Question 1

Countries today use _____ money rather than _____ money.

Accepted Answer

A)   medium; value
B)   commodity; fiat
C)   fiat; commodity
D)   value; mediumE) A) and B)
F) A) and C) C

Question 2

A banking system has $800 billion in deposits and a reserve requirement of 10%. Total reserves are $90 billion. How much does the banking system have in excess reserves?

Accepted Answer

A)   $8 billion
B)   $10 billion
C)   $80 billion
D)   $90 billionE) A) and B)
F) None of the above

Question 3

Which of the following would count as money in the M2 measure of the money supply?

Accepted Answer

A)   stock in General Motors that is worth $10,000
B)   a house that sells for $400,000
C)   a savings account that has a balance of $20,000
D)   bonds that are worth $50,000E) A) and D)
F) B) and C)

Question 4

Raising the reserve requirement would _____ a nation's money supply.

Accepted Answer

A)   increase
B)   have no impact on
C)   decrease
D)   increase, decrease, or have no impact onE) All of the above
F) B) and C)

Question 5

Joe produces flower pots and wants some apples. If Joe lives where barter exchange (rather than monetary exchange)  is used, then he must find a trading partner who both has apples to trade and also wants flower pots. Economists would say that Joe must find a _____ in a trading partner.

Accepted Answer

A)   double fiat match
B)   coincidental match
C)   fiat condition
D)   double coincidence of wantsE) A) and B)
F) All of the above D

Question 6

Which of the following is not a function of money?

Accepted Answer

A)   unit of account
B)   store of value
C)   medium of exchange
D)   open market operationsE) None of the above
F) B) and C)

Question 7

Bigtown Bank has total deposits of $900 million and total reserve of $150 million. It is subject to a required reserve ratio of 15%. What are Bigtown Bank's required reserves?

Accepted Answer

A)   $22.5 million
B)   $15 million
C)   $120 million
D)   $135 millionE) All of the above
F) B) and D)

Question 8

In regard to banking and a nation's money supply, the discount rate is the:

Accepted Answer

A)   interest rate that banks must pay to borrow from the central bank.
B)   reduction in interest rates that is given to a bank's preferred customers on their loans.
C)   percentage reduction in inflation that is achieved through a monetary policy action.
D)   interest rate that a bank pays to borrow another bank's excess reserves.E) A) and C)
F) B) and C)

Question 9

Summarize the three functions of money.

Accepted Answer

For something to gain widespread accepta...

Question 10

What action does a country take when it adopts a policy of dollarization?

Accepted Answer

Dollarization occurs when a country offi...

Question 11

When a fractional reserve banking system is present, can the banking system impact the money supply?

Accepted Answer

A)   No, policymakers set the level of the money supply, and banks are not free to make decisions that impact the money supply.
B)   No, the fractional reserve constraint prevents banks from impacting the money supply.
C)   Yes, at the moment that a bank accepts a deposit of cash, the money supply immediately increases.
D)   Yes, banks decide how much of their excess reserves to loan out. When the loans are made, the money supply grows.E) B) and C)
F) A) and B)

Question 12

Summarize the main roles of the Federal Reserve Bank.

Accepted Answer

The Federal Reserve Bank (the Fed) is th...

Question 13

Which of the following actions taken by a central bank would increase a nation's money supply?

Accepted Answer

A)   Reduce the reserve requirement.
B)   Sell bonds in open market operations.
C)   Raise the discount rate.
D)   Raise the federal funds rate.E) A) and D)
F) A) and C)

Question 14

Bigtown Bank has total deposits of $900 million and total reserve of $150 million. It is subject to a required reserve ratio of 15%. What is the maximum amount of additional loans that Bigtown Bank could lend out today?

Accepted Answer

A)   $150 million
B)   $135 million
C)   $15 million
D)   $90 millionE) B) and C)
F) A) and D)

Question 15

Which of the following is NOT included in the M1 money supply?

