Question 1

A $70 price tag on a sweater in a department store window in an example of money functioning as a:

Accepted Answer

A) unit of account

Question 2

A single commercial bank must meet a 25 percent reserve requirement. If the bank has no excess reserves initially and $5,000 of cash is deposited in the bank, it can increase its loans by maximum of:

Accepted Answer

D) $3,750

Question 3

A decrease in the reserve ration increases the:

Accepted Answer

B) amount of excess reserves in the banking system

Question 4

A bank that has liabilities of $150 billion and a net worth of $20 billion must have:

Accepted Answer

D) asset of $170 billion

Question 5

A reserve requirement of 20 percent means a bank must have $1,000 of reserves if its checkable deposits are:

Accepted Answer

C) $5,000

Question 6

An increase in the legal reserve ratio:

Accepted Answer

B) decreases the money supply by decreasing excess reserves and decreasing the monetary multiplier

Question 7

Assume that a bank initally has no excess reserves. If it receives $5,000 in cash from a depositor and the bank finds that it can safely lend out $4,500 the reserve requirement must must:

Accepted Answer

B) 10 percent

Question 8

Answer the next question(s) on the basis of the following information about a banking system: new currency deposited in the system = $40 billion, legal reserve ration = 0.20; excess reserves prior to the currency deposit = $0    Refer to the above information. The $40 billion deposit of currency into checking accounts will create excess reserves of:

Accepted Answer

$32 billion

Question 9

Answer the next question on the basis of the following information for a bond having no expiration date: bond price = $1000; bond fixed annual interest payment = $100; bond annual interest rate = 10 percent.    Refer to the above information. If the price of this bond increases to $1250, the interest rate will:

Accepted Answer

B) fall to 8 percent

Question 10

Answer the next question(s) on the basis of the following list of assets.    Refer to the above list. The assets that are not included in either M1 or M2 are:

Accepted Answer

A) items 1, 5, 9, and 10

Question 11

Answer the next question(s) on the basis of the following information about a banking system: new currency deposited in the system = $40 billion; legal reserve ration = 0.20; excess reserves prior to the currency deposit = $0.    Refer to the above information. The $40 billion deposit of new currency will support total checkable deposits of:

Accepted Answer

B) $200 billion

Question 12

Answer the next question(s) on the basis of the following information about a banking system: new currency deposited in the system = $40 billion; legal reserve ration = 0.20; excess reserves prior to the currency deposit = $0    Refer to the above information. With the $40 billion deposit, the banking system will be able to expand the money supply through loans by:

Accepted Answer

A) $160 billion

Question 13

As it relates to the Federal Reserve activities, the acronym for FOMC describes the:

Accepted Answer

A) Federal Open Market Committee

Question 14

Assuming no other changes, if checkable deposits decrease by $40 billion and balances in money market mutual funds increase by $40 billion the:

Accepted Answer

A) M1 money supply will decline and M2 supply will remain unchanged

Question 15

Assume that the listed amounts constitute this bank\'s complete set of accounts. Moolah\'s:

Accepted Answer

A) assets are $1,110

Question 16

Assume that Smith deposits $600 in currency into her checking account in the XYZ Bank. Later that samr days Jones negociates a loan for $1,200 at the same bank. In what direction and by what amount has the supply of money changed?

Accepted Answer

D) increased by 1,200

Question 17

Assuming no other changes, if checkable deposits increase by $40 billion and currency in circulation decreases by $40 billion, the:

Accepted Answer

B) M1 money supply will not change

Question 18

Coins in people\'s pockets and purses are:

Accepted Answer

B) included in both M1 and in M2

Question 19

Coins held in commercial banks are:

Accepted Answer

D) not part of the nations money supply

Question 20

Currency held in the vault of First National Bank is:

Accepted Answer

D) not counted as part of the money supply

Question 21

Currency held within bank is part of:

Accepted Answer

D) none of these definitions of the money supply

Question 22

Excess reserves refer to the:

Accepted Answer

D) difference between actual reserves and required reserves

Question 23

If actual reserves in the banking system are $40,000, excess reserves are $10,000, and checkable deposits are $240,000, then the legal reserve requirement is:

Accepted Answer

B) 12.5 percent

Question 24

If actual reserves in the banking system are $50,000, excess reserves are $5,000, and checkable deposits are $225,000, then the monetary multiplier is:

Accepted Answer

C) 5

Question 25

If the economy were encountering a servere recession, proper monetary and fiscal policies would call for:

Accepted Answer

B) buying government securities, reducing the reserve ration, reducing the discount rate,

Question 26

If the Fed wants to lower the Federal funds rate, it should:

Accepted Answer

C) buy government securities in the open market

Question 27

If the monetary authorities want to reduce the montetary multiplier, they should:

Accepted Answer

B) raise the required reserve ratio

Question 28

If you are estimating your total expenses for school next semester, you are using money primarily as:

Accepted Answer

C) unit of account

Question 29

If the amount of the money demanded exceeds the amount supplied, the:

Accepted Answer

C) interest rate will rise

Question 30

If severe demand-pull inflation was occuring in the economy, proper government policies would involve a government

