Question 1

At one time, people in a certain country had no access to banks; they relied exclusively on currency. Then, a fractional-reserve banking system was created. As a result, the money supply

Accepted Answer

A)  increased. The central bank could have reduced the size of this increase by buying bonds.
B)  increased. The central bank could have reduced the size of this increase by selling bonds.
C)  decreased. The central bank could have reduced the size of this decrease by buying bonds.
D)  decreased. The central bank could have reduced the size of this decrease by selling bonds.E) B) and C)
F) A) and D)

Question 2

Table 29-3. An economy starts with $50,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $45,750. The T-account of the bank is shown below. 
-Refer to Table 29-3. The bank's reserve ratio is

Accepted Answer

A)  17.5 percent.
B)  8.5 percent.
C)  91.5 percent.
D)  100 percent.E) C) and D)
F) A) and B)

Question 3

To increase the money supply, the Fed could

Accepted Answer

A)  sell government bonds.
B)  increase the discount rate.
C)  decrease the reserve requirement.
D)  None of the above is correct.E) A) and D)
F) All of the above

Question 4

Suppose that in a country people gain more confidence in the banking system and so hold relatively less currency and more deposits. As a result, bank reserves will

Accepted Answer

A)  decrease and the money supply will eventually decrease.
B)  decrease and the money supply will eventually increase.
C)  increase and the money supply will eventually decrease.
D)  increase and the money supply will eventually increase.E) B) and C)
F) None of the above

Question 5

If the Fed buys bonds in the open market, the money supply decreases.

Accepted Answer

A) True 
 B)False

Question 6

​Which government body is primarily responsible for regulating banks and ensuring the health of the banking system?

Accepted Answer

A)  ​The U.S. Treasury
B)  Federal Deposit Insurance Corporation
C)  The Federal Reserve Board
D)  ​The regional Federal Reserve BanksE) A) and D)
F) B) and D)

Question 7

Derek decides to forego a major appliance purchase and save the money. He transfers $2,100 from his checking account to his money market mutual fund. As a result of this transfer,

Accepted Answer

A)  both M1 and M2 decrease by $2,100.
B)  M1 increases by $2,100 and M2 increases by $2,100.
C)  M1 decreases by $2,100 and M2 increases by $2,100.
D)  M1 decreases by $2,100 and M2 stays the same.E) All of the above
F) A) and B)

Question 8

If the central bank in some country raised the reserve requirement, then the money multiplier for that country

Accepted Answer

A)  would increase.
B)  would not change.
C)  would decrease.
D)  could do any of the above.E) B) and C)
F) A) and D)

Question 9

List two reasons why the Fed can not control the exact size of the money supply.

Accepted Answer

1) The Fed can not control how much mone...

Question 10

The money supply of Granov is $10,000 in a 100-percent-reserve banking system. If the Central Bank of Granov decreases the reserve requirement ratio to 10 percent, the money supply could increase by no more than $9,000.

Accepted Answer

A) True 
 B)False

Question 11

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

Question 12

What does the text mean by the question, "Where Is All the Currency?" How does it answer the question?

Accepted Answer

The amount of currency per person is nea...

Question 13

If the discount rate is lowered, banks borrow

Accepted Answer

A)  less from the Fed so reserves increase.
B)  less from the Fed so reserves decrease.
C)  more from the Fed so reserves increase.
D)  more from the Fed so reserves decrease.E) A) and D)
F) All of the above

Question 14

​Under a 100-percent-reserve banking system, banks do not influence the supply of money.

Accepted Answer

A) True 
 B)False

Question 15

A bank loans Kellie's Print Shop $350,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is

Accepted Answer

A)  an asset for the bank and a liability for Kellie's Print Shop. The loan increases the money supply.
B)  an asset for the bank and a liability for Kellie's Print Shop. The loan does not increase the money supply.
C)  a liability for the bank and an asset for Kellie's Print Shop. The loan increases the money supply.
D)  a liability for the bank and an asset for Kellie's Print Shop. The loan does not increase the money supply.E) A) and B)
F) A) and C)

Question 16

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) All of the above
F) None of the above

Question 17

An open-market sale

Accepted Answer

A)  increases the number of dollars and the number of bonds in the hands of the public.
B)  increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public.
C)  decreases the number of dollars and the number of bonds in the hands of the public.
D)  decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public.E) None of the above
F) All of the above

Question 18

If the Fed increases the reserve ratio from 5 percent to 12.5 percent, then the money multiplier

Accepted Answer

A)  decreases from 20 to 8.
B)  decreases from 12.5 to 5.
C)  increases from 8 to 20.
D)  increases from 5 to 12.5.E) None of the above
F) All of the above

Question 19

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 loaned the banks of Tazi 10 million tazes. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply change?

