Macroeconomics 2113 Chapter 25 exam

Assets Liabilities Reserves +$7000 Deposits $50000 Loans +$46000 Net Worth $3000 Refer to the tab;e above. Consider the following simplified balance sheet for a bank. If the required reserve ratio is 10%, the bank can make a maximum loan of... A.) $2000 B.) $5000 C.) $6300 D.) $45000

A.) $2000

The most liquid measure of money supply is... A.) M1 B.) M3 C.) L D.) M0 E.) M2

A.) M1

A balance sheet... A.) equals flows of revenue with flows of expenditure B.) measures assets, liabilities, and net worth at a given instance in time C.) measures flows of income and expenditure over a given period of time D.) None of the above are correct

B.) measures assets, liabilities, and net worth at a given instance in time

The major assets o a bank's balance sheet are its... A.) reserves, checking and savings account deposits B.) reserves, loans, and holdings of securities C.) reserves, loans, and checking account deposits D.) checking and savings account deposits E.) loans, ans checking and savings account deposits

B.) reserves, loans, and holdings of securities

Imagine that Kristy deposits $10000 of currency into her checking account deposit at Bank A ans 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.) $10000 B.) $2000 C.) $8000 D.) $50000

C.) $8000

The statement, "My iPhone is worth $700" represents money's function as... A.) a store of value B.) a medium of exchange C.) a unit of account D.) a standard of deferred payment

C.) a unit of accounts

The M1 measure of the money supply equals... A.) paper money plus coins in circulation B.) currency plus checking account balances plus traveler's checks plus savings account balances C.) currency plus checking account plus traveler's checks D.) currency plus account balances

C.) currency plus checking account balances plus traveler's checks

A persons wealth... A.) is a measure of only hid or her current and expected future income B.) is measure of how much money the person has C.) equals the value of the person's assets minus his or hers liabilities D.) all of the above are correct

C.) equals the value of the person's assets minus his or her liabilities

Fiat money has... A.) value, because it can be redeemed for gold by the central bank B.) little to no intrinsic value but is backed by the quantity of gold held by the central bank C.) little to no intrinsic value and is authorized by the central bank or governmental body D.) a great intrinsic value that is independent of its use as money

C.) little to no intrinsic value and is authorized by the central bank or governmental body

The three main monetary policy tools used by the Federal Reserve to manage the money supply are... A.) tax rates, government purchases, and government transfer payments B.) interest rates, tax rates, and government spending C.) open market operations, discount policy, and reserve requirements D.) open market operations, the exchange rate of the dollar against foreign currency, and government purchases

C.) open market operations, discount policy, and reserve requirements

Open market operations refer to the purchase or sale of ________ to control the money supply... A.) discount and advances by the federal reserve B.) corporation bonds and stocks by federal reserve C.) U.S. treasury securities by the U.S. treasury D.) corporation bonds and stocks by the U.S. treasury E.) U.S. treasury securities by the federal reserve

E.) U.S. treasury securities by the federal reserve

Of the three primary tools the federal reserve uses to conduct monetary policy, the tool used most often is... A.) discount policy B.) acting as the lender of last resort C.) setting reserve requirements D.) check clearing E.) open market operations

E.) open market operations

The M2 measure of the money supply equals... A.) M1 plus savings account balances plus small - denomination time deposits plus non institutional money market fund shares B.) savings account balances plus small - denomination time deposits plus traveler's checks C.) M1 plus savings account balances plus small - denomination time deposits D.) savings account balances plus small - denomination time deposits plus non-institutional money market fund shares

A.) M1 plus savings account balances plus small - denomination time deposits plus non-institutional money market fund shares

Which of the following is not counted in M1?... A.) credit card balances B.) coins in circulation C.) currency in circulation D.) checking account balances E.) traveler's check balances

A.) credit card balances

The required reserves of a bank equal its _______ the required reserve ratio... A.) deposits multiplied by B.) loans multiplied by C.) deposits divided by D.) loans divided by

A.) deposits multiplied by

The federal Open Market Committee consists of the seven members of the _______, the president of the Federal reserve Bank of New York, and ______.... A.) federal reserve's board of governors; four presidents from other 11 federal reserve banks B.) council of economic advisors; four presidents from th e11 federal reserve banks C.) council of economic advisors; four members of the U.S. banking committee D.) federal reserve's board of governors; four members of the council of economic advisors

