Question 1

Money is the most liquid asset in the economy.

Accepted Answer

A) True 
 B)False

Question 2

Use the following to answer questions 
Scenario: Holding Cash
Suppose that the public holds 50% of the money supply in currency and the reserve requirement is 20%. Banks hold no excess reserves. A customer deposits $6,000 in her checkable deposit.
-(Scenario: Holding Cash)  Look at the scenario Holding Cash. As a result of the deposit, the bank's loans will increase by:

Accepted Answer

A)   $6,000.
B)   $1,200.
C)   $3,000.
D)   $4,800.E) B) and C)
F) A) and C)

Question 3

Use the following to answer questions 
Table: Components of the Money System 
-(Table: Components of the Money Supply)  Look at the table Money Supply. The money supply measured by M2 is:

Accepted Answer

A)   $450 billion.
B)   $1,425 billion.
C)   $1,725 billion.
D)   $2,075 billion.E) None of the above
F) B) and C)

Question 4

Suppose your grandma sends you $100 for your birthday and you deposit that $100 in your checking account. The reserve ratio is 10%. Based upon this deposit, the bank's excess reserves have increased by _____, and if the bank lends these new excess reserves, the money supply could eventually grow by as much as an additional _____.

Accepted Answer

A)   $90; $1,000
B)   $100; $900
C)   $90; $900
D)   $100; $1,000E) A) and B)
F) B) and D)

Question 5

Use the following to answer questions : 
-(Scenario: Assets and Liabilities of the Banking System)  Look at the scenario Assets and Liabilities of the Banking System. If the reserve ratio is 5% and the banking system does NOT want to hold excess reserves, how much more can be added to the money supply?

Accepted Answer

A)   about $667,000
B)   about $111,000
C)   $250,000
D)   $1 millionE) None of the above
F) B) and D)

Question 6

The two parts of the U.S. Federal Reserve are the Board of Governors and 50 regional banks.

Accepted Answer

A) True 
 B)False

Question 7

If the Federal Reserve buys $250 million worth of U.S. Treasury bills in the open market and the reserve ratio is 10%, then the money supply will:

Accepted Answer

A)   have the potential to increase by $2,500 million.
B)   remain unchanged.
C)   increase by only $250 million.
D)   increase by only $25 million.E) A) and B)
F) A) and C)

Question 8

The Panic of 1907, the savings and loan crisis, and the financial crisis of 2008 were similar in that they all:

Accepted Answer

A)   were caused by restrictive monetary policy.
B)   involved financial institutions that were not as strictly regulated as deposit-taking banks.
C)   were caused by large budget deficits.
D)   were caused by excessive regulation by the Federal Reserve.E) C) and D)
F) B) and C)

Question 9

The monetary base is the sum of:

Accepted Answer

A)   reserves held by the banks and currency in circulation.
B)   checkable bank deposits and bank reserves.
C)   savings deposits and currency in circulation.
D)   checkable bank deposits and currency in circulation.E) All of the above
F) A) and D)

Question 10

The discount rate is usually exactly equal to the federal funds rate.

Accepted Answer

A) True 
 B)False

Question 11

A bank's capital is the:

Accepted Answer

A)   sum of its total assets and total liabilities.
B)   difference between its total assets and its total liabilities.
C)   difference between its total assets and its total required reserves.
D)   sum of its liabilities.E) C) and D)
F) B) and C)

Question 12

The functions of money are:

Accepted Answer

A)   expander of economic activity, medium of exchange, and store of value.
B)   medium of exchange, store of value, and factor of production.
C)   store of value, medium of exchange, and determinant of investment.
D)   store of value, unit of account, and medium of exchange.E) A) and C)
F) A) and B)

Question 13

The main problem with the national banking system in the United States between 1864 and 1913 was that the money supply was difficult to shift from urban to rural areas.

Accepted Answer

A) True 
 B)False

Question 14

Money is any asset that:

Accepted Answer

A)   the government says is money.
B)   can easily be used to purchase goods and services.
C)   has a positive value.
D)   the government says is money and that has a positive value.E) A) and C)
F) C) and D)

Question 15

The money multiplier and the required reserve ratio are:

Accepted Answer

A)   independent of one another.
B)   directly related to one another.
C)   inversely related.
D)   both greater than 1.E) None of the above
F) A) and B)

Question 16

Money used to buy a ticket to a football game is functioning primarily as a:

Accepted Answer

A)   medium of exchange.
B)   store of value.
C)   unit of account.
D)   standard of deferred payment.E) None of the above
F) A) and B)

Question 17

The main problem with the banking system from 1864 to 1913 was that:

Accepted Answer

A)   the Federal Reserve's monetary policy was too restrictive.
B)   government budget deficits destabilized the system.
C)   the money supply was not sufficiently responsive to local economic changes.
D)   the currency was not uniform because each bank issued its own notes.E) A) and C)
F) A) and B)

Question 18

A bank run occurs when:

Accepted Answer

A)   too many people are trying to borrow more at one time.
B)   many bank depositors are trying to withdraw their funds from the bank.
C)   interest rates start to increase.
D)   interest rates are higher than inflation rates.E) C) and D)
F) None of the above

Question 19

Money that some authority, generally a government, has ordered to be accepted as a medium of exchange is called _____ money.

