chapter 9/10

in which of the following US cities is one of the 12 FRB located? A. denver B. new york city C. miami D. seattle

B

what function is money serving when you buy a ticket to a movie? A. unit of account B. medium of exchange C. store of value D. transaction demand

B

which of the following actions by the fed will increase commercial bank lending potential? A. increasing the federal funds rate target B. raising the reserve ratio C. expanding the amount of reserves available through the term auction facility D. selling bonds to commercial banks and the public

C

which of the following is a tool of monetary policy for altering the reserves of commercial banks? A. federal reserves notes B. treasury deposits C. reserve ratio D. budget surplus or budget deficit

C

which of the following is true ab US FRS A. there are 14 members B. there are 10 regional federal reserve banks C. the FOMC has more members than the federal board of governors D. the head of us treasury also chairs the federal reserve bond

C

if the board of governors of the federal reserves system increases the legal reserve ratio, this change will:

decrease the excess reserves of member banks and thus decrease the money supply

if the Fed buys government securities from the public in the open market:

the public gives securities to the Fed; the Fed pays for the securities by check, which when deposited at commercial banks will increase their reserves at the Fed

how many members can serve on the board of governors of the federal reserve system? A. 12 B. 7 c. 9 D. 14

B

if nominal GDP decreases this will: A.increase the transactions demand and total demand for money B.decrease the transactions demand and total demand for money C. increase the transactions demand for money but decrease the total demand for money D. decrease the transactions demand for money but increase the total demand for money

B

if the rate increases, there will be a: A. increase in the amount of money held as assets B. decrease in the amount of money held as assets C. increase in the transactions demand for money D. decrease in the transactions demand for money

B

in which case would the quantity of money demanded by the public tend to increase by the greatest amount? A. the interest rate decreases and nominal GDP decreases B. the interest rate decreases and nominal GDP increases C. the interest rate increases and nominal GDP increases D. the interest rate increases and nominal GDP decreases

B

paper money in the US comes in the form of: A. us treasury bonds B. federal reserve notes C. federal legit tender D. US treasury bills

B

a decrease in the rate of interest would: A. decrease the opportunity cost of holding money B. increase the transactions demand for money C. decrease the prices of bonds D. decrease the asset demand for money

A

an increase in the money supply is likely to decrease: A. interest rates B. prices C. money demanded D. nominal income

A

checkable deposits are: A. debts of commercial banks and savings institutions B. credits of commercial banks and savings institutions C. debts of the federal government and government agencies D. credits of the federal government and government agencies

A

how often does the fed offer reserves through the term auction facility? A. twice a month B. every two months C. twice a year D. once a week

A

one major advantage of the medium of exchange function of money is that allows society to: A. escape the complications of barter B. measure the relative worth of products C. use credit cards instead of currency D. transfer purchasing power from the present to the future

A

one reason that near monies are important because: A. they can easily be converted into money or vice versa, and thereby can influence the stability of the economy B. they do not reflect the level of consumer spending but they have a critical impact on saving and investment in the economy C. credit cards synchronize ones expenditures and income, thereby reducing the cash and checkable deposits one must hold D. they simplify the definition of money and therefore the formulation of monetary policy

A

raising the reserve ratio: A. changes excess reserves to required reserves B. decreases the discount rate C. increases the discount rate D. decreases the amount of excess reserves banks must keep

A

a decrease in the interest rate will cause a: A. decrease in the transactions demand for money B. decrease in the amount of money held as an asset C. increase in the amount of money held as an asset D. increase in the transactions demand for money

C

a major component of the money supply is A. gold certificates B. saving deposits C. checkable deposits D. saving bonds

C

a wealthy executive is holding money for a good time to invest in the stock market. this action would be an example of the: A. creation of fiat money B. transactions demand for money C. asset demand for money D. use of money as a medium of exchange

C

assume that the stock of money is determined by the federal reserve and does not change when the interest rate changes. this situation means that the: A. supply of money curve is horizontal B. the demand for money curve is directly related to the interest rate C. supply of money curve is vertical D. supply of money curve is inversely related to the interest rate

C

checkable deposits are money bc they are: A. legal tender B. token money C. acceptable in exchange D. fiat money

C

coins and paper money are: A. credits of commercial banks and savings institutions B. debts of commercial banks and savings institutions C. debts of the federal government and government agencies D. credits of the federal government and federal agencies

C

all coins in circulation within the US are: A. near monies B. time deposits C. checkable deposits D. token money

