Macro Econ Chapter 11 Practice Quiz

If people decide to hold more currency relative to deposits, the money supply a. falls. The Fed could lessen the impact of this by buying Treasury bonds. b. falls. The Fed could lessen the impact of this by selling Treasury bonds. c. rises. The Fed could lessen the impact of this by buying Treasury bonds. d. rises. The Fed could lessen the impact of the by selling Treasury bonds.

a

The money supply increases when the Fed a. lowers the discount rate. The increase will be larger the smaller the reserve ratio is. b. lowers the discount rate. The increase will be larger the larger the reserve ratio is. c. raises the discount rate. The increase will be larger the smaller the reserve ratio is. d. raises the discount rate. The increase will be larger the larger the reserve ratio is.

a

If the reserve ratio is 5 percent, the money multiplier is a. 25 b. 20 c. 2.5. d. 1.25.

b

In a fractional reserve banking system, an increase in reserve requirements a. increases both the money multiplier and the money supply. b. decreases both the money multiplier and the money supply. c. increases the money multiplier, but decreases the money supply. d. decreases the money multiplier, but increases the money supply.

b

In recent years the Federal Open Market Committee has focused on a target for a. M1 growth. b. the federal funds rate. c. the number of Treasury Securities issued by the federal government. d. total reserves of banks.

b

Suppose that banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the a. money supply to fall. To reduce the impact of this the Fed could sell Treasury bonds. b. money supply to fall. To reduce the impact of this the Fed could buy Treasury bonds. c. money supply to rise. To reduce the impact of this the Fed could sell Treasury bonds. d. money supply to rise. To reduce the impact of this the Fed could buy Treasury bonds.

b

Suppose that the reserve ratio is 5 percent and that a bank has $1,000 in deposits. Its reserves are a. $5. b. $50. c. $95. d. $950.

b

When the Fed conducts open-market sales, a. it sells Treasury securities, which increases the money supply. b. it sells Treasury securities, which decreases the money supply. c. it borrows from member banks, which increases the money supply. d. it lends money to member banks, which decreases the money supply.

b

Which of the following lists two things that both decrease the money supply? a. raise the discount rate, make open market purchases b. raise the discount rate, make open market sales c. lower the discount rate, make open market purchases d. lower the discount rate, make open market sales

b

Which of the following lists two things that both increase the money supply? a. lower the discount rate, raise the reserve requirement ratio b. lower the discount rate, lower the reserve requirement ratio c. raise the discount rate, raise the reserve requirement ratio d. raise the discount rate, lower the reserve requirement ratio

b

Consider four survivors on an island. Rupert has machete wants fishing spear Amber has cooking pot wants fishing spear Rob has fishing spear wants machete Tom has cooking pot wants machete Which of the following pairs have a double-coincidence of wants with each other? a. Rupert with Amber, and Rob with Tom b. Amber with Tom c. Rupert with Rob d. None of the above have a double-coincidence of wants

c

If the public decides to hold less currency and more deposits in banks, bank reserves a. decrease and the money supply eventually decreases. b. decrease but the money supply does not change. c. increase and the money supply eventually increases. d. increase but the money supply does not change.

c

In a 100-percent reserve banking system, if people decided to decrease the amount of currency they held by increasing the amount they held in checkable deposits a. M1 would increase. b. M1 would decrease. c. M1 would not change. d. M1 might rise or fall.

c

In a fractional reserve banking system with no excess reserves and no currency holdings, if the central bank buys $100 million of bonds, a. reserves and the money supply increase by less than $100 million. b. reserves increase by $100 million and the money supply increases by $100 million. c. reserves increase by $100 million and the money supply increases by more than $100 million. d. both reserves and the money supply increase by more than $100 million.

c

The Fed's primary tool to change the money supply is a. changing the discount rate. b. changing the reserve requirement. c. conducting open market operations. d. redeeming Federal Reserve notes.

c

A bank's liabilities include a. both its reserves and the deposits of its customers. b. neither its reserves nor the deposits of its customers. c. its reserves, but not the deposits of its customers. d. the deposits of its customers, but not its reserves.

d

If the Fed sells government bonds to the public, bank reserves tend to a. increase and the money supply increases. b. increase and the money supply decreases. c. decrease and the money supply increases. d. decrease and the money supply decreases.

d

If the reserve ratio is 5 percent, $1,000 of additional reserves can create a. $5,500 of new money b. $5,000 of new money c. $4,000 of new money d. None of the above is correct.

d

The Fed can increase the money supply by conducting open market a. sales and raising the discount rate. b. sales and lowering the discount rate. c. purchases and raising the discount rate. d. purchases and lowering the discount rate.

d

Which of the following is a store of value? a. currency b. U.S. government bonds c. fine art d. All of the above are correct.

d