Intermediate Economics- EC 341

If the monetary base equals $400,000,000,000 and the money multiplier equals 2, then the money supply equals :

A) $200,000,000,000 B) $400,000,000,000 C) $800,000,000,000 D) $1,000,000,000,000 C) $800,000,000,000

Excess reserves are reserves that banks keep:

A) in their vaults B) at the central bank C) to meet legal reserve requirements D) above the legally required amount D) above the legally required amount

When a pizza maker lists the price of a pizza as $10, this is an example of using money as a:

A) store of value B) unit of account C) medium of exchange D) flow of value B) unit of account

The reserve-deposit ratio is determined by:

A) the inflation rate B) business policies of banks and the laws regulating banks C) preferences of households about the form of money they wish to hold D) Federal Deposit Insurance Corporation (FDIC) B) business policies of banks and the laws regulating banks

Payment is deferred by using ____, but immediate access to funds occurs when using _____

A) currency; demand deposits B) credit cards; debit cards C) demand deposits; savings deposits D) debit cards; credit cards B) credit cards; debit cards

In a country on a gold standard, the quantity of money is determined by the:

A) government B) central bank C) amount of gold D) buying and selling of government securities C) amount of gold

People use money as a store of value when they:

A) hold money to transfer purchasing power into the future B) use money as a measure of economic transactions C) use money to buy goods and services D) hold money to gain power and esteem A) hold money to transfer purchasing power into the future

Economists use the term money to refer to:

A) income B) profits C) assets used for transactions D) earnings from labor C) assets used for transaction

If many banks fail, this is likely to:

A) increase the ratio of currency to deposits B) decrease the ratio of currency to deposits C) have no effect on the ratio of currency to deposits D) decrease the amount of currency in circulation if the FED takes no action A) increase the ratio of currency to deposits

When the FED decreases the interest rate paid on reserves, it:

A) increases the reserve-deposit ratio (rr) B) decreases the reserve-deposit ratio (rr) C) increases the monetary base (B) D) decreases the monetary base (B) B) decreases the reserve-deposit ratio (rr)

The money supply will decrease if the :

A) monetary base increases B) currency-deposit ratio increases C) discount rate decreases D) reserve-deposit ratio decreases B) currency-deposit ratio increases

Assets of banks include:

A) money market mutual funds B) currency in the hands of the public C) loans to customers D) demand deposits C) loans to customers

If the monetary base is denoted by B, rr is the ratio of reserves to deposits, and cr is ratio of currency to deposits, then the money supply is equal to ____ multiplied by B.

A) (rr+1)/(rr+cr) B) (cr+1)/(cr+rr) C) (rr+cr)/(rr+1) D) (rr+cr)/(cr+1) B) (cr+1)/(cr+rr)

Deposits- $1,000 Reserves- $100 Securities- $400 Bonds Issued -$ 500 Loans- $2,000 What is the value of bank capital?

A) -$1,000 B) + $500 C) + $1,000 D) +$1,500 C) + $1,000

Based on the table, what is the reserve-deposit ratio at the bank?

A) 3% B) 5% C) 10% D) 15% C) 10%

When banks borrow through the Term Auction Facility, the price of borrowing is determined by:

A) The Federal Reserve B) a competitive building process C) the difference between the discount rate and the interest rate on a 3 month Treasury security D) Open-market operations B) a competitive bidding process

In a system with fractional-reserve banking:

A) all banks must hold reserves equal to a fraction of their loans B) no banks can make loans C) the banking system completely controls the size of the money supply D) all banks must hold reserves equal to a fraction of their deposits D) all banks must hold reserves equal to a fraction of their deposits

To reduce the money supply, the Federal Reserve:

A) buys government bonds B) sells government bonds C) creates demand deposits D) destroys demand deposits B) sells government bonds

To increase the monetary base, the FED can:

A) conduct open-market purchases B) conduct open-market sales C) raise the interest rate paid on reserves D) lower the required reserve ratio A) conduct open-market purchases

All of these assets are included in M1 EXCEPT:

A) currency B) demand deposits C) traveler's checks D) Money Market Deposit Accounts D) Money Market Deposit Accounts