ECON201 Chapter 10

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Gravity

Money is A) the same as income.

B) anything that is generally accepted as a medium
of exchange. C) the value of all coins and currency
in circulation at any time. D) backed by gold in Fort
Knox.
B
Any transaction that involves exchanging one
good for another without using money is
considered a
A) liquidity transaction. B) barter transaction. C)
 deferred payment.
D) black market exchange.
B
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Case Foster Questions, Macroeconomics
Tags related to this set
Principles Of Economics: Macroeconomics
Excess Reserves Are Equal To
Required Reserve Ratio
Could Have Caused

Terms in this set (142)

Money is A) the same as income.

B) anything that is generally accepted as a medium of exchange. C) the value of
all coins and currency in circulation at any time. D) backed by gold in Fort Knox.
B
Any transaction that involves exchanging one good for another without using
money is considered a
A) liquidity transaction. B) barter transaction. C) deferred payment.
D) black market exchange.
B
Jacob makes excellent tamales and Amanda is very good at mowing lawns.
Amanda agrees to mow Jacob'ʹs lawn, if he makes her a dozen tamales. This is
an example of
A) legal tender. B) barter. C) commodity money.
D) fiat money.
B
Which of the following factors causes the barter system to be inefficient? A) Its
cost of transaction is too low.
B) The cost associated with information search is too low. C) It requires a double
coincidence of wants. D) It requires high liquidity.
C
Josie wants to trade swimming lessons for cooking lessons. Maria wants to trade
cooking lessons for swimming lessons. Josie and Maria have
A) the basis for a liquidity exchange. B) a double incidence of demand. C) the
basis for a double fiat exchange.
D) a double coincidence of wants.
D
The development of money as a medium of exchange has facilitated the
expansion of trade because
A) holding money increases people'ʹs wealth. B) holding money increases
people'ʹs income. C) money eliminates the "ʺdouble coincidence of wants"ʺ
problem.
D) no other mediums of exchange are available.
C
When money is used as a medium of exchange A) the need for a barter system
diminishes.
B) the cost of transactions increases. C) the need for a banking system in the
economy decreases. D) it reduces the number of transactions in the economy.
A
Betty won $500 in a poker tournament. She deposits her $500 winnings into a
money market fund so that she can use the money next year to help her pay for
a trip to Las Vegas. This is an example of money serving as a(n)
A) unit of account. B) medium of exchange. C) store of value.
D) investment good.
C
When you pay $8 for salad you ordered for lunch, you are using money as a(n)
A) store of value.
B) investment good. C) medium of exchange. D) unit of account.
C
Veronica received a federal income tax rebate check of $600 in May 2008.
Veronica put this money in a saving account so that she could spend it when she
went on vacation in July 2008. This is an example of money serving as a(n)
A) store of value. B) medium of exchange. C) unit of account.
D) investment good.
A
When you keep your savings in a saving account, you are using money as a(n)
A) investment good.
B) store of value. C) medium of exchange. D) unit of account.
B
The main disadvantage of using money as a store of value is that A) money is
not portable.
B) it requires a double coincidence of wants. C) currency is intrinsically
worthless. D) the value of money actually falls when the prices of goods and
services rise.
D
The liquidity property of money is the property that makes money A) a good
medium of exchange and a good unit of account.
B) a good store of value and a good unit of account. C) a good medium of
exchange and a good store of value. D) a good store of value and a good
standard of deferred payment.
C
When the manager of a department store attaches price tags to his/her products,
he/she is using money as a
A) medium of exchange. B) store of value. C) unit of transfer.
D) unit of account.
D
Circuit City, a retailer of electronics, has 2,000 different products in inventory.
Circuit City reports its inventory is worth $12 million. This is an example of using
money as a
A) medium of exchange. B) unit of account. C) standard of deferred payment.
D) store of value.