Accepted Answer

A)  250 million tazes
B)  200 million tazes
C)  125 million tazes
D)  None of the above is correct.E) A) and B)
F) B) and C)

Question 20

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold

Accepted Answer

A)  fewer reserves, so the reserve ratio will fall.
B)  fewer reserves, so the reserve ratio will rise.
C)  more reserves, so the reserve ratio will fall.
D)  more reserves, so the reserve ratio will rise.E) B) and D)
F) None of the above

Exam 29: The Monetary System

Derek decides to forego a major appliance purchase and save the money. He transfers $2,100 from his checking account to his money market mutual fund. As a result of this transfer,

Correct Answer
verified

Table 29-3. An economy starts with $50,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $45,750. The T-account of the bank is shown below. -Refer to Table 29-3. The bank's reserve ratio is

Correct Answer
verified

If the Fed increases the reserve ratio from 5 percent to 12.5 percent, then the money multiplier

Correct Answer
verified

Suppose that in a country people gain more confidence in the banking system and so hold relatively less currency and more deposits. As a result, bank reserves will

Correct Answer
verified

Correct Answer
verified

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold

Correct Answer
verified

To increase the money supply, the Fed could

Correct Answer
verified

A bank loans Kellie's Print Shop $350,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is

Correct Answer
verified

The money supply of Granov is $10,000 in a 100-percent-reserve banking system. If the Central Bank of Granov decreases the reserve requirement ratio to 10 percent, the money supply could increase by no more than $9,000.

Correct Answer
verified

What does the text mean by the question, "Where Is All the Currency?" How does it answer the question?

Correct Answer
verified
The amount of currency per person is nea...
View Answer

If the central bank in some country raised the reserve requirement, then the money multiplier for that country

Correct Answer
verified

If the discount rate is lowered, banks borrow

Correct Answer
verified

An open-market sale

Correct Answer
verified

Correct Answer
verified

At one time, people in a certain country had no access to banks; they relied exclusively on currency. Then, a fractional-reserve banking system was created. As a result, the money supply

Correct Answer
verified

Which government body is primarily responsible for regulating banks and ensuring the health of the banking system?

Correct Answer
verified

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

Correct Answer
verified

If the Fed buys bonds in the open market, the money supply decreases.

Correct Answer
verified

List two reasons why the Fed can not control the exact size of the money supply.

Correct Answer
verified
1) The Fed can not control how much mone...
View Answer

Under a 100-percent-reserve banking system, banks do not influence the supply of money.

Correct Answer
verified

Exam 29: The Monetary System

Derek decides to forego a major appliance purchase and save the money. He transfers $2,100 from his checking account to his money market mutual fund. As a result of this transfer,

Correct AnswerverifiedShow Answer

Table 29-3. An economy starts with $50,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $45,750. The T-account of the bank is shown below. -Refer to Table 29-3. The bank's reserve ratio is

Correct AnswerverifiedShow Answer

If the Fed increases the reserve ratio from 5 percent to 12.5 percent, then the money multiplier

Correct AnswerverifiedShow Answer

Suppose that in a country people gain more confidence in the banking system and so hold relatively less currency and more deposits. As a result, bank reserves will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold

Correct AnswerverifiedShow Answer

To increase the money supply, the Fed could

Correct AnswerverifiedShow Answer

A bank loans Kellie's Print Shop $350,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is

Correct AnswerverifiedShow Answer

The money supply of Granov is $10,000 in a 100-percent-reserve banking system. If the Central Bank of Granov decreases the reserve requirement ratio to 10 percent, the money supply could increase by no more than $9,000.

Correct AnswerverifiedShow Answer

What does the text mean by the question, "Where Is All the Currency?" How does it answer the question?

Correct AnswerverifiedThe amount of currency per person is nea...View AnswerShow Answer

If the central bank in some country raised the reserve requirement, then the money multiplier for that country

Correct AnswerverifiedShow Answer

If the discount rate is lowered, banks borrow

Correct AnswerverifiedShow Answer

An open-market sale

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

At one time, people in a certain country had no access to banks; they relied exclusively on currency. Then, a fractional-reserve banking system was created. As a result, the money supply

Correct AnswerverifiedShow Answer

​Which government body is primarily responsible for regulating banks and ensuring the health of the banking system?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the Fed buys bonds in the open market, the money supply decreases.

Correct AnswerverifiedShow Answer

List two reasons why the Fed can not control the exact size of the money supply.

Correct Answerverified1) The Fed can not control how much mone...View AnswerShow Answer

​Under a 100-percent-reserve banking system, banks do not influence the supply of money.

Correct AnswerverifiedShow Answer

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Correct Answer
verified
The amount of currency per person is nea...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Which government body is primarily responsible for regulating banks and ensuring the health of the banking system?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
1) The Fed can not control how much mone...
View Answer

Under a 100-percent-reserve banking system, banks do not influence the supply of money.

Correct Answer
verified