Question 1

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) B) and C)
F) None of the above

Question 2

The Federal Open Market Committee meets approximately

Accepted Answer

A)  every three weeks
B)  every six weeks
C)  every 3 months
D)  every 6 months.E) C) and D)
F) A) and B)

Question 3

In recent years the Federal Open Market Committee has focused on a target for

Accepted Answer

A)  M1 growth.
B)  the federal funds rate.
C)  the number of Treasury Securities issued by the federal government.
D)  total reserves of banks.E) All of the above
F) A) and B)

Question 4

The members of the Federal Reserve's Board of Governors

Accepted Answer

A)  are appointed by the president of the U.S. and confirmed by the U.S. Senate.
B)  serve six-year terms.
C)  are also the presidents of the regional Federal Reserve banks.
D)  share power equally, with no governor having any more influence or power than any other governor.E) A) and B)
F) All of the above

Question 5

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Accepted Answer

A) True 
 B)False

Question 6

The existence of money leads to

Accepted Answer

A)  greater specialization in production, but not to a higher standard of living.
B)  a higher standard of living, but not to greater specialization.
C)  greater specialization and to a higher standard of living.
D)  neither greater specialization nor to a higher standard of living.E) A) and B)
F) None of the above

Question 7

If the central bank in some country lowered the reserve requirement, then the money multiplier for that country

Accepted Answer

A)  would increase.
B)  would not change.
C)  would decrease.
D)  could do any of the above.E) C) and D)
F) A) and C)

Question 8

Which list ranks assets from most to least liquid?

Accepted Answer

A)  currency, demand deposits, money market mutual funds
B)  currency, money market mutual funds, demand deposits
C)  money market mutual funds, demand deposits, currency
D)  demand deposits, money market mutual funds, currencyE) A) and D)
F) B) and C)

Question 9

When in France you notice that prices are posted in euros, this best illustrates money's function as

Accepted Answer

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

Question 10

Scenario 16-2.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 16-2. Assuming the only other thing Tazian banks have on their balance sheets is loans, what is the value of existing loans made by Tazian banks?

Accepted Answer

A)  6,900 million tazes
B)  7,125 million tazes
C)  7,350 million tazes
D)  None of the above is correct.E) B) and C)
F) C) and D)

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 open-market operations.
D)  All of the above are correct.E) C) and D)
F) None of the above

Question 12

Suppose the Fed requires banks to hold 10 percent of their deposits as reserves. A bank has $20,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have to lend out if it decides to hold only required reserves?

Accepted Answer

A)  $29,000
B)  $28,100
C)  $19,100
D)  $11,000E) B) and C)
F) A) and C)

Question 13

Scenario 16-2.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 16-2. Suppose the Bank of Tazi loaned the banks of Tazi 10 million tazes. 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 change?

Accepted Answer

A)  250 million tazes
B)  200 million tazes
C)  125 million tazes
D)  None of the above is correct.E) A) and B)
F) None of the above

Question 14

Which of the following entities actually executes open-market operations?

Accepted Answer

A)  the Board of Governors
B)  the New York Federal Reserve Bank
C)  the Federal Open Market Committee
D)  the Open Market Committees of the regional Federal Reserve BanksE) None of the above
F) B) and C)

Question 15

If the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Accepted Answer

A)  buying bonds. This buying would increase the money supply.
B)  buying bonds. This buying would reduce the money supply.
C)  selling bonds. This selling would increase the money supply.
D)  selling bonds. This selling would reduce the money supply.E) A) and B)
F) A) and C)

Question 16

In the United States, currency holdings per person average about

Accepted Answer

A)  $125; one explanation for this relatively small average is that many people use credit and debit cards to make transactions.
B)  $125; one explanation for this relatively small average is that U.S. citizens hold a lot of foreign currency.
C)  $3,700; one explanation for this relatively large amount is that criminals probably prefer currency as a medium of exchange.
D)  $3,700; one explanation for this relatively large average is that U.S. citizens hold a lot of foreign currency.E) A) and B)
F) All of the above

Question 17

Which of the following is not included in M1?

Accepted Answer

A)  currency
B)  demand deposits
C)  savings deposits
D)  traveler's checksE) A) and B)
F) None of the above

Question 18

Roundabout trade decreases production.

Accepted Answer

A) True 
 B)False

Question 19

Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate?

Accepted Answer

A)  store of value
B)  medium of exchange
C)  unit of account
D)  None of the above is correct.E) B) and C)
F) A) and C)

Question 20

A bank has a 10 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement.

Accepted Answer

A)  It has $50 in reserves and $4,950 in loans.
B)  It has $500 in reserves and $4,500 in loans.
C)  It has $555 in reserves and $4,445 in loans.
D)  None of the above is correct.E) A) and B)
F) All of the above

Exam 16: The Monetary System

The members of the Federal Reserve's Board of Governors

Correct Answer
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In the United States, currency holdings per person average about

Correct Answer
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Correct Answer
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Which list ranks assets from most to least liquid?

Correct Answer
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The Fed's policy decisions have an important influence on

Correct Answer
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Which of the following entities actually executes open-market operations?

Correct Answer
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Suppose the Fed requires banks to hold 10 percent of their deposits as reserves. A bank has $20,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have to lend out if it decides to hold only required reserves?

Correct Answer
verified

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Correct Answer
verified

If the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Correct Answer
verified

Which of the following is not included in M1?

Correct Answer
verified

Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate?

Correct Answer
verified

The existence of money leads to

Correct Answer
verified

A bank has a 10 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement.

Correct Answer
verified

The Federal Open Market Committee meets approximately

Correct Answer
verified

Roundabout trade decreases production.

Correct Answer
verified

In recent years the Federal Open Market Committee has focused on a target for

Correct Answer
verified

Correct Answer
verified

When in France you notice that prices are posted in euros, this best illustrates money's function as

Correct Answer
verified

If the central bank in some country lowered the reserve requirement, then the money multiplier for that country

Correct Answer
verified

Which of the following is not correct?

Correct Answer
verified

Exam 16: The Monetary System

The members of the Federal Reserve's Board of Governors

Correct AnswerverifiedShow Answer

In the United States, currency holdings per person average about

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which list ranks assets from most to least liquid?

Correct AnswerverifiedShow Answer

The Fed's policy decisions have an important influence on

Correct AnswerverifiedShow Answer

Which of the following entities actually executes open-market operations?

Correct AnswerverifiedShow Answer

Suppose the Fed requires banks to hold 10 percent of their deposits as reserves. A bank has $20,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have to lend out if it decides to hold only required reserves?

Correct AnswerverifiedShow Answer

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Correct AnswerverifiedShow Answer

If the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Correct AnswerverifiedShow Answer

Which of the following is not included in M1?

Correct AnswerverifiedShow Answer

Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate?

Correct AnswerverifiedShow Answer

The existence of money leads to

Correct AnswerverifiedShow Answer

A bank has a 10 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement.

Correct AnswerverifiedShow Answer

The Federal Open Market Committee meets approximately

Correct AnswerverifiedShow Answer

Roundabout trade decreases production.

Correct AnswerverifiedShow Answer

In recent years the Federal Open Market Committee has focused on a target for

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When in France you notice that prices are posted in euros, this best illustrates money's function as

Correct AnswerverifiedShow Answer

If the central bank in some country lowered the reserve requirement, then the money multiplier for that country

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

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