Accepted Answer

A)   demand deposits
B)   time deposits
C)   currency in circulation
D)   traveler's checksE) B) and C)
F) A) and B) B

Question 16

A change in the required reserve ratio will impact a nation's money supply by changing the:

Accepted Answer

A)   denominations of currency that are printed and available to banks.
B)   amount that is held in excess reserves and the public's willingness to make deposits.
C)   holdings of government bonds by the Federal Reserve and the cost of buying them.
D)   size of the potential deposit multiplier and the amount that is held in excess reserves.E) All of the above
F) None of the above

Question 17

If the central bank wants to decrease the money supply, it would change the discount rate by:

Accepted Answer

A)   decreasing the discount rate.
B)   increasing the discount rate.
C)   allowing the discount rate to apply to more customers.
D)   allowing the discount rate to apply to fewer customers.E) None of the above
F) A) and D)

Question 18

What connection does the underground economy have to the money supply?

Accepted Answer

A)   The funds used in the underground economy are not part of M1 or M2.
B)   The underground economy uses primarily checking accounts and debit cards for transactions.
C)   The transactions of the underground economy are subject to more oversight than other transactions.
D)   The underground economy often uses currency for its transactions.E) B) and D)
F) All of the above

Question 19

Which of the following is NOT included in the M1 measure of the money supply?

Accepted Answer

A)   checking account balances
B)   currency
C)   savings account balances
D)   traveler's checksE) None of the above
F) A) and B)

Question 20

If required reserves (RR)  equals 0.2 and there are $5 million of new deposits of currency made (not transfers of deposits) , what is the maximum potential impact of these deposits on the country's money supply over time?

Accepted Answer

A)   $20 million
B)   $8 million
C)   $5 million
D)   $25 millionE) All of the above
F) B) and D)

Exam 24: The Monetary System

Countries today use _____ money rather than _____ money.

Correct AnswerverifiedC

A banking system has $800 billion in deposits and a reserve requirement of 10%. Total reserves are $90 billion. How much does the banking system have in excess reserves?

Correct AnswerverifiedShow Answer

Which of the following would count as money in the M2 measure of the money supply?

Correct AnswerverifiedShow Answer

Raising the reserve requirement would _____ a nation's money supply.

Correct AnswerverifiedShow Answer

Joe produces flower pots and wants some apples. If Joe lives where barter exchange (rather than monetary exchange) is used, then he must find a trading partner who both has apples to trade and also wants flower pots. Economists would say that Joe must find a _____ in a trading partner.

Correct AnswerverifiedD

Which of the following is not a function of money?

Correct AnswerverifiedShow Answer

Bigtown Bank has total deposits of $900 million and total reserve of $150 million. It is subject to a required reserve ratio of 15%. What are Bigtown Bank's required reserves?

Correct AnswerverifiedShow Answer

In regard to banking and a nation's money supply, the discount rate is the:

Correct AnswerverifiedShow Answer

Summarize the three functions of money.

Correct AnswerverifiedFor something to gain widespread accepta...View AnswerShow Answer

What action does a country take when it adopts a policy of dollarization?

Correct AnswerverifiedDollarization occurs when a country offi...View AnswerShow Answer

When a fractional reserve banking system is present, can the banking system impact the money supply?

Correct AnswerverifiedShow Answer

Summarize the main roles of the Federal Reserve Bank.

Correct AnswerverifiedThe Federal Reserve Bank (the Fed) is th...View AnswerShow Answer

Which of the following actions taken by a central bank would increase a nation's money supply?

Correct AnswerverifiedShow Answer

Bigtown Bank has total deposits of $900 million and total reserve of $150 million. It is subject to a required reserve ratio of 15%. What is the maximum amount of additional loans that Bigtown Bank could lend out today?

Correct AnswerverifiedShow Answer

Which of the following is NOT included in the M1 money supply?

Correct AnswerverifiedB

A change in the required reserve ratio will impact a nation's money supply by changing the:

Correct AnswerverifiedShow Answer

If the central bank wants to decrease the money supply, it would change the discount rate by:

Correct AnswerverifiedShow Answer

What connection does the underground economy have to the money supply?

Correct AnswerverifiedShow Answer

Which of the following is NOT included in the M1 measure of the money supply?

Correct AnswerverifiedShow Answer

If required reserves (RR) equals 0.2 and there are $5 million of new deposits of currency made (not transfers of deposits) , what is the maximum potential impact of these deposits on the country's money supply over time?

Correct AnswerverifiedShow Answer

Countries today use _ money rather than _ money.

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C

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D

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For something to gain widespread accepta...
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Dollarization occurs when a country offi...
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The Federal Reserve Bank (the Fed) is th...
View Answer

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B

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