D

money functions as a store of value if it allows you to: A. measure the value of goods in a reliable way B. increase your confidence in money C. make exchanges in a more efficient D. delay purchases until you want the goods

D

the asset demand for money and the rate of interest are: A. directly related B. unrelated C. both stable D. inversely related

D

when money serves as a means of determining the relative worth of goods, services, and its resources, it is functioning as a: A. medium of exchange B. store of value C. standard of deferred payment D. unit of account

D

which increases the excess reserves of commercial banks? A. the central banks sell bonds to commercial banks B. the central banks sell bonds to the public C. the board of governors increases the discount rate D. the central banks buy bonds from commercial banks

D

which of the following do economists consider to be a stock? A. income B. wages C. salaries D. money

D

which of the following is a tool of monetary policy for altering the reserves of commercial banks A. unemployment rate B. tax rate C. budget surplus of deficit D. discount rate

D

if the Fed sells government securities to commercial banks in the open public:

the fed gives the securities to the commercial banks, and commercial banks pay for them by writing a check that decreases their reserves at the Fed

if the fed sells government securities to the public in the open market:

the fed gives the securities to the public: the public pays for the securities by writing checks that when cleared will decrease commercial bank reserves at the fed

which of the following statements best describes the 12 FRB?

they are privately owned and publicly controlled central banks whose basic goal is to control the money supply and interest rates in promoting the general economic welfare

currency and checkable deposits are: A. debts of the federal reserve banks or of financial institutions B. of intrinsic value which determines the relative worth of money C. the major components of the M3 definition of the money supply D. redeemable for gold and silver from the federal reserve system

A

if the dollars held for transactions purposes are, on the average, spent four times a year for final goods and services, then the quantity of money people will wish to hold for transactions is equal to: A. 25 percent of nominal GDP B. 4 percent of nominal GDP C. nominal GDP divided by 25 D.nominal GDP multipled by 4

A

if the value of the dollar is falling, then it follows that: A. the price index is rising B. real incomes are falling C. interest rates are rising D. the price index is falling

A

lowering the reserve ratio: A. changes required reserves to excess reserves B. decreases the amount of excess reserves banks must keep C. increase the discount rate D. decrease the discount rate

A

the federal backing for the money in the US comes from: A. control over the money supply designed to keep the value of money relatively stable over time B. protecting checkable deposits at financial institutions with deposit guarantees C. providing sufficient quantities of precious metal such as gold, and silver to cover the amount of paper money in circulation

A

the federal reserve alters the amount of the nations money supply by: A. manipulating the size of excess reserves held by commercial banks B. minting coins and printing currency that is distributed to banks C. controlling the assets of the nations largest banks D. reducing the liabilities of the banking system

A

the federal reserve banks are owned by the: A. member banks B. federal government C. US treasury D. board of governors

A

the transactions demand for money will shift to the: A. left when nominal GDP decreases B. right when nominal GDP decreases C. right when nominal GDP increases D. left when nominal GDP increases

A

to keep high inflation from eroding the value of money, monetary authorities in the US A. control the supply of money in the economy B. establish insurance on checkable deposit accounts C. create token money that is less than its intrinsic value D. make paper money legal tender for the payment of debt

A

what function is money serving when you deposit money in a savings account? A. store of value B. checkable deposit C. medium of exchange D. unit of account

A

what function is money serving when you take it on a trip and keep it in your wallet or purse in case you need it? A. store of value B. unit of account C. flow of funds D. medium of exchange

A

when a consumer wants to compare the price of one product with another, money is primarily functioning as a: A. unit of account B. checkable deposit C. store of value D. medium exchange

A

which of the following is the basic economic policy function of the FRB? A. controlling the supply of money B. acting as fiscal agents for the fed. gov. C. the collection or clearing of checks among commercial banks

A

which of the following would be considered to be the most liquid? A. checkable deposits B. money market mutual funds C. savings deposit D. small time deposits

A

which varies directly with the interest rate? A. the opportunity cost of holding money B. the level of investment C. the transactions demand for money D. the asset demand for money

A

which best describes the backing for money in the US? A. the size of the budget surplus in the US government B. the acceptability of it as a medium of exchange C. the willingness of foreign government to hold US dollars D. the gold stored in the federal reserve bank of new york

B

which of the following is a tool of monetary policy for altering the reserves of commercial banks? A. check collection B. open market operations C. acting as the fiscal agent for the federal government D. issuing currency

