econ final Exam

A $70 price tag on a sweater in a department store window in an example of money functioning as a:A) unit of account
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:D) $3,750
A decrease in the reserve ration increases the:B) amount of excess reserves in the banking system
A bank that has liabilities of $150 billion and a net worth of $20 billion must have:D) asset of $170 billion
A reserve requirement of 20 percent means a bank must have $1,000 of reserves if its checkable deposits are:C) $5,000
An increase in the legal reserve ratio:B) decreases the money supply by decreasing excess reserves and decreasing the monetary multiplier
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:B) 10 percent
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:

$32 billion
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:

B) fall to 8 percent
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:

A) items 1, 5, 9, and 10
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:

B) $200 billion
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:

A) $160 billion
As it relates to the Federal Reserve activities, the acronym for FOMC describes the:A) Federal Open Market Committee
Assuming no other changes, if checkable deposits decrease by $40 billion and balances in money market mutual funds increase by $40 billion the:A) M1 money supply will decline and M2 supply will remain unchanged
Assume that the listed amounts constitute this bank’s complete set of accounts. Moolah’s:A) assets are $1,110
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?D) increased by 1,200
Assuming no other changes, if checkable deposits increase by $40 billion and currency in circulation decreases by $40 billion, the:B) M1 money supply will not change
Coins in people’s pockets and purses are:B) included in both M1 and in M2
Coins held in commercial banks are:D) not part of the nations money supply
Currency held in the vault of First National Bank is:D) not counted as part of the money supply
Currency held within bank is part of:D) none of these definitions of the money supply
Excess reserves refer to the:D) difference between actual reserves and required reserves
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:B) 12.5 percent
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:C) 5
If the economy were encountering a servere recession, proper monetary and fiscal policies would call for:B) buying government securities, reducing the reserve ration, reducing the discount rate,
If the Fed wants to lower the Federal funds rate, it should:C) buy government securities in the open market
If the monetary authorities want to reduce the montetary multiplier, they should:B) raise the required reserve ratio
If you are estimating your total expenses for school next semester, you are using money primarily as:C) unit of account
If the amount of the money demanded exceeds the amount supplied, the:C) interest rate will rise
If severe demand-pull inflation was occuring in the economy, proper government policies would involve a governmentC) surplus and the sale of securities in the open market, a higher discount rate, and higher reserve requirements
If you place a part of your summer earnings in a savings account, you are using money primarily as a:B) store of value
If you write a check on a bank of purchase a used Honda Civic, you are using money primarily as:A) medium of exchange
If you deposit a $50 bill in a commercial bank that has a 10 percent legal reserve requirement the bank will:A) have $45 of additional excess reserves
In the United States, the money supply (M1) is comprised of:A) coins, paper currency, and checkable deposits
In a fractional reserve banking system:C) banks can create money through the ledning process
In the United States monetary poilcy is the responsibility of the:C) Board of Governors of the Federal Reserve System
In the U.S. economy the money supply is controlled by the:B) Federal Reserve System
Purchasing common stock by writing a check best exemplifies money serving as a(n):C) medium of exchange
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:A) horizontally adding the transactions and the asset demand for money
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:B) a vertical line
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:C) a downsloping line or curve from left to right
Open-market operations refer to:B) the purchase or sale of government securities by the Fed
Refer to the above information. Money supply M2 for this economy is:A) 480
Refer to the above information. Money supply M1 for this economy is:C) $130
Refer to the above digram of the market for money. The equilibrium interest rate is:B) i2
Suppose the reserve requirement is 10 percent. If a bank has $5 million of checkable deposits and actual reserves of $500,000, the bank:D) cannot safely lend out more money
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?C) $24,000
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:A) 40%
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:C) are $20,000
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:C) $200,000
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:C) 54,000
Stock market price quotations best exemplify money serving as a(n):B) unit of account
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:B) $90,000 in checkable deposit liabilities and $32,000 in reserves
The discount rate is the interest:B) rate at which the Federal Reserve Banks lend to commercial banks
The Federal funds rate is:B) lower than both the prime interest rate and the discount rate
The primary purpose of the legal reserve requirement is to:B) provide a means by which the monetary authorities can influence the lending ability of commercial banks
The group that sets the Federal Systems policy on buying and selling government securities (bills, notes, and bonds) is the:D) Federal Open Market Committee (FOMC)
The Federal Open Market Committee (FOMC) is made up of:D) the seven meber of the Board of Governors of the Federal..
The greater the required reserve ratio, the:lower is the monetary multiplier
To increase the Federal funds rate, the Fed can:D) sell government bonds to commercial banks
The Federal Reserve System:B) is basically an independent agency
When the required reserve ration is increased, the excess reserves of member banks are:D) reduced and the multiple by which the commercial banking system can lend is reduced
When economists say that money serves as a unit of account, they mean that it is:C) a monetary unit for measuring and comparing the relative values of goods
When economists say that money serves as a store of value, they mean that it is:A) a way to keep wealth in a readily spendable form for future use
When the required reserve ration is decreased, the excess reserves of member banks are:C) increased and the multiple by which the commercial bank system can lend is increased
Which one of the following is true about the U.S. Federal Reserve System?A) There are 12 regional Federal Reserve Banks.
When economists say that money serves as a medium of exchange, they mean that it is:B) a means of payment
Use the following balance sheet for the ABC National Bank in answering the next question(s).

Refer to the above data. Assuming the bank loans out all of its remaining excess reserves as a checkable deposit, and has a check against it for that amount, its reserves and checkable deposits will now be:

B) $22,000 and $110,000 respectively
Use the following balance sheet for the ABC National Bank in answering the next questions. Assume the required reserve ration is 20 percent.

Refer to the above data. This commerical bank has excess reserves of:

D) $5,000
A bank that has assets of $85 billion and a net worth of $10 billion must have:A) liabilities of $75 billion
Use the following balance sheet for the ABC National Bank in answering the next question(s). Assume the required reserve ration is 20 percent.

Refer to the above data. This bank can safely expand its loans by a maximum of:

D) $5,000
Other things equal, which of the following would increase the Federal funds rate?D) a decline in excess reserves in the banking system
The differnce between M1 and M2 is that:B) the latter includes small-denominated time deposits, non-checkable saving accounts, money market deposit accounts
The amount that a commercial bank can lend is determined by its:B) excess reserves
Assuming no other changes, if balances in money market depsits accounts increase by $50 billion and small-denominated time deposits decrease by $50 billion, the:A) M1 and M2 money supplies will not change
When the reserve requirement is increased:D) the excess reserves of mmeber banks are reduced
The discount rate is the interest:B) rate at which the Federal Reserve lend to commerical banks
Excess reserves to the:D) difference bewtween actual reserver and required reserves
Which one of the following is true about the U.S. Federal Reserves Systems:A) There are 12 regional Federal Reserve Banks