Question 1

Demand deposits are a type of

Accepted Answer

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

Question 2

When the Soviet Union began breaking up in the late 1980s,cigarettes began replacing the ruble as the medium of exchange even though the ruble was legal tender.The cigarettes provide an example of fiat money.

Accepted Answer

A) True 
 B)False

Question 3

If people decide to hold more currency relative to deposits,the money supply

Accepted Answer

A)   falls.The Fed could lessen the impact of this by buying Treasury bonds.
B)   falls.The Fed could lessen the impact of this by selling Treasury bonds.
C)   rises.The Fed could lessen the impact of this by buying Treasury bonds.
D)   rises.The Fed could lessen the impact of the by selling Treasury bonds.E) B) and C)
F) B) and D)

Question 4

Other things the same if reserve requirements are decreased,the reserve ratio

Accepted Answer

A)   decreases,the money multiplier increases,and the money supply decreases.
B)   increases,the money multiplier increases,and the money supply increases.
C)   decreases,the money multiplier increases,and the money supply increases.
D)   increases,the money multiplier increases,and the money supply decreases.E) A) and B)
F) A) and C)

Question 5

If the reserve ratio is 8 percent,banks do not hold excess reserves,and people do not hold currency,then when the Fed purchases $20 million of government bonds,bank reserves

Accepted Answer

A)   increase by $20 million and the money supply eventually increases by $250 million.
B)   decrease by $20 million and the money supply eventually increases by $250 million.
C)   increase by $20 million and the money supply eventually decreases by $250 million.
D)   decrease by $20 million and the money supply eventually decreases by $250 million.E) A) and B)
F) B) and D)

Question 6

Which of the following statements about the Federal Reserve is not correct?

Accepted Answer

A)   The members of the Board of Governors are also presidents of the Federal Reserve's regional banks.
B)   The Federal Open Market Committee makes monetary policy.
C)   All members of the Board of Governors sit on the Federal Open Market Committee.
D)   The Federal Reserve serves as a bank regulator.E) A) and B)
F) A) and C)

Question 7

Commodity money is

Accepted Answer

A)   backed by gold.
B)   the principal type of money in use today.
C)   money with intrinsic value.
D)   receipts created in international trade that are used as a medium of exchange.E) B) and C)
F) A) and D)

Question 8

On a T-account for a bank,

Accepted Answer

A)   reserves and deposits are both assets.
B)   reserves are assets and deposits are liabilities.
C)   deposits are assets and reserves are liabilities.
D)   reserves and deposits are both liabilities.E) None of the above
F) A) and B)

Question 9

If an economy used gold as money,its money would be

Accepted Answer

A)   commodity money,but not fiat money.
B)   fiat money,but not commodity money.
C)   both fiat and commodity money.
D)   functioning as a store of value and as a unit of account,but not as a medium of exchange.E) B) and C)
F) A) and B)

Question 10

A sale of government bonds by the Fed

Accepted Answer

A)   increases the money supply and increases the federal funds rate.
B)   increases the money supply and decreases the federal funds rate.
C)   decreases the money supply and increases the federal funds rate.
D)   decreases the money supply and decreases the federal funds rate.E) B) and D)
F) B) and C)

Question 11

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) None of the above
F) A) and B)

Question 12

Which individuals among the following serve four-year terms?

Accepted Answer

A)   the members of the Board of Governors
B)   the Chair of the Board of Governors
C)   the members of the FOMC
D)   All of the above are correct.E) A) and C)
F) B) and C)

Question 13

Which of the following is an example of barter?

Accepted Answer

A)   A parent gives a teenager a $10 bill in exchange for her babysitting services.
B)   A homeowner gives an exterminator a check for $50 in exchange for extermination services.
C)   A barber gives a plumber a haircut in exchange for the plumber fixing the barber's leaky faucet.
D)   All of the above are examples of barter.E) None of the above
F) B) and D)

Question 14

Which of the following defer payments?

Accepted Answer

A)   credit cards and debit cards
B)   neither credit cards nor debit cards
C)   credit cards but not debit cards
D)   debit cards but not credit cardsE) B) and C)
F) A) and B)

Question 15

Are credit cards and debit cards money? What's the difference between credit and debit cards?

Accepted Answer

Neither credit cards nor debit cards are...

Question 16

Under a fractional-reserve banking system,banks

Accepted Answer

A)   hold more reserves than deposits.
B)   generally lend out a majority of the funds deposited.
C)   cause the money supply to fall by lending out reserves.
D)   All of the above are correct.E) All of the above
F) B) and C)

Question 17

When we say that trade is roundabout we mean that

Accepted Answer

A)   people sometimes trade goods for goods.
B)   trades require a double coincidence of wants.
C)   currency is accepted primarily to make further trades.
D)   people must spend time searching for the products they wish to purchase.E) A) and B)
F) A) and C)

Question 18

Liquidity refers to

Accepted Answer

A)   the ease with which an asset is converted to the medium of exchange.
B)   a measurement of the intrinsic value of commodity money.
C)   the suitability of an asset to serve as a store of value.
D)   how many time a dollar circulates in a given year.E) None of the above
F) B) and D)

Question 19

Suppose a bank has a 10 percent reserve requirement,$5,000 in deposits,and has loaned out all it can given the reserve requirement.

Accepted Answer

A)   It has $50 in reserves and $4,950 in loans.
B)   It has $500 in reserves and $4,500 in loans.
C)   It has $555 in reserves and $4,445 in loans.
D)   None of the above is correct.E) B) and C)
F) All of the above

Question 20

The interest rate that the Fed charges banks that borrow reserves from it is the

Accepted Answer

A)   federal funds rate.
B)   discount rate.
C)   reserve requirement.
D)   prime rate.E) A) and D)
F) A) and B)

Exam 29: The Monetary System

Liquidity refers to

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A sale of government bonds by the Fed

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Under a fractional-reserve banking system,banks

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Demand deposits are a type of

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When we say that trade is roundabout we mean that

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If an economy used gold as money,its money would be

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Which of the following is an example of barter?

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Commodity money is

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On a T-account for a bank,

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

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Which of the following statements about the Federal Reserve is not correct?

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When the Soviet Union began breaking up in the late 1980s,cigarettes began replacing the ruble as the medium of exchange even though the ruble was legal tender.The cigarettes provide an example of fiat money.

Correct AnswerverifiedShow Answer

If the reserve ratio is 8 percent,banks do not hold excess reserves,and people do not hold currency,then when the Fed purchases $20 million of government bonds,bank reserves

Correct AnswerverifiedShow Answer

Are credit cards and debit cards money? What's the difference between credit and debit cards?

Correct AnswerverifiedNeither credit cards nor debit cards are...View AnswerShow Answer

Other things the same if reserve requirements are decreased,the reserve ratio

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Which individuals among the following serve four-year terms?

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Which of the following defer payments?

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The interest rate that the Fed charges banks that borrow reserves from it is the

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Suppose a bank has a 10 percent reserve requirement,$5,000 in deposits,and has loaned out all it can given the reserve requirement.

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If people decide to hold more currency relative to deposits,the money supply

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Neither credit cards nor debit cards are...
View Answer

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