B
Denny'ʹs lists the price of a Grand Slam Breakfast at $4.99 a plate. Listing the
price on the menu is an example of money serving as a(n)
A) store of value. B) unit of account. C) medium of exchange.
D) investment good.
B
When Mexico experiences a period of high inflation and Mexicans lose
confidence in their peso as a store of value, which of the following would be most
likely to occur?
A) The demand for pesos would increase. B) The buying power of the peso
would increase. C) The value of foreign currencies would depreciate relative to
the peso.
D) Mexicans would use a different currency as a medium of exchange.
D
A currency that is not backed by gold, silver, or any other precious commodity
equal to the face value of the money is known as
A) fake money. B) weak money. C) token money.
D) commodity money.
C
After World War II, cigarettes were used as money in Germany. This is an
example of A) fiat money.
B) legal money. C) token money. D) commodity money.
D
The U.S. dollar is an example of fiat money because A) it is the strongest
currency in the world.
B) it is the most widely used currency in international trade. C) it is backed by a
large reserve of gold and silver. D) by law, it is decreed as money.
D
Which of the following is an example of fiat money? A) cigarettes
B) an ounce of gold C) a U.S. one-hundred dollar bill D) a government bond
C
Money that a government has required to be accepted in settlement of debts is
A) fiat money.
B) commodity money. C) barter money. D) legal tender.
D
To ensure that paper money will be accepted, the U.S. government implicitly
promises the public that
A) it will not print money so fast that it loses its value. B) it will not change the
rate at which the dollar is exchanged for other currencies. C) it will always remain
the strongest currency of all industrialized nations.
D) the U.S. monetary system will always be backed by a precious metal.
A
Currency debasement occurs when A) the value of money falls as a result of a
rapid increase in its supply.
B) the government requires that a certain form of money must be accepted in
settlement of debts.
C) items are designated as money that are intrinsically worthless.
D) items are used as money that also have intrinsic value in some other use.
A
Assume that in the country of Salmon, the government tripled the money supply
overnight. As a result of this action, the price of a loaf of bread increased from 1
bill to 100 bills. This is an example of
A) a change in the legal tender. B) a change from commodity money to fiat
money. C) currency debasement.
D) deflation.
C
Currency held outside banks + demand deposits + travelers checks + other
checkable deposits =
A) M2
B) M1 and M2
C) neither M1 or M2
D) M1
D
Transaction money is A) M1.
B) M2. C) M3. D) M4.
A
Traveler'ʹs checks are A) not money.
B) included in M1 and M2. C) not included in M2. D) not included in M1.
B
Which of the following is included in M2, but not included in M1?
A) currency held outside banks B) travelers checks C) demand deposits
D) savings accounts
D
Jaime transfers $2,500 from his checking account to his savings account. This
transaction will A) decrease both M1 and M2.
B) not change M1 and decrease M2. C) decrease M1 and not change M2. D)
increase both M1 and M2.
C
Ruby transfers $700 from her saving account to her checking account. This
transaction will A) increase M1 and not change M2.
B) not change M1 and decrease M2. C) increase both M1 and M2. D) decrease
both M1 and M2.
A
Teddy transfers $175 from his money market fund to his checking account. This
transaction will
A) decrease M2 and increase M1. B) increase M1, but leave M2 unchanged. C)
decrease M1 and increase M2.
D) decrease both M1 and M2.
B
Which of the following would NOT be counted as part of M1?
A) demand deposits B) traveler'ʹs check C) money market accounts
D) currency
C
Saving account balances are included in A) M1.
B) M2. C) neither M1 nor M2. D) both M1 and M2.
B
Which of the following would NOT be included in M2?
A) demand deposits B) money market accounts C) checking accounts
D) Treasury bonds
D
Included in M2 are A) bank loans.
B) credit cards. C) bank capital. D) demand deposits
D
Which of the following would NOT be included in M1?
A) demand deposits B) money market accounts C) checking accounts
D) traveler'ʹs checks
B
Currency held outside banks is included in A) both M1 and M2.
