Question 1

-The above table has information about the hypothetical economy of Robotica.Based on the data,the size of M2 is

Accepted Answer

A)  $2,600 billion.
B)  $2,610 billion.
C)  $610 billion.
D)  $600 billion.
E)  $1,710 billion.F) B) and C)
G) D) and E)

Question 2

Suppose the desired reserve ratio is 20 percent and there is no currency drain.Then a $1 increase in the monetary base leads to the banking system to increase the quantity of money by

Accepted Answer

A)  $0.02.
B)  $4.
C)  $5.
D)  $20.
E)  $2.F) A) and B)
G) A) and E)

Question 3

The required reserve ratio is the

Accepted Answer

A)  amount of excess reserves the bank holds just in case.
B)  total amount of reserves the bank holds in its vaults.
C)  total amount of reserves the bank holds at the Fed.
D)  amount of reserves banks are required by the Fed to be held as a percentage of the bank's deposits.
E)  amount of reserves banks are required by the Fed to be held as a percentage of the bank's loans.F) B) and C)
G) A) and E)

Question 4

When a bank receives $100,000 in new deposits,the amount of loans the bank can make is limited by

Accepted Answer

A)  federal law.
B)  the annual federal budget.
C)  the Treasury Department.
D)  its desired reserve ratio.
E)  state law,with banks in different states being able to make different amounts of loans.F) C) and D)
G) B) and C)

Question 5

When Maria deposits $100 in currency in her checkable deposit at Bank of America,the immediate effect is that the quantity of M1 ________ because ________.

Accepted Answer

A)  decreases;checkable deposits are included in M2 but are not included in M1
B)  does not change;both currency and checkable deposits are included in M1
C)  increases;both currency and checkable deposits are included in M1
D)  changes,but the direction of the change cannot be determined;the direction of the change depends on what Bank of America does with the deposit
E)  changes only if Bank of America has excess reserves;if the bank does not have excess reserves,the overall effect to M1 is too small to noticeF) A) and E)
G) None of the above

Question 6

Money is used as a ________ when you visit the local farmers' market and compare prices across different vendors.

Accepted Answer

A)  means of payment
B)  unit of account
C)  store of value
D)  medium of exchange
E)  measure of barterF) None of the above
G) A) and D)

Question 7

What assets are included in M1? In M2? Is all of M1 and M2 money? If some assets of M1 or M2 are not money,why are they included in M1 or M2?

Accepted Answer

M1 is the sum of currency held by indivi...

Question 8

What are the institutions that make up the nation's banking system?

Accepted Answer

Part of the nation's banking system is t...

Question 9

A currency drain is

Accepted Answer

A)  an increase in currency held outside banks.
B)  when the Fed buys securities,but it is not when the Fed sells securities.
C)  when the Fed sells securities,but it is not when the Fed buys securities.
D)  when the Fed either buys or sells securities.
E)  when the Fed raises the required reserve ratio.F) A) and D)
G) C) and D)

Question 10

The unit of account is defined as

Accepted Answer

A)  the exchange of goods and services directly for other goods and services.
B)  barter.
C)  an object that is accepted in return for goods and services.
D)  an agreed upon measure for stating prices of goods and services.
E)  the medium of exchange.F) B) and C)
G) A) and E)

Question 11

The Fed conducts an open market operation and buys $50,000 of government securities from Commerce Bank.The desired reserve ratio is 25 percent.What is the change in Commerce Bank's total reserves and its excess reserves?

Accepted Answer

When the Fed buys $50,000 of government ...

Question 12

Explain what is meant by the phrase "a bank's balancing act."

Accepted Answer

Banks accept deposits and make loans wit...

Question 13

If the Fed sells $100 million of U.S.government securities,what happens to the quantity of money?

Accepted Answer

If the Fed sells $100 million of U.S.gov...

Question 14

Required reserve ratios are the minimum amount of

Accepted Answer

A)  deposits any one bank is allowed to accept as percentage of its capital.
B)  reserves any one bank must hold as a percentage of its loans.
C)  reserves any one bank must hold as a percentage of its deposits.
D)  deposits any one bank must hold as a percentage of its reserves.
E)  reserves any one bank must hold as a percentage of its total assets.F) D) and E)
G) C) and D)

Question 15

As the central bank,the Federal Reserve System provides banking services to

Accepted Answer

A)  individuals and controls the quantity of money.
B)  the government and the stock market.
C)  foreign corporations and determines the exchange rate.
D)  banks and regulates financial institutions and markets.
E)  banks and determines how much the U.S.government will borrow.F) B) and D)
G) A) and E)

Question 16

Barter is

Accepted Answer

A)  the exchange of goods and services for money.
B)  the pricing of goods and services with one agreed upon standard.
C)  the exchange of goods and services directly for other goods and services.
D)  a generally accepted means of payment.
E)  storing money for use at a later date.F) A) and B)
G) All of the above

Question 17

If Jose deposits $2,000 in his bank and the desired reserve ratio is 10 percent,what is the amount of new loans that the bank can make?