B

which of the following is true ab the federal reserve system? A. the head of the us treasury also chairs the federal reserve system B. there are 7 members C. the open market committee is smaller than the federal reserve board D. there are 10 regional

B

which of the following monetary policy tools was introduced in december 2007? A. the federal funds rate B. the term auction facility C. the discount rate D. open market operations

B

which would be included in the definition of the money supply? currency and checkable deposits owned by: A. the federal reserve banks B. the public C. the US treasury D. commercial banks

B

checkable deposits are: A. token money B. legal tender C. a medium of exchange D. near money

C

how are the following items treated in the calculation of M1? A. small time deposits and money market mutual funds of individuals are both included B. checkable deposits are excluded and currency is included C. checkable deposits and currency are both included D. small time deposits and currency are both included

C

if the demand for money and the supply of money both increase, then the new equilibrium: A. interest rate will increase, but the change in the interest rate cannon be predicted B. quantity of money and the interest rate will both increase C. quantity of money will increase, but the change in interest rate cannot be predicted D. quantity of money and the interest rate will both decrease

C

if the interest rate is above equilibrium, the: A. quantity of money demanded would be greater than the quantity of money supplied B. supply of money would increase and the demand for money would decrease C. quantity of money demanded would be less than the quantity of money supplied D. demand for money would increase and the supply of money would decrease

C

if you write a check on a bank to purchase a used honda civic, you are using money primarily as: A. an economic investment B. a store of value C. a medium of exchange D. a unit of account

C

monetary policy in the US is conducted by: A. office of management and budget B. US treasury C. federal reserve D. internal revenue service

C

stock market price quotations best exemplify money serving as a: A. medium of exchange B. index of satisfaction C. unit of account D. store of value

C

the board of governors of the federal reserve system can increase commercial bank reserves by: A. increase the discount rate B. decreasing the prime interest rate C. buying government securities in the open market D. increasing the reserve ratio

C

the conduct of monetary policy in the US is the main responsibility of the: A. federal reserve B. bureau of economic analysis C. federal reserve D. bureau of the public debt

C

the federal reserve system consists of which of the following? A. us treasury department and bureau of engraving and printing B. federal open market committee and office of thrift supervision C. board of governors and the 12 federal reserve banks

C

the federal reserve system: A. is an agency of the executive branch of the federal government B. has the status of a congressional committee C. is basically an independent agency D. has the same status as a supreme court

C

the functions of money are to serve as a: A. resource allocator, method for accounting, and means of income distribution B. determinant of consumption, investment, and government spending C. unit of account, store value, and medium of exchange D. factor of production, exchange, and aggregate supply

C

the fundamental objective of monetary policy is to assist the economy in achieving:L A. a money supply which is based on the gold standard B. a rapid pace of economic growth C. a full employment, noninflationary level of total output D. a balanced budget consistent with full emplyment

C

the interest rate that is paid by term auction winners: A. is equal to the discount rate B. is equal to the rate offered by the highest bidder C. is the same for all bidders D. is equal to the rate offered by the lowest bidder

C

the largest component of the money supply is: A. checkable deposits B. saving deposits C. currency D. small time deposits

C

the members of the federal reserve bond: A. are appointed by the american economic association B. are elected by votes of the 12 presidents of the FRB C. serve 14 year terms D. serve 7 year terms

C

the most frequently used monetary device for achieving price stability is: A. discount rate B. prime interest rate C. open market operations D. reserve ratio

C

the principal advantage money has over barter it its function as: A. unit of account B. debt C. medium of exchange D. store of value

C

the tools of monetary policy for altering the reserves of commercial banks are the: A. consumer price index and unemployment B. public debt, budget surplus, and budget deficit C. discount rate, reserve ratio, and open market operations D. tax rate and level of government spending

C

there is an asset demand for money primarily because of which function of money? A. legal tender B. measure of value C. store of value D. medium of exchange

C

what primary function is money serving when you keep it in a bank account until you need it to purchase a product? A. medium of exchange B. unit of account C. store of value D. double coincidence of wants

C

which definition of the money supply indicates only items which are directly and immediately usable as a medium of exchange? A. M2 B. M1 and M2 C. M1 D. neither

C

the major purpose of the federal reserve buying government securities in open market operations is to: A. reduce the excess reserves of banks B. raise money for government spending C. increase interest rates D. allow banks to increase their lending