B) M2 only. C) M1 only. D) neither M1 nor M2.
A
Close substitutes for transactions money are known as A) fiat monies.
B) near monies. C) commodity monies. D) token monies.
B
Which of the following is the best example of a near money? A) a valuable
painting
B) a dollar bill C) a Treasury bond D) a money market account
D
An equation for M1 is A) M2 + Savings Accounts - Currency Held Outside Banks
+ Other Near Monies.
B) M2 - Savings Accounts - Money Market Accounts - Other Near Monies. C)
Money Market Accounts + Automatic-transfer Savings Accounts.
D) M2 + Near Monies
B
The main advantage of using M2 instead of M1 as the measure for money is that
A) M2 can be measured more accurately.
B) M2 includes only instantly accessible assets. C) M2 is sometimes more stable.
D) M2 varies as the interest rate varies.
C
Commercial banks A) implement monetary policy.
B) are nonprofit organizations that lend and borrow funds. C) are financial
intermediaries that lend funds and accept deposits. D) hold reserves against
bank capital.
C
Among the assets of a commercial bank are A) loans.
B) demand deposits. C) savings deposits. D) time deposits.
A
Among the liabilities of commercial banks are A) loans.
B) demand deposits. C) reserves. D) government securities.
B
Net worth is A) assets - liabilities.
B) assets + capital. C) assets - capital. D) assets + liabilities.
A
Related to the Economics in Practice on p. 183 [495]: In the Solomon Islands,
dolphin teeth are used as currency. In this instance, dolphin teeth would be
considered
A) fiat money. B) token money. C) commodity money.
D) legal tender.
C
Related to the Economics in Practice on p. 183 [495]: In the Solomon Islands,
dolphin teeth are used as currency. Using dolphin teeth to make a purchase
would be using the teeth as a(n)
A) medium of exchange. B) store of value. C) unit of account.
D) legal tender.
A
When you use money to fill your car with gas every week, you are using money
as a unit of account.
False
Money is anything that generally is accepted as a medium of exchange.
True
In an economy that uses fiat money, there is no need for double coincidence of
wants.
true
When you take $100 from your saving account and deposit it in your checking
account, M2
decreases.
False
If all banks are loaned up and so will not make further loans, a $1,000 deposit
creates $1,000 in new money.
False
Fiat money is money the government says is money.
True
The M1 definition of money includes money market accounts.
False
The M2 definition of money includes demand deposits.
true
Napoli National Bank has liabilities of $3 million and net worth of $200,000.
Napoli National Bank'ʹs assets are
A) $200,000. B) $3 million C) $3.2 million.
D) $2.8 million.
C
Saturn County Savings and Loan has liabilities of $400,000 and net worth of
$125,000. Saturn County Savings and Loan'ʹs assets are
A) $525,000. B) $275,000. C) $400,000. D) $125,000.
A
Thompson National Trust has assets of $500,000 and liabilities of $400,000.
Thompson National Trust'ʹs net worth is
A) $900,000. B) $400,000. C) $100,000. D) $500,000.
C
A commercial bank lists A) loans as liabilities.
B) deposits as liabilities. C) required reserves as liabilities. D) excess reserves as
liabilities.
B
Things that a firm owns that are worth something are classified as A) liabilities.
B) assets. C) deposits. D) net worth.
B
Which of the following is considered a liability to a bank? A) time deposits
B) reserves C) the bank'ʹs loans D) the bank'ʹs buildings and equipment
A
The central bank of the United States is known as the A) Federal Reserve
System.
B) Federal Deposit Insurance Corporation. C) Department of the Treasury. D)
Federal Savings and Loan Insurance Corporation
A
A loan made by a bank is considered ________ of that bank. A) a liability
B) capital C) net worth D) an asset
D
A checking deposit in a bank is considered ________ of that bank. A) an asset
B) a liability C) net worth D) capital
B
In T chart under liabilities -- Deposits of $800, Net worth of $400, total of $1,200
The required reserve ratio is 25%. If the First Charter Bank is meeting its reserve
requirement and has no excess reserves, its reserves equal
A) $100. B) $200. C) $600. D) $300.
