Question 1

Fiat money

Accepted Answer

A)   is worthless.
B)   has no intrinsic value.
C)   may be used as a medium of exchange, but is not legal tender.
D)   refers to highly liquid assets that do not serve as a medium of exchange.E) C) and D)
F) All of the above

Question 2

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Accepted Answer

Commodity money has "intrinsic value," o...

Question 3

Scenario 29-2.
The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the taz. Aggregate banking statistics show that collectively the banks of Tazi hold 300 million tazes of required reserves, 75 million tazes of excess reserves, have issued 7,500 million tazes of deposits, and hold 225 million tazes of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank.
-Refer to Scenario 29-2. Suppose that the Bank of Tazi changes the reserve requirement to 3 percent. Assuming that the banks still want to hold the same percentage of excess reserves what is the value of the money supply after the change in the reserve requirement?

Accepted Answer

A)   9,375 million tazes
B)   10,000 million tazes
C)   12,500 million tazes
D)   None of the above is correct to the nearest million tazes.E) A) and B)
F) A) and C)

Question 4

If the reserve ratio is 5 percent, then $600 of additional reserves can create up to

Accepted Answer

A)   $30 of new money.
B)   $3,000 of new money.
C)   $12,000 of new money.
D)   None of the above is correct.E) B) and C)
F) C) and D)

Question 5

How does the Fed Open Market Committee increase the money supply?

Accepted Answer

The answer of How does the Fed Open Market Committee...

Question 6

What does it mean for the Fed to be the "lender of last resort?"

Accepted Answer

When banks cannot borrow in the market p...

Question 7

To increase the money supply, the Fed can

Accepted Answer

A)   buy government bonds or increase the discount rate.
B)   buy government bonds or decrease the discount rate.
C)   sell government bonds or increase the discount rate.
D)   sell government bonds or decrease the discount rate.E) B) and D)
F) A) and B)

Question 8

The federal funds rate is the

Accepted Answer

A)   percentage of face value that the Federal Reserve is willing to pay for Treasury Securities.
B)   percentage of deposits that banks must hold as reserves.
C)   interest rate at which the Federal Reserve makes short-term loans to banks.
D)   interest rate at which banks lend reserves to each other overnight.E) A) and B)
F) A) and C)

Question 9

The existence of money makes trade easier. How is it that money can also increase the standard of living?

Accepted Answer

The existence of money means the economy...

Question 10

In an economy that relies upon barter,

Accepted Answer

A)   trade does not require a double coincidence of wants.
B)   scarce resources are allocated just as easily as they are in economies that do not rely upon barter.
C)   there is no item in the economy that is widely accepted in exchange for goods and services.
D)   All of the above are correct.E) B) and D)
F) A) and C)

Question 11

At any meeting of the Federal Open Market Committee, that committee's voting members consist of

Accepted Answer

A)   5 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors.
B)   5 Federal Reserve Regional Bank Presidents and 5 members of the Board of Governors.
C)   12 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors.
D)   12 Federal Reserve Regional Bank Presidents and 5 members of the Board of Governors.E) None of the above
F) A) and B)

Question 12

Table 29-3. An economy starts with $50,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $45,750. The T-account of the bank is shown below.
 
-Refer to Table 29-3. If all banks in the economy have the same reserve ratio as this bank, then the value of the economy's money multiplier is

Accepted Answer

A)   9.33.
B)   1.09.
C)   10.76.
D)   11.76.E) C) and D)
F) B) and D)

Question 13

Demand deposits are a type of

Accepted Answer

A)   checking account.
B)   time deposit.
C)   money market mutual fund.
D)   savings deposit.E) C) and D)
F) B) and C)

Question 14

A decrease in the money supply might indicate that the Fed had

Accepted Answer

A)   purchased bonds to increase banks reserves.
B)   purchased bonds to decrease banks reserves.
C)   sold bonds to increase banks reserves.
D)   sold bonds to decrease banks reserves.E) A) and D)
F) B) and C)

Question 15

If the reserve ratio is 4 percent, then $81,250 of new money can be generated by

Accepted Answer

A)   $325 of new reserves.
B)   $3,250 of new reserves.
C)   $20,312.50 of new reserves.
D)   $2,031,250 of new reserves.E) B) and C)
F) A) and B)

Question 16

The Board of Governors

Accepted Answer

A)   is chaired by the U.S. Secretary of the Treasury.
B)   members are elected by the U.S. public.
C)   has 7 members.
D)   All of the above are correct.E) All of the above
F) B) and D)

Question 17

When the Fed purchases $1000 worth of government bonds from the public, the U.S. money supply eventually increases by

Accepted Answer

A)   more than $1000.
B)   exactly $1000.
C)   less than $1000.
D)   None of the above are correct.E) A) and D)
F) None of the above

Question 18

Which of the following increases when the Fed makes open-market sales?

