Question 1

Of the tools available to the Fed to regulate the money supply,which is the least used?

Accepted Answer

A)  the federal funds rate
B)  the reserve ratio
C)  tax cutting
D)  the open-market operationsE) None of the above
F) All of the above

Question 2

The main advantage of using M2 instead of M1 as the measure for money is that

Accepted Answer

A)  M2 can be measured more accurately.
B)  M2 includes only instantly accessible assets.
C)  M2 is sometimes more stable.
D)  M2 varies as the interest rate varies.E) B) and C)
F) A) and D)

Question 3

Denny's lists the price of a Grand Slam Breakfast at $4.99 a plate.Listing the price on the menu is an example of money serving as a(n)

Accepted Answer

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

Question 4

The required reserve ratio is 5%.The money multiplier is

Accepted Answer

A)  0.5.
B)  5.
C)  15.
D)  20.E) B) and C)
F) None of the above

Question 5

Among the members of the Federal Open Market Committee

Accepted Answer

A)  is the Secretary of the Treasury.
B)  is the Comptroller of the Currency.
C)  are the seven members of the Board of Governors of the Fed.
D)  is the Chair of the Senate Banking Committee.E) A) and D)
F) B) and C)

Question 6

Suppose the required reserve ratio is 20%.A $40 million cash deposit will,at most,allow an expansion of the money supply to

Accepted Answer

A)  $20 million.
B)  $80 million.
C)  $200 million.
D)  $800 million.E) All of the above
F) B) and C)

Question 7

Money is

Accepted Answer

A)  the same as income.
B)  anything that is generally accepted as a medium of exchange.
C)  the value of all coins and currency in circulation at any time.
D)  backed by gold in Fort Knox.E) A) and B)
F) A) and C)

Question 8

A sale of government securities to the public by the Federal Reserve will increase the money supply.

Accepted Answer

A) True 
 B)False

Question 9

Currency held outside banks + demand deposits + travelers checks + other checkable deposits =

Accepted Answer

A)  M3.
B)  M2 - M1.
C)  M3 - M1.
D)  M1.E) A) and B)
F) A) and D)

Question 10

The multiple by which total deposits can increase for every dollar increase in reserves is the

Accepted Answer

A)  required reserve ratio.
B)  bank's line of credit.
C)  deposit insurance limit.
D)  money multiplier.E) B) and C)
F) A) and D)

Question 11

Refer to the information provided in Scenario 10.1 below to answer the questions that follow.
SCENARIO 10.1: 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 10.1.What is the required reserve ratio?

Accepted Answer

A)  4%
B)  5%
C)  8%
D)  10%E) All of the above
F) B) and D)

Question 12

An open-market sale of securities by the Fed results in ________ in reserves and ________ in the supply of money.

Accepted Answer

A)  an increase; a decrease
B)  an increase; an increase
C)  a decrease; an increase
D)  a decrease; a decreaseE) B) and D)
F) B) and C)

Question 13

Net worth is

Accepted Answer

A)  assets - liabilities.
B)  assets + capital.
C)  assets - capital.
D)  assets + liabilities.E) A) and C)
F) All of the above

Question 14

Which of the following would NOT be included in M2?

Accepted Answer

A)  demand deposits
B)  money market accounts
C)  checking accounts
D)  Treasury bondsE) None of the above
F) A) and C)

Question 15

Among the assets of commercial banks are demand deposits.

Accepted Answer

A) True 
 B)False

Question 16

The Fed has tended not to use changes in the reserve requirement as a means of controlling the money supply because

Accepted Answer

A)  only banks that are members of the Fed are subject to reserve requirements,and most banks do not belong to the Fed.
B)  a change in the reserve requirement has only a very small impact on the money supply.
C)  it is a crude monetary policy tool because a change in the requirement does not affect banks until about two weeks after the change is implemented.
D)  it takes a long time for the Congress to approve a change in the reserve requirement.E) C) and D)
F) B) and D)

Question 17

A commercial bank lists

Accepted Answer

A)  loans as liabilities.
B)  deposits as liabilities.
C)  required reserves as liabilities.
D)  excess reserves as liabilities.E) All of the above
F) A) and B)

Question 18

Currency held outside banks is included in

Accepted Answer

A)  both M1 and M2.
B)  M2 only.
C)  M1 only.
D)  neither M1 nor M2.E) None of the above
F) B) and C)

Question 19

Which of the following instruments is NOT used by the Federal Reserve to change the money supply?