Accepted Answer

A)   fiat
B)   intrinsic
C)   bank-created
D)   debtE) B) and C)
F) All of the above

Question 20

The _____ multiplier is equal to _____.

Accepted Answer

A)   reserve; the required reserve ratio
B)   bank loan; the required reserve ratio divided by 1
C)   money; 1 divided by the required reserve ratio
D)   excess reserve; change in reserves divided by the change in depositsE) None of the above
F) A) and C)

Exam 26: Money, Banking, and the Federal Reserve System

Correct Answer
verified

The _ multiplier is equal to _.

Correct Answer
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Money is any asset that:

Correct Answer
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A bank's capital is the:

Correct Answer
verified

The Panic of 1907, the savings and loan crisis, and the financial crisis of 2008 were similar in that they all:

Correct Answer
verified

Use the following to answer questions Table: Components of the Money System -(Table: Components of the Money Supply) Look at the table Money Supply. The money supply measured by M2 is:

Correct Answer
verified

If the Federal Reserve buys $250 million worth of U.S. Treasury bills in the open market and the reserve ratio is 10%, then the money supply will:

Correct Answer
verified

The functions of money are:

Correct Answer
verified

The two parts of the U.S. Federal Reserve are the Board of Governors and 50 regional banks.

Correct Answer
verified

Money that some authority, generally a government, has ordered to be accepted as a medium of exchange is called _____ money.

Correct Answer
verified

The monetary base is the sum of:

Correct Answer
verified

The discount rate is usually exactly equal to the federal funds rate.

Correct Answer
verified

The main problem with the national banking system in the United States between 1864 and 1913 was that the money supply was difficult to shift from urban to rural areas.

Correct Answer
verified

A bank run occurs when:

Correct Answer
verified

Correct Answer
verified

The main problem with the banking system from 1864 to 1913 was that:

Correct Answer
verified

Correct Answer
verified

The money multiplier and the required reserve ratio are:

Correct Answer
verified

Money is the most liquid asset in the economy.

Correct Answer
verified

Money used to buy a ticket to a football game is functioning primarily as a:

Correct Answer
verified

Exam 26: Money, Banking, and the Federal Reserve System

Correct AnswerverifiedShow Answer

The _____ multiplier is equal to _____.

Correct AnswerverifiedShow Answer

Money is any asset that:

Correct AnswerverifiedShow Answer

A bank's capital is the:

Correct AnswerverifiedShow Answer

The Panic of 1907, the savings and loan crisis, and the financial crisis of 2008 were similar in that they all:

Correct AnswerverifiedShow Answer

Use the following to answer questions Table: Components of the Money System -(Table: Components of the Money Supply) Look at the table Money Supply. The money supply measured by M2 is:

Correct AnswerverifiedShow Answer

If the Federal Reserve buys $250 million worth of U.S. Treasury bills in the open market and the reserve ratio is 10%, then the money supply will:

Correct AnswerverifiedShow Answer

The functions of money are:

Correct AnswerverifiedShow Answer

The two parts of the U.S. Federal Reserve are the Board of Governors and 50 regional banks.

Correct AnswerverifiedShow Answer

Money that some authority, generally a government, has ordered to be accepted as a medium of exchange is called _____ money.

Correct AnswerverifiedShow Answer

The monetary base is the sum of:

Correct AnswerverifiedShow Answer

The discount rate is usually exactly equal to the federal funds rate.

Correct AnswerverifiedShow Answer

The main problem with the national banking system in the United States between 1864 and 1913 was that the money supply was difficult to shift from urban to rural areas.

Correct AnswerverifiedShow Answer

A bank run occurs when:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The main problem with the banking system from 1864 to 1913 was that:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The money multiplier and the required reserve ratio are:

Correct AnswerverifiedShow Answer

Money is the most liquid asset in the economy.

Correct AnswerverifiedShow Answer

Money used to buy a ticket to a football game is functioning primarily as a:

Correct AnswerverifiedShow Answer

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verified

The _ multiplier is equal to _.

Correct Answer
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