B
In T chart under liabilities -- Deposits of $800, Net worth of $400, total of $1,200
The required reserve ratio is 25%. If the First Charter Bank is meeting its reserve
requirement and has no excess reserves, its loans equal
A) $900. B) $1,000. C) $600.
D) $1,800.
B
In T chart under liabilities -- Deposits of $800, Net worth of $400, total of $1,200
First Charter Bank'ʹs total assets are A) $1,200.
B) $400. C) $800. D) $2,400
A
Assets: Reserves $800,000 (required $200,000, Excess unknown), Loans
unknown, total $2.5 million
Liabilities: $2 million deposits, $500,000 net worth, total $2.5 mill:

First Commercial Bank'ʹs excess reserves equal $________. A) 600,000 B)

1,000,000 C) 200,000 D) 1,500,000
A
Assets: Reserves $800,000 (required $200,000, Excess unknown), Loans
unknown, total $2.5 million
Liabilities: $2 million deposits, $500,000 net worth, total $2.5 mill:
The required reserve ratio A) is 5%. B) is 10%. C) is 20%. D) cannot be
determined from the given information.
B
Assets: Reserves $800,000 (required $200,000, Excess unknown), Loans
unknown, total $2.5 million
Liabilities: $2 million deposits, $500,000 net worth, total $2.5 mill:
First Commercial Bank'ʹs total loans equal $________. A) 1,000,000 B)
5,000,000 C) 2,500,000 D) 1,700,000.
D
Assets: Reserves $300,000 (required $100,000, Excess unknown), Loans
unknown, total $800,000
Liabilities: $500,000 deposits, unknown net worth, total $800,000:
The net worth of People'ʹs Bank is $________. A) 1,000,000
B) 200,000 C) 800,000 D) 300,000
D
Assets: Reserves $300,000 (required $100,000, Excess unknown), Loans
unknown, total $800,000
Liabilities: $500,000 deposits, unknown net worth, total $800,000:
The required reserve ratio is A) 25%. B) 20%. C) 50%. D) 10%.
B
Assets: Reserves $300,000 (required $100,000, Excess unknown), Loans
unknown, total $800,000
Liabilities: $500,000 deposits, unknown net worth, total $800,000:
People'ʹs Bank excess reserves are $________. A) 200,000
B) 100,000 C) 300,000 D) 400,000
A
Assets: Reserves $300,000 (required $100,000, Excess unknown), Loans
unknown, total $800,000
Liabilities: $500,000 deposits, unknown net worth, total $800,000:
Total loans of People'ʹs Bank equal $________. A) 100,000
B) 400,000 C) 500,000 D) 800,000
C
Crescent City Bank has $200 million in deposits. Crescent City Bank is meeting
its reserve requirement and has no excess reserves. It has $40 million in
reserves. Crescent City Bank faces a required reserve ratio of
A) 5%. B) 4%. C) 20%.
D) 25%.
C
Narnia National Bank has $750 million in deposits. The required reserve ratio is
30%. Narnia National Bank must keep ________ in reserves.
A) $125 million B) $150 million C) $225 million D) $250 million
C
Neon Bank has $300 million in deposits. The required reserve ratio is 25%. Neon
Bank must keep ________ in reserves.
A) $275 million B) $145 million C) $75 million
D) $120 million
C
The Intracoastal Bank has $5 million in deposits and $500,000 in reserves. If the
required reserve ratio is 5%, excess reserves are equal to
A) $125,000. B) $500,000. C) zero.
D) $250,000.
D
The Bank of Arugula has $9 million in deposits and $900,000 in reserves. If the
required reserve ratio is 10%, excess reserves are equal to
A) $90,000. B) $180,000. C) $81,000.