Accepted Answer

C) surplus and the sale of securities in the open market, a higher discount rate, and higher reserve requirements

Question 31

If you place a part of your summer earnings in a savings account, you are using money primarily as a:

Accepted Answer

B) store of value

Question 32

If you write a check on a bank of purchase a used Honda Civic, you are using money primarily as:

Accepted Answer

A) medium of exchange

Question 33

If you deposit a $50 bill in a commercial bank that has a 10 percent legal reserve requirement the bank will:

Accepted Answer

A) have $45 of additional excess reserves

Question 34

In the United States, the money supply (M1) is comprised of:

Accepted Answer

A) coins, paper currency, and checkable deposits

Question 35

In a fractional reserve banking system:

Accepted Answer

C) banks can create money through the ledning process

Question 36

In the United States monetary poilcy is the responsibility of the:

Accepted Answer

C) Board of Governors of the Federal Reserve System

Question 37

In the U.S. economy the money supply is controlled by the:

Accepted Answer

B) Federal Reserve System

Question 38

Purchasing common stock by writing a check best exemplifies money serving as a(n):

Accepted Answer

C) medium of exchange

Question 39

On a diagram where the interest rate and the quantity of money demanded are shown on the verticle and horizontal axes respectively, the total demand for money can be found by:

Accepted Answer

A) horizontally adding the transactions and the asset demand for money

Question 40

On a diagram where the interest rate and the quantity of money demanded are shown on the vertical and horizonal axes respectively, the transformations demand for money can be represented by:

Accepted Answer

B) a vertical line

Question 41

On a diagram where the interest rate and the quantity of money demanded are shown on the vertical and horizontal axes respectively, that asset demand for money can be represented by:

Accepted Answer

C) a downsloping line or curve from left to right

Question 42

Open-market operations refer to:

Accepted Answer

B) the purchase or sale of government securities by the Fed

Question 43

Refer to the above information. Money supply M2 for this economy is:

Accepted Answer

A) 480

Question 44

Refer to the above information. Money supply M1 for this economy is:

Accepted Answer

C) $130

Question 45

Refer to the above digram of the market for money. The equilibrium interest rate is:

Accepted Answer

B) i2

Question 46

Suppose the reserve requirement is 10 percent. If a bank has $5 million of checkable deposits and actual reserves of $500,000, the bank:

Accepted Answer

D) cannot safely lend out more money

Question 47

Suppose the ABC bank has excess reserves of $4,000 and outstanding checkable deposits of $80,000. If the reserve requirement is 25 percent, what is the of of the bank\'s actual reserves?

Accepted Answer

C) $24,000

Question 48

Suppose that a bank\'s actual reserves are $5 million, its checkable deposits are $5 million, and its excess reserves are $3 million. The reserve requirement must be:

Accepted Answer

A) 40%

Question 49

Suppose a commercial bank has checkable deposits of $100,000 and the legal reserve ration is 10 percent. If the bank\'s required and excess reserves are equal, then its actual reserves:

Accepted Answer

C) are $20,000

Question 50

Suppose the reserve requirement is 20 percent. If a bank has checkable deposits of $4 million and actual reserves of $1 million, it can safely lend out:

Accepted Answer

C) $200,000

Question 51

Suppose a credit union has checkable deposits of $500,000 and the legal reserve ration is 10 percent. If the institution has excess reserves of $4,000 then its actual reserves are:

Accepted Answer

C) 54,000

Question 52

Stock market price quotations best exemplify money serving as a(n):

Accepted Answer

B) unit of account

Question 53

The ABC Commercial bank has $5,000 in excess reserves and the reserve ratio is 30 percent. This information is consistent with the bank having:

Accepted Answer

B) $90,000 in checkable deposit liabilities and $32,000 in reserves

Question 54

The discount rate is the interest:

Accepted Answer

B) rate at which the Federal Reserve Banks lend to commercial banks

Question 55

The Federal funds rate is:

Accepted Answer

B) lower than both the prime interest rate and the discount rate

Question 56

The primary purpose of the legal reserve requirement is to:

Accepted Answer

B) provide a means by which the monetary authorities can influence the lending ability of commercial banks

Question 57

The group that sets the Federal Systems policy on buying and selling government securities (bills, notes, and bonds) is the:

Accepted Answer

D) Federal Open Market Committee (FOMC)

Question 58

The Federal Open Market Committee (FOMC) is made up of:

Accepted Answer

D) the seven meber of the Board of Governors of the Federal..

Question 59

The greater the required reserve ratio, the:

Accepted Answer

lower is the monetary multiplier

Question 60

To increase the Federal funds rate, the Fed can:

Accepted Answer

D) sell government bonds to commercial banks

Question 61

The Federal Reserve System:

Accepted Answer

B) is basically an independent agency

Question 62

When the required reserve ration is increased, the excess reserves of member banks are:

Accepted Answer

D) reduced and the multiple by which the commercial banking system can lend is reduced

Question 63

When economists say that money serves as a unit of account, they mean that it is:

Accepted Answer

C) a monetary unit for measuring and comparing the relative values of goods

Question 64

When economists say that money serves as a store of value, they mean that it is:

Accepted Answer

A) a way to keep wealth in a readily spendable form for future use

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