Accepted Answer

A)   currency and reserves
B)   currency but not reserves
C)   reserves but not currency
D)   neither currency nor reservesE) None of the above
F) B) and D)

Question 19

Which list ranks assets from most to least liquid?

Accepted Answer

A)   currency, fine art, stocks
B)   currency, stocks, fine art
C)   fine art, currency, stocks
D)   fine art, stocks, currencyE) C) and D)
F) A) and C)

Question 20

Today, bank runs are not a major problem for the U.S. banking system because

Accepted Answer

A)   bank runs are now illegal.
B)   banks now hold 100 percent of their deposits in reserve.
C)   banks are now all government-operated.
D)   the federal government now guarantees the safety of deposits at most banks.E) A) and D)
F) A) and C)

Exam 21: The Monetary System

The federal funds rate is the

Correct Answer
verified

Which of the following increases when the Fed makes open-market sales?

Correct Answer
verified

A decrease in the money supply might indicate that the Fed had

Correct Answer
verified

Correct Answer
verified

If the reserve ratio is 4 percent, then $81,250 of new money can be generated by

Correct Answer
verified

If the reserve ratio is 5 percent, then $600 of additional reserves can create up to

Correct Answer
verified

The existence of money makes trade easier. How is it that money can also increase the standard of living?

Correct Answer
verified
The existence of money means the economy...
View Answer

Demand deposits are a type of

Correct Answer
verified

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Correct Answer
verified
Commodity money has "intrinsic value," o...
View Answer

To increase the money supply, the Fed can

Correct Answer
verified

How does the Fed Open Market Committee increase the money supply?

Correct Answer
verified

In an economy that relies upon barter,

Correct Answer
verified

Fiat money

Correct Answer
verified

Today, bank runs are not a major problem for the U.S. banking system because

Correct Answer
verified

When the Fed purchases $1000 worth of government bonds from the public, the U.S. money supply eventually increases by

Correct Answer
verified

Correct Answer
verified

At any meeting of the Federal Open Market Committee, that committee's voting members consist of

Correct Answer
verified

The Board of Governors

Correct Answer
verified

What does it mean for the Fed to be the "lender of last resort?"

Correct Answer
verified
When banks cannot borrow in the market p...
View Answer

Which list ranks assets from most to least liquid?

Correct Answer
verified

Exam 21: The Monetary System

The federal funds rate is the

Correct AnswerverifiedShow Answer

Which of the following increases when the Fed makes open-market sales?

Correct AnswerverifiedShow Answer

A decrease in the money supply might indicate that the Fed had

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the reserve ratio is 4 percent, then $81,250 of new money can be generated by

Correct AnswerverifiedShow Answer

If the reserve ratio is 5 percent, then $600 of additional reserves can create up to

Correct AnswerverifiedShow Answer

The existence of money makes trade easier. How is it that money can also increase the standard of living?

Correct AnswerverifiedThe existence of money means the economy...View AnswerShow Answer

Demand deposits are a type of

Correct AnswerverifiedShow Answer

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Correct AnswerverifiedCommodity money has "intrinsic value," o...View AnswerShow Answer

To increase the money supply, the Fed can

Correct AnswerverifiedShow Answer

How does the Fed Open Market Committee increase the money supply?

Correct AnswerverifiedShow Answer

In an economy that relies upon barter,

Correct AnswerverifiedShow Answer

Fiat money

Correct AnswerverifiedShow Answer

Today, bank runs are not a major problem for the U.S. banking system because

Correct AnswerverifiedShow Answer

When the Fed purchases $1000 worth of government bonds from the public, the U.S. money supply eventually increases by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

At any meeting of the Federal Open Market Committee, that committee's voting members consist of

Correct AnswerverifiedShow Answer

The Board of Governors

Correct AnswerverifiedShow Answer

What does it mean for the Fed to be the "lender of last resort?"

Correct AnswerverifiedWhen banks cannot borrow in the market p...View AnswerShow Answer

Which list ranks assets from most to least liquid?

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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Correct Answer
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The existence of money means the economy...
View Answer

Correct Answer
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Correct Answer
verified
Commodity money has "intrinsic value," o...
View Answer

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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Correct Answer
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Correct Answer
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Correct Answer
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When banks cannot borrow in the market p...
View Answer

Correct Answer
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