Question 1

Which measure of money would be used to look at savings in the economy?

Accepted Answer

A)   The monetary base
B)   M1
C)   M2
D)   ReservesE) A) and B)
F) All of the above

Question 2

Money can serve as a(n) :

Accepted Answer

A)   valuation tool.
B)   medium of exchange.
C)   alternative to credit.
D)   completely fixed unit of measurement.E) B) and C)
F) A) and B)

Question 3

The graph shown displays the relationship between money and the interest rate. S2, and the Fed uses open market operations to move the money supply to MS3, what is the overall effect on the economy? A)  Aggregate demand decreases, causing GDP to fall. B)  Aggregate supply decreases, causing GDP to fall. C)  Aggregate demand increases, causing GDP to rise. D)  The LRAS curve moves to the full employment level of output." class="answers-bank-image d-inline" rel="preload" > If the money supply in the economy is currently at MS2, and the Fed uses open market operations to move the money supply to MS3, what is the overall effect on the economy?

Accepted Answer

A)   Aggregate demand decreases, causing GDP to fall.
B)   Aggregate supply decreases, causing GDP to fall.
C)   Aggregate demand increases, causing GDP to rise.
D)   The LRAS curve moves to the full employment level of output.E) A) and B)
F) A) and C)

Question 4

The one central bank president that always has a seat on the Federal Open Market Committee is located in:

Accepted Answer

A)   New York City.
B)   Chicago.
C)   Boston.
D)   San Francisco.E) A) and B)
F) A) and C)

Question 5

Open-market operations are:

Accepted Answer

A)   sales or purchases of government securities, by the Fed, to or from banks on the open market.
B)   regulations that set the minimum fraction of deposits banks must hold in reserve.
C)   lending facilities that allow banks to borrow reserves from the Fed at a discounted interest rate.
D)   sales or purchases of financial instruments on the open market.E) C) and D)
F) A) and B)

Question 6

Decisions regarding monetary policy:

Accepted Answer

A)   are made by politicians, rather than experts in finance or banking.
B)   can be influenced by political pressures.
C)   are made quickly and often cannot be changed.
D)   are made by financial experts who are independent of political pressures.E) A) and B)
F) None of the above

Question 7

The amount of cash kept as reserves divided by the total amount of demand deposits is known as the:

Accepted Answer

A)   reserve ratio.
B)   demand deposit ratio.
C)   demand-reserve ratio.
D)   federal funds rate.E) A) and D)
F) A) and C)

Question 8

We know how many dollars banks create using the:

Accepted Answer

A)   money multiplier.
B)   federal funds rate.
C)   demand deposit ratio.
D)   interest rate.E) All of the above
F) A) and B)

Question 9

The liquidity-preference model was first introduced by:

Accepted Answer

A)   Ben Bernanke in 2008.
B)   John Maynard Keynes in 1936.
C)   Adam Smith in 1776.
D)   John Kenneth Galbraith in 1970.E) B) and C)
F) A) and D)

Question 10

The Fed rarely changes the reserve requirement because:

Accepted Answer

A)   very small changes to the reserve requirement cause very large changes to the overall money supply.
B)   the money supply is usually well-suited to the needs of the economy.
C)   changing the reserve requirement does not typically have a large enough effect on the overall money supply.
D)   None of these are true.E) C) and D)
F) A) and B)

Question 11

Modern banks in the United States keep reserves:

Accepted Answer

A)   as commodity money only.
B)   as deposits at the Federal Reserve.
C)   as gold.
D)   in accounts with other banks.E) B) and D)
F) A) and D)

Question 12

The Federal Reserve System has twelve:

Accepted Answer

A)   regional banks.
B)   members on its Board of Governors.
C)   member banks.
D)   basic functions.E) B) and D)
F) All of the above

Question 13

The institution ultimately responsible for managing the nation's money supply and coordinating the banking system to ensure a sound economy is called a:

Accepted Answer

A)   central bank.
B)   national bank.
C)   public banking system.
D)   peoples' bank.E) All of the above
F) A) and B)

Question 14

If the Fed wishes to increase the money supply, it could:

Accepted Answer

A)   buy bonds.
B)   increase the reserve requirement.
C)   increase the discount rate.
D)   print more currency.E) B) and D)
F) A) and D)

Question 15

Funds held in bank accounts that can be withdrawn by depositors at any time without advance notice are:

Accepted Answer

A)   demand deposits.
B)   required reserves.
C)   free funds.
D)   flow funds.E) A) and C)
F) A) and B)

Question 16

The Federal Reserve's twin responsibilities is known as the:

Accepted Answer

A)   dual mandate.
B)   double duties.
C)   twin spin.
D)   dual tasks.E) A) and B)
F) A) and C)

Question 17

The monetary base:

Accepted Answer

A)   is the least narrow definition of money.
B)   includes cash.
C)   cannot always be used immediately in transactions, but is accessible.
D)   is not very liquid.E) C) and D)
F) A) and C)

Question 18

In an effort to increase the money supply, the Fed might:

Accepted Answer

A)   increase the reserve requirement.
B)   decrease the reserve requirement.
C)   open the discount window longer.
D)   increase the discount rate.E) B) and D)
F) All of the above

Question 19

Suppose a bank operates in a country with a 20 percent reserve requirement, and someone deposits $4,000 into a savings account. Including the deposit, how much money has been created in this economy?

Accepted Answer

A)   $20,000
B)   $3,200
C)   $4,800
D)   $9,500E) B) and D)
F) All of the above

Question 20

If the Fed wishes to increase the money supply, what action could it take?

Accepted Answer

A)   It could sell a bond to a bank, receiving money in return which could then be taken out of circulation.
B)   It could buy a bond from a bank, giving the bank cash in return which can then be lent out.
C)   It could sell a bond to a bank, receiving money in return which could then be lent out to someone else.
D)   It could buy a bond from a bank, giving the bank cash in return which is then required to be held as excess reserves.E) B) and C)
F) A) and B)

Exam 15: Moneyand the Monetary System

We know how many dollars banks create using the:

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Funds held in bank accounts that can be withdrawn by depositors at any time without advance notice are:

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Modern banks in the United States keep reserves:

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Decisions regarding monetary policy:

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The institution ultimately responsible for managing the nation's money supply and coordinating the banking system to ensure a sound economy is called a:

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If the Fed wishes to increase the money supply, it could:

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The Fed rarely changes the reserve requirement because:

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Money can serve as a(n) :

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The one central bank president that always has a seat on the Federal Open Market Committee is located in:

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Open-market operations are:

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The Federal Reserve System has twelve:

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The Federal Reserve's twin responsibilities is known as the:

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The monetary base:

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Which measure of money would be used to look at savings in the economy?

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If the Fed wishes to increase the money supply, what action could it take?

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The amount of cash kept as reserves divided by the total amount of demand deposits is known as the:

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The liquidity-preference model was first introduced by:

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In an effort to increase the money supply, the Fed might:

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The graph shown displays the relationship between money and the interest rate. If the money supply in the economy is currently at MS2, and the Fed uses open market operations to move the money supply to MS3, what is the overall effect on the economy?

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Suppose a bank operates in a country with a 20 percent reserve requirement, and someone deposits $4,000 into a savings account. Including the deposit, how much money has been created in this economy?

Correct AnswerverifiedShow Answer

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The graph shown displays the relationship between money and the interest rate. If the money supply in the economy is currently at M^S2, and the Fed uses open market operations to move the money supply to M^S3, what is the overall effect on the economy?

Correct Answer
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Correct Answer
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