D

the total quantity of money demanded is determined by: A. subtracting the transactions demand for money to nominal GDP B. adding the asset demand for money to nominal GDP C. subtracting the asset demand for money from the transactions demand for money D. adding the transactions demand for money to the asset demand for money

D

which of the following is correct? A. commercial bank reserves are a liability to commercial banks but an asset to federal reserve banks B. commercial banks reduce the supply of money when they "purchase" personals IOUs or government bonds from the public C. excess reserves may be found by subtracting actual from required reserves D. the supply of money declines when the public purchases securities from commercial banks

D

which of the following statements best describes the relationship between the term auction facility and changes in the discount rate A. neither tool guarantees that the amount of reserves the fed wishes loan will be borrowed B. both tools guarantee that the amount of reserves the fed wishes to loan will be borrowed C. changes in the discount rate guarantee that the amount of reserves the fed wishes to loan will be borrows but the term auction facility does not D. the term auction facility guarantees that the amount do reserves the fed wishes to loan will be borrowed, but changes in the discount rate do not

D

the federal reserve could increase the money supply by: A. raising interest rates B. selling gov bonds on the open market C. raising the discount rate D. buying gov bonds on the open market

D

an increase in nominal GDP will: A. increase the transactions demand for money but decrease the total demand for money B. increase the transactions demand and total demand for money C. increase the transactions demand for money but decrease the total demand for money D. decrease the transactions demand for money but increase the total demand for money

B

assume the commercial banking system has checkable deposits of $20 billion and excess reserves of $2 billion at a time when the reserve ratio is 25%. if the ratio is lowered to 20%, we can conclude that the: A. board of governors has decided that the economy is experiencing a high rate of inflation B. maximum money-creating potential of the banking system has been increased by $7 billion C. bank now has excess reserves of $3.2 billion D. bank now has either an excess nor a deficiency of reserves

B

how long is the term of office for members appointed to serve on the board? A. 2 years B. 14 years C. 7 years D. 4 years

B

if interest rates rise, there will be a: A. decrease in total amount of money supplied B. decrease in the total amount of money demanded C. increase in the asset demand for money D. increase in the total amount of money demanded

B

lowering the discount rate has the effect of: A. changing required into excess reserves B. making it less expensive for commercial banks to borrow from the central banks C. changing excess into required reserves D. forcing commercial banks to call in outstanding loans from their best customers

B

money eliminates the need for a coincidence of wants primarily through its use as a: A. unit of account B. medium of exchange C. store of value D. standard of confidence

B

the M1 money supply is composed of A. saving deposits and time deposits B. checkable deposits and currency C. money market mutual finds held by businesses D. money market mutual finds held by individuals

B

the basic requirement of money is that it be: A. some form of debt or credit B. generally accepted as a medium of exchange C. authorized as legal tender by the central government D. backed by precious metals, gold or sliver

B

the greater the amount of financial wealth people hold in the form of near monies, the: A. less is the asset demand for money B. greater is their willingness to spend out of their money incomes C. greater is the transactions demand for money D. less is their willingness to spend out of their money incomes

B

the transactions demand for money is least likely to be a function of the: A. level of national income B. interest rate C. price level D. frequency of wage and salary payments

B

to say that the federal reserve banks are quasi-public bank means that: A. they deal with commercial banks and not the public B. they are privately owned but managed in public interest C. they are publicly owned but privately managed

B

what "backs" the money supply: A. the fact that the intrinsic value of coins in circulation is greater than their face value B. the US gov ability to keep the value of money relatively stable C. the fact that currency is issued as federal reserve notes

B

when the fed auctions and loans reserves using the term auction facility, what determines the interest rate that will be charged for those reserves? A. the interest rate of the lowest bidder B. the interest rate of the highest bidder C. each bank with an accepted bid is charged whatever interest rate it bid D. the interest rate of the highest bidder

B

a television report states: "the federal reserve will lower the discount rate for the fourth time this year." this report indicates that the federal reserve is most likely trying to: A. improve the savings rate B. reduce inflation C. save the banking idustry D. stimulate the economy

D

if the buys government securities from commercial banks in the open market:

commercial banks give the securities to the Fed, and the Fed pays for them by increasing the reserves of commercial banks at the Fed

if the board of governors of the federal reserve system decreases the legal reserve ratio, this change will:

increase excess reserves of member banks and thus increase the money supply

US currency has value primarily because it:

is relatively scarce, is legal tender, and is generally acceptable in exchange for goods and services

an important routine function of the FRB is to:

provide facilities by which commercial banks and thrift institutions may collect checks