D) zero.
D
The Bank of Red Oak has $2 million in deposits and $400,000 in reserves. If
excess reserves are equal to $100,000, the required reserve ratio is
A) 15%. B) 10%. C) 20%.
D) 5%
A
Reserves 1.2 mill, Loans 6.8 mill, total assets 8 mill; 8 mill deposits, total
liabilities 8 mill
If the required reserve ratio is 15%, First Charter Bank A) is loaned up.
B) has too few reserves on hand. C) is meeting its required reserve ratio and has
$200,000 in excess reserves. D) has excess reserves of $100,000.
A
Reserves 1.2 mill, Loans 6.8 mill, total assets 8 mill; 8 mill deposits, total
liabilities 8 mill:
First Charter Bank could make additional, first round loans of $400,000 if the
required reserve ratio were A) 10%. B) 8%. C) 7.5%. D) 12%.
A
Reserves 1.2 mill, Loans 6.8 mill, total assets 8 mill; 8 mill deposits, total
liabilities 8 mill:
If the required reserve ratio were changed to 5% and First Charter Bank
continues to hold $1,200,000 in reserves, its excess reserves will be
A) $600,000. B) $1,000,000. C) $800,000.
D) $400,000.
C
Dollar Bank is currently loaned up. If the required reserve ratio is lowered, A)
Dollar Bank'ʹs net worth will increase.
B) Dollar Bank will have excess reserves that it can lend out. C) Dollar Bank will
still be loaned up because it did not receive any additional deposits. D) Dollar
Bank'ʹs actual reserves will increase, but it will still be loaned up.
B
When a bank has no excess reserves, and thus can make no more loans, it is
said to be A) bankrupt.
B) ripe for a takeover. C) in receivership. D) loaned up.
D
Commercial banks create money through A) printing treasury notes. B) making
loans. C) facilitating borrowing from the Federal Reserve to the public. D)
reducing risk in the economy.
B
The multiple by which total deposits can increase for every dollar increase in
reserves is the A) required reserve ratio.
B) bank'ʹs line of credit. C) deposit insurance limit. D) money multiplier.
D
Suppose the required reserve ratio is 20%. A $40 million cash deposit will, at
most, allow an expansion of the money supply to A) $20 million. B) $80 million.
C) $200 million.
D) $800 million.
C
Suppose the required reserve ratio is 15%. A $10 million deposit will, at most,
allow an expansion of the money supply to
A) $147.5 million. B) $250 million. C) $150 million.
D) $66.7 million.
D
The required reserve ratio is 5%. The money multiplier is A) 0.5. B) 5. C) 15. D)
20.
D
The required reserve ratio is 50%. The money multiplier is A) 2.5. B) 10. C) 5. D)
2.
D
If the money multiplier is 8, the required reserve ratio is A) 8%. B) 16%. C)
12.5%. D) 20%.
C
Assume that banks become more conservative in their lending policies and start
holding some excess reserves. Compared to a situation in which banks are not
holding excess reserves, the size of the money supply will be
A) zero. B) larger. C) the same. D) smaller.
D
As commercial banks keep more excess reserves, money creation A) increases.
B) decreases. C) remains the same. D) could either increase or decrease.
B
(order: new deposit, required reserve, loans):
Bank 1: (100,000;5,000;95,000)
Bank 2: (95,000;4,750;90,250)
Bank 3: (90,250;4,512;85,737)
B4:(85,737.50;4,28.90;81,450.63)
What is the required reserve ratio? A) 4% B) 5% C) 8% D) 10%
B
(order: new deposit, required reserve, loans):
Bank 1: (100,000;5,000;95,000)
Bank 2: (95,000;4,750;90,250)
Bank 3: (90,250;4,512;85,737)
B4:(85,737.50;4,28.90;81,450.63)
What is the money multiplier in this economy? A) 20 B) 10 C) 50 D) 16.67
A
(order: new deposit, required reserve, loans):
Bank 1: (100,000;5,000;95,000)
Bank 2: (95,000;4,750;90,250)
Bank 3: (90,250;4,512;85,737)
B4:(85,737.50;4,28.90;81,450.63)
Based on the initial $100,000 deposit, the money supply will, at most, expand to
A) $1 million. B) $2 million. C) $50 million.