Accepted Answer

A)  the discount rate
B)  the required reserve ratio
C)  the federal tax code
D)  open market operationsE) B) and D)
F) A) and D)

Question 20

The Federal Open Market Committee (FOMC) directs the Open Market Desk to

Accepted Answer

A)  determine the required reserve ratio.
B)  determine the discount rate.
C)  buy or sell government securities.
D)  determine the federal funds rate.E) B) and C)
F) A) and D)

Exam 10: The Money Supply and the Federal Reserve System

Of the tools available to the Fed to regulate the money supply,which is the least used?

Correct Answer
verified

An open-market sale of securities by the Fed results in in reserves and in the supply of money.

Correct Answer
verified

Which of the following would NOT be included in M2?

Correct Answer
verified

A sale of government securities to the public by the Federal Reserve will increase the money supply.

Correct Answer
verified

Currency held outside banks + demand deposits + travelers checks + other checkable deposits =

Correct Answer
verified

Correct Answer
verified

Among the members of the Federal Open Market Committee

Correct Answer
verified

The required reserve ratio is 5%.The money multiplier is

Correct Answer
verified

Which of the following instruments is NOT used by the Federal Reserve to change the money supply?

Correct Answer
verified

Net worth is

Correct Answer
verified

Denny's lists the price of a Grand Slam Breakfast at $4.99 a plate.Listing the price on the menu is an example of money serving as a(n)

Correct Answer
verified

Currency held outside banks is included in

Correct Answer
verified

Among the assets of commercial banks are demand deposits.

Correct Answer
verified

Suppose the required reserve ratio is 20%.A $40 million cash deposit will,at most,allow an expansion of the money supply to

Correct Answer
verified

The Federal Open Market Committee (FOMC) directs the Open Market Desk to

Correct Answer
verified

The main advantage of using M2 instead of M1 as the measure for money is that

Correct Answer
verified

The multiple by which total deposits can increase for every dollar increase in reserves is the

Correct Answer
verified

Money is

Correct Answer
verified

The Fed has tended not to use changes in the reserve requirement as a means of controlling the money supply because

Correct Answer
verified

A commercial bank lists

Correct Answer
verified

Exam 10: The Money Supply and the Federal Reserve System

Of the tools available to the Fed to regulate the money supply,which is the least used?

Correct AnswerverifiedShow Answer

An open-market sale of securities by the Fed results in ________ in reserves and ________ in the supply of money.

Correct AnswerverifiedShow Answer

Which of the following would NOT be included in M2?

Correct AnswerverifiedShow Answer

A sale of government securities to the public by the Federal Reserve will increase the money supply.

Correct AnswerverifiedShow Answer

Currency held outside banks + demand deposits + travelers checks + other checkable deposits =

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Among the members of the Federal Open Market Committee

Correct AnswerverifiedShow Answer

The required reserve ratio is 5%.The money multiplier is

Correct AnswerverifiedShow Answer

Which of the following instruments is NOT used by the Federal Reserve to change the money supply?

Correct AnswerverifiedShow Answer

Net worth is

Correct AnswerverifiedShow Answer

Denny's lists the price of a Grand Slam Breakfast at $4.99 a plate.Listing the price on the menu is an example of money serving as a(n)

Correct AnswerverifiedShow Answer

Currency held outside banks is included in

Correct AnswerverifiedShow Answer

Among the assets of commercial banks are demand deposits.

Correct AnswerverifiedShow Answer

Suppose the required reserve ratio is 20%.A $40 million cash deposit will,at most,allow an expansion of the money supply to

Correct AnswerverifiedShow Answer

The Federal Open Market Committee (FOMC) directs the Open Market Desk to

Correct AnswerverifiedShow Answer

The main advantage of using M2 instead of M1 as the measure for money is that

Correct AnswerverifiedShow Answer

The multiple by which total deposits can increase for every dollar increase in reserves is the

Correct AnswerverifiedShow Answer

Money is

Correct AnswerverifiedShow Answer

The Fed has tended not to use changes in the reserve requirement as a means of controlling the money supply because

Correct AnswerverifiedShow Answer

A commercial bank lists

Correct AnswerverifiedShow Answer

Correct Answer
verified

An open-market sale of securities by the Fed results in in reserves and in the supply of money.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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