Econ 14
The main tool the Federal Reserve uses to conduct monetary policy is A. acting as the lender of last resort. B. open market operations. C. check clearing. D. discount policy. E. setting reserve requirements.
B
The most liquid measure of money supply is A. M3. B. M0. C. M1. D. M2. E. L.
C
A decrease in the discount rate ________ bank reserves and ________ the money supply if banks respond appropriately to the change in the rate. A. increases; increases B. decreases; increases C. decreases; decreases D. increases; decreases
A
Economies where goods and services are traded directly for other goods and services are called ________ economies. A. barter B. direct C. trade D. seigniorage
A
If whole tomatoes were money, which of the following functions of money would be the hardest for tomatoes to satisfy? A. store of value B. certificate of gold C. medium of exchange D. unit of account
A
Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. Refer to the scenario above. As a result of Kristy's deposit, Bank A can make a maximum loan of A. $8,000. B. $2,000. C. $10,000. D. $50,000.
A
Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. Refer to the scenario above. As a result of Kristy's deposit, Bank A's excess reserves increase by A. $8,000. B. $50,000. C. $10,000. D. $2,000.
A
Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. Refer to the scenario above. As a result of Kristy's deposit, checking account deposits in the banking system as a whole (including the original deposit) could eventually increase up to a maximum of A. $50,000. B. $100,000. C. $8,000. D. $10,000.
A
Which of the following assets is most liquid? A. money B. stock C. bond D. savings account
A
Banks can continue to make loans until their A. actual reserves equal their excess reserves. B. actual reserves equal their checking account balances. C. actual reserves equal their required reserves. D. excess reserves equal their required reserves.
C
Banks can make additional loans when required reserves are A. less than total deposits. B. greater than total reserves. C. less than total reserves. D. less than total loans.
C
Commodity money A. is backed by a valuable commodity such as gold. B. can be used to purchase commodities, but not services. C. has value independent of its use as money. D. has little to no value independent of its use as money.
C
Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. Refer to the scenario above. As a result of Kristy's deposit, Bank A's required reserves increase by A. $8,000. B. $50,000. C. $2,000. D. $10,000.
C
Open market operations refer to the purchase or sale of ________ to control the money supply. A. discount and advances by the Federal Reserve B. corporate bonds and stocks by the Federal Reserve C. U.S. Treasury securities by the Federal Reserve D. U.S. Treasury securities by the U.S. Treasury E. corporate bonds and stocks by the U.S. Treasury
C
Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio is 20 percent. If the Federal Reserve reduces the required reserve ratio to 15 percent, then the bank will now have excess reserves of A. $20 million. B. $15 million. C. $5 million. D. $0.
C
Suppose that you deposit $2,000 in your bank and the required reserve ratio is 10 percent. The maximum loan your bank can made as a direct result of your deposit is A. $20,000. B. $2,000. C. $1,800. D. $200.
C
The seven members of the Board of Governors of the Federal Reserve are appointed by A. leaders in the banking industry. B. the Congress. C. the President. D. the Governors of the States. E. the Treasury Department.
C
The sale of Treasury securities by the Federal Reserve will, in general, A. decrease the quantity of reserves held by banks. B. increase the quantity of reserves held by banks. C. not change the money supply. D. not change the quantity of reserves held by banks.
A
The three main monetary policy tools used by the Federal Reserve to manage the money supply are A. open market operations, discount policy, and reserve requirements. B. open market operations, the exchange rate of the dollar against foreign currencies, and government purchases. C. tax rates, government purchases, and government transfer payments. D. interest rates, tax rates, and government spending.
A
Which of the following is not a function of the Federal Reserve System or the "Fed"? A. acting as a lender of last resort B. performing check clearing services C. taking actions to control the money supply D. acting as a banker's bank E. insuring deposits in the banking system
E
Bank reserves include A. customer checking accounts and vault cash. B. vault cash and deposits with the Federal Reserve. C. deposits with the Federal Reserve and holdings of securities. D. loans to bank customers and deposits with the Federal Reserve. E. vault cash and loans to bank customers.
B
If a person takes $100 from his/her piggy bank at home and puts it in his/her savings account, then M1 will ________ and M2 will ________. A. not change; increase B. decrease; not change C. increase; decrease D. increase; increase E. decrease; increase
B
If the reserve requirement ratio (RR) is 0.20, the simple deposit multiplier is A. 2. B. 5. C. 10. D. 20.
B
In response to the destructive bank panics of the Great Depression, future bank panics are designed to be prevented by A. the Federal Reserve System acting as a lender of last resort. B. the establishment of the Federal Deposit Insurance Corporation. C. increasing the required reserve ratio to 100%. D. the Federal Reserve System conducting open market operations. E. establishing a fractional reserve system of banking.
B
The major shortcoming of a barter economy is A. the requirement of specialization and exchange. B. the requirement of a double coincidence of wants. C. that goods and services are not traded. D. that money loses value from inflation.
B
Which of the following best describes how banks create money? A. Banks make loans from reserves. B. Banks create checking account deposits when making loans from excess reserves. C. Banks charge fees for providing financial advice. D. Banks charge higher interest rates on loans than they pay on deposits.
B
A decrease in the reserve requirement ________ bank reserves and ________ the money supply. A. decreases; decreases B. decreases; increases C. increases; decreases D. increases; increases
D
Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. Refer to the scenario above. As a result of Kristy's deposit, Bank A's reserves immediately increase by A. $50,000. B. $8,000. C. $2,000. D. $10,000.
D
In economics, money is defined as A. the total amount of salary, interest, and rental income earned during a year. B. the total value of one's assets minus the total value of one's debts, in current prices. C. the total value of one's assets in current prices. D. any asset people generally accept in exchange for goods and services.
D
The required reserves of a bank equal its ________ the required reserve ratio. A. loans multiplied by B. deposits divided by C. loans divided by D. deposits multiplied by
D
To decrease the money supply, the Federal Reserve could A. lower the required reserve ratio. B. raise income taxes. C. raise transfer payments. D. conduct an open market sale of Treasury securities. E. lower the discount rate.
D
Which of the following about fiat money is false? Fiat money A. serves as a medium of exchange. B. is authorized by a central bank or governmental body. C. has little to no value except as money. D. is backed by gold.
D
Which of the following is not counted in M1? A. currency in circulation B. coins in circulation C. checking account balances D. credit card balances E. traveler's check balances
D
You earn $500 a month, currently have $200 in currency, $100 in your checking account, $2,000 in your savings accounts, $3,000 worth of illiquid assets and $1,000 of debt. You have A. money = $200, annual income = $500, and wealth = $4,300. B. money = $2,300, annual income = $6,000, and wealth = $5,000. C. money = $300, annual income = $6,000, and wealth = $5,000. D. money = $300, annual income = $6,000, and wealth = $4,300.
D
