Question 1

When the Fed buys bonds through open market operations,it gives banks money in return,which:

Accepted Answer

A)  increases their ability to lend,and increases aggregate demand.
B)  decreases their ability to lend,and increases aggregate demand.
C)  increases their ability to lend,and decreases aggregate demand.
D)  decreases their ability to lend,and decreases aggregate demand.E) A) and B)
F) C) and D)

Question 2

The interest rate charged for loans through the discount window is called:

Accepted Answer

A)  the discount rate.
B)  the reserve rate.
C)  the interest rate.
D)  the prime rate.E) A) and C)
F) A) and B)

Question 3

The amount of money available in the economy:

Accepted Answer

A)  is called the money supply.
B)  is managed by the Federal Reserve.
C)  varies depending on what is considered money.
D)  All of these are true.E) A) and B)
F) All of the above

Question 4

Expansionary monetary policy:

Accepted Answer

A)  decreases the interest rate and increases the price level.
B)  decreases the interest rate and decreases the price level.
C)  increases the interest rate and increases the price level.
D)  increases the interest rate and decreases the price level.E) B) and D)
F) B) and C)

Question 5

If the reserve ratio is 5 percent,then the money multiplier is approximated to be:

Accepted Answer

A)  20.
B)  5.
C)  10.
D)  2.E) B) and C)
F) A) and B)

Question 6

Banks create money in the economy by:

Accepted Answer

A)  loaning out part of each deposit,which will be redeposited by someone else.
B)  charging higher interest on loans than savings.
C)  charging higher interest on savings than loans.
D)  Only the government can create money.E) None of the above
F) A) and B)

Question 7

Fiat money is:

Accepted Answer

A)  any form of money that can be legally exchanged into a fixed amount of an underlying commodity.
B)  money created by rule.
C)  money used for the exchange of large commodities.
D)  None of these is true.E) All of the above
F) A) and B)

Question 8

The Federal Open Market Committee includes:

Accepted Answer

A)  the Board of Governors.
B)  all regional bank presidents.
C)  the Chairman of the Treasury.
D)  All of these people are members of the FOMC.E) C) and D)
F) None of the above

Question 9

An advantage of monetary policy over fiscal policy is:

Accepted Answer

A)  the decisions are made by experts in finance,banking,and monetary policy,not politicians.
B)  the decision makers are independent of political pressures.
C)  the decision makers can change and enact policy every six weeks.
D)  All of these are advantages.E) A) and B)
F) C) and D)

Question 10

The reserve requirement is:

Accepted Answer

A)  the regulation that sets the minimum fraction of deposits banks must hold in reserve.
B)  the dollar amount of cash banks must keep on hand and not loan out.
C)  currently set at $2 million for most banks.
D)  None of these is true.E) B) and C)
F) A) and B)

Question 11

The smaller the reserve ratio:

Accepted Answer

A)  the less a bank can loan out.
B)  the smaller is the money multiplier.
C)  the less money is created in the economy.
D)  None of these is true.E) B) and D)
F) All of the above

Question 12

If the Fed wanted to decrease the money supply,one way to make an enormous impact would be to:

Accepted Answer

A)  increase the reserve requirement,which would decrease the money multiplier.
B)  decrease the reserve requirement,which would decrease the money multiplier.
C)  increase the reserve requirement,which would increase the money multiplier.
D)  decrease the reserve requirement,which would increase the money multiplier.E) C) and D)
F) None of the above

Question 13

The institution ultimately responsible for managing the nation's money supply and coordinating the banking system to ensure a sound economy is called a:

Accepted Answer

A)  central bank.
B)  national bank.
C)  public banking system.
D)  peoples' bank.E) B) and C)
F) C) and D)

Question 14

In the United States,the dollar was commodity backed by:

Accepted Answer

A)  gold.
B)  silver.
C)  oil.
D)  diamonds.E) B) and D)
F) B) and C)

Question 15

The most used tool of the Fed is:

Accepted Answer

A)  open market operations.
B)  the reserve requirement.
C)  the discount window.
D)  These are all used with equal frequency.E) A) and C)
F) B) and D)

Question 16

Compared to the other tools the Fed uses to change the money supply,the discount window is used:

Accepted Answer

A)  less often than open market operations,but more often than the reserve requirement.
B)  more often than open market operations and the reserve requirement.
C)  about the same as open market operations,but more often than the reserve requirement.
D)  more often than open market operations,and about the same as the reserve requirement.E) All of the above
F) None of the above

Question 17

Wide acceptance of money without intrinsic value comes largely from the fact that:

Accepted Answer

A)  it has a stable value.
B)  it is convenient to use.
C)  it is hard to counterfeit.
D)  None of these is true.E) A) and B)
F) A) and C)

Question 18

Holding money is:

Accepted Answer

A)  nearly always the most convenient way to hold onto wealth over time.
B)  almost never the most convenient way to hold onto wealth over time.
C)  sometimes the most convenient way to hold onto wealth over time.
D)  rarely the most convenient way to hold onto wealth over time.E) None of the above
F) A) and D)

Question 19

Over time:

Accepted Answer

A)  all three measures of money have increased,in general.
B)  M1 spiked up dramatically in 2008 in response to the financial crisis.
C)  M2 spiked up dramatically in 2009 in reaction to the increase in M1 in 2008.
D)  All of these are true.E) B) and C)
F) A) and C)

Question 20

If fractional reserve banking exists,then:

Accepted Answer

A)  banks need only keep a portion of each deposit on hand.
B)  the money multiplier is greater than 1.
C)  money can be created in the economy through banks.
D)  All of these are true.E) A) and C)
F) B) and D)

Exam 31: Money and the Monetary System

If the reserve ratio is 5 percent,then the money multiplier is approximated to be:

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Fiat money is:

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The amount of money available in the economy:

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If the Fed wanted to decrease the money supply,one way to make an enormous impact would be to:

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The Federal Open Market Committee includes:

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Compared to the other tools the Fed uses to change the money supply,the discount window is used:

Correct AnswerverifiedShow Answer

An advantage of monetary policy over fiscal policy is:

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When the Fed buys bonds through open market operations,it gives banks money in return,which:

Correct AnswerverifiedShow Answer

The interest rate charged for loans through the discount window is called:

Correct AnswerverifiedShow Answer

Expansionary monetary policy:

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Over time:

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In the United States,the dollar was commodity backed by:

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If fractional reserve banking exists,then:

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The reserve requirement is:

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Banks create money in the economy by:

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The most used tool of the Fed is:

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The smaller the reserve ratio:

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Wide acceptance of money without intrinsic value comes largely from the fact that:

Correct AnswerverifiedShow Answer

Holding money is:

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The institution ultimately responsible for managing the nation's money supply and coordinating the banking system to ensure a sound economy is called a:

Correct AnswerverifiedShow Answer

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