W11 quiz

In the special case of 100-percent-reserve banking, the money multiplier is

1 and banks do not create money

Which of the following is an example of barter?

A barber gives a plumber a haircut in exchange for the plumber fixing the barber's leaky faucet

Which of the following both increase the money supply?

A decrease in the discount. rate and a decrease in the interest rate on reserves

Which of the following does the Federal Reserve not do?

Conduct fiscal policy

If the money multiplier is 3 and the Fed buts $50,000 worth of bonds, what happens to the moeny supply?

It increases by $150,000

When in France you notice that prices are posted in euros. This best illustrates money's function as

a unit of account

When the Fed decreases the discount rate, banks will

borrow more from the Fed and lend more to the public. The money supply increases

If the money multiplier is 3 and the Fed wants to increase the money supply by $900,000, it could

buy $300,000 worth of bonds

Which of the following lists is included in what economists call "money"?

cash

Because of the multiple tools at its disposal, the Fed can control the money supply very precisely

false

Commodity money cannot be used as a unit of account

false

If the Fed buys bonds in the open market, the money supply decreases

false

M1 includes savings deposits

false

The Federal Reserve is a privately operated commercial bank

false

The federal funds rate is the

interest rate at which banks lend reserves to each other overnight

The Federal Reserve

is the central bank of the United States

If the reserve requirement is 10 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $500, it

must increase required reserves by $50

Which of the following is not a function of money?

protection against inflation

Which of the following best represent fiat money?

the euro

money is

the most liquid asset but an imperfect store of value

Bottles of a very fine wine are less liquid than demand deposits

true

M2 is both larger and less liquid than M1

true

Members of the Board of Governors are appointed by the president of the U.S. and confirmed by the U.S. Senate

true

When you purchase school supplies at the bookstore using cash, you are using money as a medium of exchange

true

When colonists in Virginia used tobacco as money, their money

was commodity money