D) $16.67 million.
B
(order: new deposit, required reserve, loans):
Bank 1: (100,000;5,000;95,000)
Bank 2: (95,000;4,750;90,250)
Bank 3: (90,250;4,512;85,737)
B4:(85,737.50;4,28.90;81,450.63)
If the required reserve ratio were changed to 10%, total loans of Bank No. 2 will
change to
A) 81,000. B) 90,000. C) 85,000. D) 77,440.
A
Only the required reserve ratio determines how much money the Federal
Reserve can create
false
Excess reserves in a bank are the difference between required reserves and the
bank'ʹs total net worth.
false
Among the assets of commercial banks are demand deposits.
false
The amount of money banks can loan out is determined by the discount rate.
false
Among the liabilities of commercial banks are deposits.
true
Since they must lend money to make money, all banks are necessarily insolvent.
false
The Federal Reserve System consists of ________ Federal Reserve Banks. A) 8
B) 10 C) 12 D) 14
C
Which of the following activities is one of the responsibilities of the Federal
Reserve? A) issuing new bonds to finance the federal budget deficit B) loaning
money to other countries that are friendly to the United States C) assisting banks
that are in a difficult financial position D) auditing the various agencies and
departments of the federal government
C
Among the members of the Federal Open Market Committee A) is the Secretary
of the Treasury. B) is the Comptroller of the Currency. C) are the seven members
of the Board of Governors of the Fed. D) is the Chair of the Senate Banking
Committee.
C
The Board of governors of the Fed A) are appointed by the House of
Representatives.
B) has 12 members. C) have a 7-year term. D) is headquartered in Washington,
D.C.
D
The Fed A) issues deposits to the public. B) lends money to foreign
governments. C) clears inter-bank payments. D) lends money to the public.
C
The President of the NY Federal Reserve Bank is always a member of the
Federal Open Market committee.
true
The Chair of the Fed also serves as one of the Reserve Bank Presidents.
false
The Fed acts as a lender of last resort for the banking system.
true
The members of the Board of Governors of the Fed make up a majority of the
Federal Open Market Committee.
true
The Fed is a division of the Department of the Treasury.
false
Which of the following instruments is NOT used by the Federal Reserve to
change the money supply?
A) the discount rate B) the required reserve ratio C) the federal tax code D) open
market operations
c
The Federal Open Market Committee (FOMC) directs the Open Market Desk to
A) determine the required reserve ratio. B) determine the discount rate. C) buy or
sell government securities. D) determine the federal funds rate.
c
Which of the following is NOT a tool available to the Fed to change the supply of
money? A) open market operations B) the required reserve ratio C) the money
multiplier D) the discount rate
c
The discount rate is A) the interest rate commercial banks charge each other for
borrowing funds. B) the interest rate commercial banks charge their new
customers. C) the interest rate the Fed charges commercial banks for borrowing
funds. D) the interest rate commercial banks charge their most creditworthy
customers.
C
A decrease in the required reserve ratio A) will increase the money supply. B) will
decrease the money supply. C) will not change the money supply. D) will
decrease the discount rate.
A
Assume that all commercial banks are loaned up. Total deposits in the banking
system are $200 million. The required reserve ratio is increased. The money
supply will
A) decrease. B) increase. C) not change because there was no change in
deposits. D) not change because the required reserve ratio has no impact on
money supply.
A
The Fed has tended not to use changes in the reserve requirement as a means
of controlling the money supply because
A) only banks that are members of the Fed are subject to reserve requirements,
and most banks do not belong to the Fed.