Accepted Answer

A)  $2,000
B)  $200
C)  $1,800
D)  $1,900
E)  $2,200F) B) and E)
G) A) and B)

Question 18

Credit cards,debit cards,and e-checks are

Accepted Answer

A)  always counted as money.
B)  not money.
C)  sometimes counted as money,depending on how they are used.
D)  sometimes counted as money,depending on what is purchased.
E)  sometimes counted as money,depending on what measure of money is being used.F) C) and D)
G) A) and E)

Question 19

The objects that we use as money today are

Accepted Answer

A)  checks and credit cards.
B)  currency and checks.
C)  currency and deposits.
D)  deposits and checks.
E)  currency,deposits,and gold.F) B) and D)
G) A) and D)

Question 20

The discount rate is

Accepted Answer

A)  the interest rate that commercial banks have to pay for any reserves that they borrow from the non-bank public.
B)  the interest rate that commercial banks have to pay to the owners of bank deposits.
C)  equal to the nominal interest rate minus the inflation rate.
D)  the interest rate that commercial banks pay for reserves that they borrow from the Fed.
E)  the interest rate that commercial banks receive for the reserves that they have on reserve at the Fed.F) C) and D)
G) B) and D)

Exam 18: Money and the Monetary System

What assets are included in M1? In M2? Is all of M1 and M2 money? If some assets of M1 or M2 are not money,why are they included in M1 or M2?

Correct AnswerverifiedM1 is the sum of currency held by indivi...View AnswerShow Answer

The required reserve ratio is the

Correct AnswerverifiedShow Answer

Explain what is meant by the phrase "a bank's balancing act."

Correct AnswerverifiedBanks accept deposits and make loans wit...View AnswerShow Answer

The discount rate is

Correct AnswerverifiedShow Answer

The Fed conducts an open market operation and buys $50,000 of government securities from Commerce Bank.The desired reserve ratio is 25 percent.What is the change in Commerce Bank's total reserves and its excess reserves?

Correct AnswerverifiedWhen the Fed buys $50,000 of government ...View AnswerShow Answer

Suppose the desired reserve ratio is 20 percent and there is no currency drain.Then a $1 increase in the monetary base leads to the banking system to increase the quantity of money by

Correct AnswerverifiedShow Answer

Required reserve ratios are the minimum amount of

Correct AnswerverifiedShow Answer

When a bank receives $100,000 in new deposits,the amount of loans the bank can make is limited by

Correct AnswerverifiedShow Answer

A currency drain is

Correct AnswerverifiedShow Answer

Money is used as a ________ when you visit the local farmers' market and compare prices across different vendors.

Correct AnswerverifiedShow Answer

If Jose deposits $2,000 in his bank and the desired reserve ratio is 10 percent,what is the amount of new loans that the bank can make?

Correct AnswerverifiedShow Answer

-The above table has information about the hypothetical economy of Robotica.Based on the data,the size of M2 is

Correct AnswerverifiedShow Answer

Barter is

Correct AnswerverifiedShow Answer

Credit cards,debit cards,and e-checks are

Correct AnswerverifiedShow Answer

What are the institutions that make up the nation's banking system?

Correct AnswerverifiedPart of the nation's banking system is t...View AnswerShow Answer

When Maria deposits $100 in currency in her checkable deposit at Bank of America,the immediate effect is that the quantity of M1 ________ because ________.

Correct AnswerverifiedShow Answer

The objects that we use as money today are

Correct AnswerverifiedShow Answer

The unit of account is defined as

Correct AnswerverifiedShow Answer

If the Fed sells $100 million of U.S.government securities,what happens to the quantity of money?

Correct AnswerverifiedIf the Fed sells $100 million of U.S.gov...View AnswerShow Answer

As the central bank,the Federal Reserve System provides banking services to

Correct AnswerverifiedShow Answer

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M1 is the sum of currency held by indivi...
View Answer

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Banks accept deposits and make loans wit...
View Answer

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When the Fed buys $50,000 of government ...
View Answer

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Correct Answer
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Part of the nation's banking system is t...
View Answer

When Maria deposits $100 in currency in her checkable deposit at Bank of America,the immediate effect is that the quantity of M1 because .

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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If the Fed sells $100 million of U.S.gov...
View Answer

Correct Answer
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