the nation of Wiknam, the money supply is $80,000 and reserves are $18,000. Assuming that people hold only deposits and no currency, and that banks hold no excess reserves, then the reserve requirement is

Correct Answer
verified

If the reserve ratio is 10 percent, the money multiplier is

Correct Answer
verified

Which of the following best illustrates the medium of exchange function of money?

Correct Answer
verified

Correct Answer
verified

How are Federal Reserve Board Governors selected?

Correct Answer
verified
The Fed Governors are appointed by the p...
View 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 Answer
verified

In an economy that relies upon barter,

Correct Answer
verified

The Fed's policy decisions have an important influence on

Correct Answer
verified

Money allows people to specialize in what they do best, thereby raising everyone's standard of living.

Correct Answer
verified

The Soviet government in the 1980's never abandoned the ruble as the official currency. However, the people of Moscow preferred to accept

Correct Answer
verified

Money

Correct Answer
verified

The set of items that serve as media of exchange clearly includes

Correct Answer
verified

Correct Answer
verified

Currently, bank runs are a major problem for the U.S. banking system and the Fed.

Correct Answer
verified

Exam 29: The Monetary System

If the reserve ratio is 20 percent, how much money can be created from $100 of reserves? Show your work.

Correct Answerverified(1/.20) $...View AnswerShow Answer

On a bank's T-account, which are part of the bank's assets?

Correct AnswerverifiedShow Answer

Other things the same, if banks decide to hold a smaller part of their deposits as excess reserves, the money supply will fall.

Correct AnswerverifiedShow Answer

The discount rate is

Correct AnswerverifiedShow Answer

The interest rate that the Fed charges banks that borrow reserves from it is the

Correct AnswerverifiedShow Answer

A bank's assets equal its liabilities under

Correct AnswerverifiedShow Answer

In the nation of Wiknam, the money supply is $80,000 and reserves are $18,000. Assuming that people hold only deposits and no currency, and that banks hold no excess reserves, then the reserve requirement is

Correct AnswerverifiedShow Answer

If the reserve ratio is 10 percent, the money multiplier is

Correct AnswerverifiedShow Answer

Which of the following best illustrates the medium of exchange function of money?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

How are Federal Reserve Board Governors selected?

Correct AnswerverifiedThe Fed Governors are appointed by the p...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

In an economy that relies upon barter,

Correct AnswerverifiedShow Answer

The Fed's policy decisions have an important influence on

Correct AnswerverifiedShow Answer

Money allows people to specialize in what they do best, thereby raising everyone's standard of living.

Correct AnswerverifiedShow Answer

The Soviet government in the 1980's never abandoned the ruble as the official currency. However, the people of Moscow preferred to accept

Correct AnswerverifiedShow Answer

Money

Correct AnswerverifiedShow Answer

The set of items that serve as media of exchange clearly includes

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Currently, bank runs are a major problem for the U.S. banking system and the Fed.

Correct AnswerverifiedShow Answer

Correct Answer
verified
(1/.20) $...
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

Correct Answer
verified

Correct Answer
verified
The Fed Governors are appointed by the p...
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

Correct Answer
verified