Question 1

In the nation of Wiknam, the money supply is $80,000 and reserves are $18,000. Assuming that people hold only deposits and no currency, and that banks hold no excess reserves, then the reserve requirement is

Accepted Answer

A)   29 percent.
B)   22.5 percent.
C)   16 percent.
D)   None of the above is correct.E) C) and D)
F) A) and D)

Question 2

When conducting an open-market purchase, the Fed

Accepted Answer

A)   buys government bonds, and in so doing increases the money supply.
B)   buys government bonds, and in so doing decreases the money supply.
C)   sells government bonds, and in so doing increases the money supply.
D)   sells government bonds, and in so doing decreases the money supply.E) C) and D)
F) A) and B)

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. Assuming the only other thing Tazian banks have on their balance sheets is loans, what is the value of existing loans made by Tazian banks?

Accepted Answer

A)   6,900 million tazes
B)   7,125 million tazes
C)   7,350 million tazes
D)   None of the above is correct.E) None of the above
F) A) and D)

Question 4

Members of the Board of Governors are appointed by the president of the U.S. and confirmed by the U.S. Senate.

Accepted Answer

A) True 
 B)False

Question 5

Credit cards

Accepted Answer

A)   represent the largest component of M1.
B)   are not included in M1 but are included in M2.
C)   are a form of money unique to the U.S.
D)   are not considered money.E) B) and C)
F) None of the above

Question 6

In an economy that relies on barter, trade requires a double-coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 7

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 the Bank of Tazi purchased 50 million tazes of Tazian Treasury Bonds from the banks. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much does the money supply change?

Accepted Answer

A)   625 million tazes
B)   1,000 million tazes
C)   1,250 million tazes
D)   None of the above is correct.E) B) and C)
F) A) and D)

Question 8

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) B) and C)
F) A) and D)

Question 9

The amount of currency per person in the United States is about

Accepted Answer

A)   $110.
B)   $300.
C)   $2,450.
D)   $4,490.E) C) and D)
F) B) and D)

Question 10

Federal Reserve governors are given long terms to insulate them from politics.

Accepted Answer

A) True 
 B)False

Question 11

A problem that the Fed faces when it attempts to control the money supply is that

Accepted Answer

A)   since the U.S. has a fractional-reserve banking system, the amount of money in the economy depends in part on the behavior of depositors and bankers.
B)   the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools.
C)   while the Fed has the ability to change the money supply by a large amount, it does not have the ability to change it by a small amount.
D)   federal legislation in the 1950s stripped the Fed of its power to act as a lender of last resort to banks.E) B) and C)
F) A) and D)

Question 12

If the Fed decreases reserve requirements, the money supply will increase.

Accepted Answer

A) True 
 B)False

Question 13

You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money?

Accepted Answer

A)   medium of exchange
B)   unit of account
C)   store of value
D)   liquidityE) A) and D)
F) C) and D)

Question 14

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. Assume that banks desire to continue holding the same ratio of excess reserves to deposits. What is the reserve requirement and the reserve ratio for Tazian Banks?

Accepted Answer

A)   5 percent, 8 percent
B)   4 percent, 8 percent
C)   4 percent, 5 percent
D)   None of the above is correct.E) B) and D)
F) None of the above

Question 15

Which of the following is included in M1 and M2?

Accepted Answer

A)   traveler's checks
B)   savings deposits
C)   money market mutual funds
D)   small time depositsE) None of the above
F) All of the above

Question 16

In the months of November and December, people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays. As a result, other things the same, the money supply increases.

Accepted Answer

A) True 
 B)False

Question 17

Roundabout trade decreases production.

Accepted Answer

A) True 
 B)False

Question 18

The agency responsible for regulating the U.S. monetary system is the

Accepted Answer

A)   U.S. Treasury
B)   Federal Reserve
C)   Department of Justice
D)   Federal Trade CommissionE) A) and C)
F) B) and C)

Question 19

All of the presidents of the regional Federal Reserve banks

Accepted Answer

A)   attend each FOMC meeting.
B)   have voting rights at each FOMC meeting.
C)   are appointed by the president of the U.S. and confirmed by the U.S. Senate.
D)   All of the above are correct.E) A) and C)
F) All of the above

Question 20

All Fed purchases and sales of

Accepted Answer

A)   corporate stocks and bonds are conducted at the New York Fed's trading desk.
B)   government bonds are conducted at the New York Fed's trading desk.
C)   real estate and other real assets are conducted by the Federal Open Market Committee.
D)   All of the above are correct.E) B) and C)
F) A) and B)

Exam 29: The Monetary System

Roundabout trade decreases production.

Correct Answer
verified

In the months of November and December, people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays. As a result, other things the same, the money supply increases.

Correct Answer
verified

In the nation of Wiknam, the money supply is $80,000 and reserves are $18,000. Assuming that people hold only deposits and no currency, and that banks hold no excess reserves, then the reserve requirement is

Correct Answer
verified

All of the presidents of the regional Federal Reserve banks

Correct Answer
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The amount of currency per person in the United States is about

Correct Answer
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A problem that the Fed faces when it attempts to control the money supply is that

Correct Answer
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Credit cards

Correct Answer
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Correct Answer
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You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money?

Correct Answer
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In an economy that relies on barter, trade requires a double-coincidence of wants.

Correct Answer
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The agency responsible for regulating the U.S. monetary system is the

Correct Answer
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If the Fed decreases reserve requirements, the money supply will increase.

Correct Answer
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Which of the following is included in M1 and M2?

Correct Answer
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Federal Reserve governors are given long terms to insulate them from politics.

Correct Answer
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Correct Answer
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Correct Answer
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When conducting an open-market purchase, the Fed

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

Correct Answer
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All Fed purchases and sales of

Correct Answer
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Members of the Board of Governors are appointed by the president of the U.S. and confirmed by the U.S. Senate.

Correct Answer
verified

Exam 29: The Monetary System

Roundabout trade decreases production.

Correct AnswerverifiedShow Answer

In the months of November and December, people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays. As a result, other things the same, the money supply increases.

Correct AnswerverifiedShow Answer

In the nation of Wiknam, the money supply is $80,000 and reserves are $18,000. Assuming that people hold only deposits and no currency, and that banks hold no excess reserves, then the reserve requirement is

Correct AnswerverifiedShow Answer

All of the presidents of the regional Federal Reserve banks

Correct AnswerverifiedShow Answer

The amount of currency per person in the United States is about

Correct AnswerverifiedShow Answer

A problem that the Fed faces when it attempts to control the money supply is that

Correct AnswerverifiedShow Answer

Credit cards

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money?

Correct AnswerverifiedShow Answer

In an economy that relies on barter, trade requires a double-coincidence of wants.

Correct AnswerverifiedShow Answer

The agency responsible for regulating the U.S. monetary system is the

Correct AnswerverifiedShow Answer

If the Fed decreases reserve requirements, the money supply will increase.

Correct AnswerverifiedShow Answer

Which of the following is included in M1 and M2?

Correct AnswerverifiedShow Answer

Federal Reserve governors are given long terms to insulate them from politics.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When conducting an open-market purchase, the Fed

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

All Fed purchases and sales of

Correct AnswerverifiedShow Answer

Members of the Board of Governors are appointed by the president of the U.S. and confirmed by the U.S. Senate.

Correct AnswerverifiedShow Answer

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