A.) federal reserve's board of governors; four presidents from the other 11 federal reserve banks

A decrease in the reserve requirement _______ bank reserves and __________ the money supply... A.) increases; increases B.) increases; decreases C.) decreases; decreases D.) decreases; increases

A.) increases; increases

The discount rate is... A.) the interest rate the Fed charges to banks for loans from the Fed B.) the interest rate banks charge their best customers C.) the interest rate the U.S. treasury pays on the treasury Bills D.) the interest rate banks charge each other from overnight loans

A.) the interest rate Fed charges to banks for loans from the Fed

Imagine that Kristy deposits $10000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20% >> Refer tot he senario above. As a result of Kristy's deposit, Bank A's reserves immiediatly increase by... A.) $2000 B.) $10000 C.) $8000 D.) $50000

B.) $10000

Imagine that Kristy deposits $10000 of currency into her checking account deposit at Bank A and that the requires reserve ratio is 20% >> Refer to the scenario above. As a result of Kristy's deposit, Bank A's excess reserves increase by... A.) $50000 B.) $8000 C.) $10000 D.) $2000

B.) $8000

Which of the following best describes how banks create money?... A.) Banks charge fees for providing financial advice B.) Banks create checking account deposits when making loans from excess reserves C.) Bank charge higher interest rates on loans than they pay on deposits D.) Banks make loans from reserves

B.) Banks create checking account deposits when making loans from excess reserves

To decrease the money supply, the Federal Reserve could... A.) raise income taxes B.) conduct an open market sale of treasury securities C.) raise transfer payments D.) lower the discount rate E.) lower th erequired reserve ratio

B.) conduct an open market sale of Treasury securities

a fractional reserve banking system is one which banks hold less than 100 percent of ________ as reserve... A.) shareholder equity B.) deposits C.) securities D.) loans

B.) deposits

The purchase of Treasury securities by the Federal Reserve will, in general,... A.) decrease the quality of reserve heald by banks B.) increase the quantity of reserve held by banks C.) not chance the money supply D.) not change the quantity of reserves held by banks

B.) increase the quantity of reserves held by banks

Banks can make additional loans ehrn required reserves are... A.) less then total deposits B.) less than total reserves C.) greater than total reserves D.) less tan total loans

B.) less than total reserves

If the central bank can act lender or last resort a banking panic, banks can... A.) call in their loans to their customers and eventually restore B.) encourage the public to borrow directly from the central bank, and this will worsen the banking panic C.) satisfy customer withdrawal needs and eventually restore the public's faith in the banking system D.) borrow more and more money from the central bank, and this will lower its reserves and decrease the public's faith in the banking system

C.) satisfy customer withdrawal needs and eventually restore the public's faith in the banking system

Imagine tha Kristy deposits $10000 of curreny 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 increased by... A.) $10000 B.) $8000 C.) $50000 D.) $2000

D.) $2000

Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio to 15%, then the bank will have excess reserves of... A.) $20 million B.) $0 C.) $15 million D.) $5 million

D.) $5 million

If the required reserve ratio if 5%, then the simple deposit multiplyer is... A.) 2.0 B.) 5.0 C.) 10.0 D.) 20.0

D.) 20.0

Which of the following is one of the most important benefits of money in an economy... A.) Money allows for the exchange of goods and services B.) Money allows for the accumulation of wealth C.) Money encourages people to produce all of their own goods (self- sufficiency) and therefore increases economic stability D.) Money makes exchange easier, leading to more specilization and higher productivity

D.) Money makes exchange easier, leading to more specialization and higher productivity

Banks can continue to make loans until their... A.) actual reserves equal their checking account balances B.) actual reserves equal their excess reserves C.) excess reserves equal their required reserves D.) actual reserves equal their required reserves

D.) actual reserves equal their required reserves

The largest liability on the balance sheet of most banks is its... A.) loans B.) deposits with the Federal Reserve C.) holdings of securities D.) checking account and savings account deposit of its customers E.) vault cash

D.) checking account and savings account deposits of it customers

Which of the following is not a major function of the Federal Reserve System... A.) lender of last resort B.) clearing checks between banks C.) controlling the money supply D.) setting income tax rates

D.) settling income tax rates

A bank holds its reserves as _______ and ______... A.) securities; deposits at the Federal Reserve B.) vault cash; loans C.) securities; loans D.) vault cash; deposits at the Federal Reserve

D.) vault cash; deposits at the federal Reserve