B) a change in the reserve requirement has only a very small impact on the
money supply. C) it is a crude monetary policy tool because a change in the
requirement does not affect banks until about two weeks after the change is
implemented. D) it takes a long time for the Congress to approve a change in the
reserve requirement.
C
The interest rate banks pay to borrow money from the Fed is the A) federal funds
rate.
B) discount rate. C) prime lending rate. D) reserve rate.
B
Which of the following represents an action by the Federal Reserve that is
designed to increase the money supply?
A) a decrease in the required reserve ratio B) an increase in the discount rate C)
a decrease in federal tax rates D) selling government securities in the open
market
A
Which of the following represents an action by the Federal Reserve that is
designed to increase the money supply?
A) buying government securities in the open market B) an increase in the
required reserve ratio C) a decrease in federal spending D) an increase in the
discount rate
A
Of the tools available to the Fed to regulate the money supply, which is the least
used? A) the federal funds rate B) the reserve ratio C) tax cutting D) the open-
market operations
B
If the Fed sells government securities, then there is A) an increase in the supply
of money.
B) a decrease in the supply of money. C) a decrease in the discount rate. D) an
increase in the required reserve ratio.
B
Which of the following represents an action by the Federal Reserve that is
designed to decrease the money supply?
A) a decrease in the discount rate B) a decrease in federal spending C) selling
government securities in the open market
D) a decrease in the required reserve ratio
C
When the Fed raises the required reserve ratio, the banks'ʹ excess reserves will
initially ________ and the money supply ________.
A) remains constant; decreases B) decrease; decreases C) increase; remain
constant
D) increase; increases
b
The best instrument for controlling week-to-week changes in the money supply is
A) the required reserve ratio.
B) moral suasion. C) open-market operations. D) the discount rate.
C
Which of the following statements is FALSE? A) Open-market operations can be
used by the Federal Reserve with some precision. B) Open-market operations
are extremely flexible. C) The Federal Reserve undertakes open-market
operations on an infrequent basis. D) Open-market operations have a fairly
predictable effect on the supply of money.
C
An open-market purchase of securities by the Fed results in ________ in
reserves and ________ in the supply of money.
A) an increase; a decrease B) a decrease; a decrease C) an increase; an
increase
D) a decrease; an increase
C
An open-market sale of securities by the Fed results in ________ in reserves and
________ in the supply of money.
A) an increase; a decrease B) an increase; an increase C) a decrease; an
increase
D) a decrease; a decrease
D
Assume there is no leakage from the banking system and that all commercial
banks are loaned up. The required reserve ratio is 16%. If the Fed sells $5 million
worth of government securities to the public, the change in the money supply will
be
A) -$16 million. B) -$31.25 million. C) -$21 million.
D) -$11.75 million.
B
Assume there is no leakage from the banking system and that all commercial
banks are loaned up. The required reserve ratio is 10%. If the Fed buys $10
million worth of government securities from the public, the change in the money
supply will be
A) $1 million. B) $110 million. C) $100 million.
D) $10 million.
C
The money supply has increased from $1.4 trillion to $1.45 trillion. Which of the
following could have caused this increase?
A) The Fed sold government securities to the public. B) Consumers who were
holding money outside the banking system deposit this money. C) The Fed
increased the discount rate.
D) Commercial banks began to hold excess reserves.
B
If the Fed sets the money supply independent of the interest rate, then the
money supply curve is
A) upward sloping. B) downward sloping. C) vertical.
D) horizontal.
C
A decrease in the required reserve ratio increases the money supply.
true
A sale of government securities to the public by the Federal Reserve will
increase the money supply.
false
The discount rate cannot be used to control the money supply with great
precision because its effects on banks'ʹ demand for reserves are uncertain.
true
The tool most frequently used by the Fed to change the money supply is
changing the required reserve ratio.
false
If the Fed buys securities on the open market, it will increase the money supply
true