Question 1

The amount that the bank is legally required to keep on hand is called the:

Accepted Answer

A)  required reserves.
B)  demand deposits.
C)  federal funds.
D)  reserve ratio.E) C) and D)
F) B) and D)

Question 2

One of the functions of money is to serve as a:

Accepted Answer

A)  store of value.
B)  valuation tool.
C)  equality enhancer.
D)  All of these are functions of money.E) C) and D)
F) All of the above

Question 3

When the economy experiences inflation,people demand a:

Accepted Answer

A)  lower quantity of money,shifting the money demand curve leftward.
B)  higher quantity of money,shifting the money demand curve left ward.
C)  lower quantity of money,shifting the money demand curve rightward.
D)  None of these is true.E) A) and D)
F) B) and D)

Question 4

If the Fed were to change the reserve requirement in an effort to increase the money supply,they would:

Accepted Answer

A)  increase the reserve requirement.
B)  decrease the reserve requirement.
C)  open the discount window longer.
D)  increase the discount rate.E) All of the above
F) B) and D)

Question 5

The primary way that banks earn money is:

Accepted Answer

A)  through lending funds and collecting interest on those loans.
B)  through the accumulation of deposits.
C)  by lending money to the government.
D)  by the government paying them to regulate the financial system.E) A) and B)
F) B) and C)

Question 6

If the money multiplier is approximated to be 10,it means:

Accepted Answer

A)  banks create 10 dollars in deposits from each original deposit of a dollar.
B)  banks create approximately 10 times the amount of cash in the economy.
C)  the economy overall has 10 times the amount of deposits as cash that exists.
D)  All of these are true.E) A) and B)
F) All of the above

Question 7

Because banks earn money when it makes a loan to a borrower it:

Accepted Answer

A)  it has an incentive to loan out as much of each deposit it can.
B)  it has an incentive to borrow from the government as much as it can to loan out.
C)  it needs to loan out more than it takes in through deposits to make money.
D)  it has more of an incentive to loan out money than take money in through deposits.E) None of the above
F) A) and D)

Question 8

The regional Federal Reserve bank presidents are:

Accepted Answer

A)  selected from the banking and business community in the region.
B)  are responsible for overseeing the day-to-day actions of the regional banks.
C)  are responsible for regulatory oversight and implementation of monetary policy of regional banks.
D)  All of these are true.E) B) and D)
F) A) and D)

Question 9

If the economy is in a recession,the Fed could:

Accepted Answer

A)  buy bonds through open market operations to increase spending in the economy.
B)  sell bonds through open market operations to increase spending in the economy.
C)  increase the discount rate so banks will increase their lending in the economy.
D)  increase the reserve requirement to increase confidence in the financial system.E) A) and D)
F) All of the above

Question 10

A central bank is:

Accepted Answer

A)  the institution ultimately responsible for managing the nation's money supply.
B)  the institution ultimately responsible for coordinating the banking system to ensure a sound economy.
C)  an institution that exists in almost every major nation.
D)  All of these are true.E) A) and B)
F) A) and C)

Question 11

When considering the change to the money demand curve,if the interest rate rises,the quantity demanded is:

Accepted Answer

A)  lower,moving leftward along the money demand curve.
B)  higher,moving leftward along the money demand curve.
C)  lower,moving rightward along the money demand curve.
D)  higher,moving rightward along the money demand curve.E) A) and C)
F) None of the above

Question 12

Which of the following countries have used adjustments to the required reserve ratio as
A primary tool of monetary policy?

Accepted Answer

A)  United States
B)  China
C)  Mexico
D)  IndiaE) A) and D)
F) B) and C)

Question 13

One reason we use paper money instead of gold coins in the Unites States today is because:

Accepted Answer

A)  it is more convenient.
B)  it has no intrinsic value.
C)  it is easier to control its worth.
D)  All of these are reasons why we use paper for money instead of gold.E) None of the above
F) A) and C)

Question 14

Which of the following tools is used most often by the Fed for changing the supply of money?

Accepted Answer

A)  Open market operations
B)  Reserve requirement
C)  Discount window
D)  Interest rateE) None of the above
F) All of the above

Question 15

If the Fed wanted to increase the money supply,they could:

Accepted Answer

A)  increase the reserve requirement,reducing the reserve ratio.
B)  decrease the reserve requirement,reducing the reserve ratio.
C)  increase the reserve requirement,increasing the reserve ratio.
D)  decrease the reserve requirement,increasing the reserve ratio.E) A) and D)
F) A) and C)

Question 16

The Board of Governors:

Accepted Answer

A)  are experts in banking,finance,and monetary policy.
B)  are appointed by the U.S.president and confirmed by the Senate.
C)  serve 14-year terms.
D)  All of these are true.E) All of the above
F) B) and C)

Question 17

Funds held in bank accounts that can be withdrawn by depositors at any time without advance notice are called:

Accepted Answer

A)  demand deposits.
B)  required reserves.
C)  free funds.
D)  flow funds.E) None of the above
F) C) and D)

Question 18

The narrowest definition of money:

Accepted Answer

A)  includes the things that can be used in transactions immediately.
B)  contains only cash and bank reserves held at the Fed.
C)  is referred to as hard money.
D)  All of these are true.E) A) and C)
F) B) and D)

Question 19

We know how many dollars banks create using the:

Accepted Answer

A)  money multiplier.
B)  federal funds.
C)  demand deposits.
D)  interest rate.E) A) and C)
F) B) and C)

Question 20

The twin responsibilities of the Federal Reserve is called the:

Accepted Answer

A)  dual mandate.
B)  double duty.
C)  twin spin.
D)  two tasks.E) A) and C)
F) B) and C)

Exam 31: Money and the Monetary System

We know how many dollars banks create using the:

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Which of the following tools is used most often by the Fed for changing the supply of money?

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The primary way that banks earn money is:

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The amount that the bank is legally required to keep on hand is called the:

Correct AnswerverifiedShow Answer

Funds held in bank accounts that can be withdrawn by depositors at any time without advance notice are called:

Correct AnswerverifiedShow Answer

If the Fed were to change the reserve requirement in an effort to increase the money supply,they would:

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One of the functions of money is to serve as a:

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A central bank is:

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Which of the following countries have used adjustments to the required reserve ratio as A primary tool of monetary policy?

Correct AnswerverifiedShow Answer

When considering the change to the money demand curve,if the interest rate rises,the quantity demanded is:

Correct AnswerverifiedShow Answer

Because banks earn money when it makes a loan to a borrower it:

Correct AnswerverifiedShow Answer

The regional Federal Reserve bank presidents are:

Correct AnswerverifiedShow Answer

If the money multiplier is approximated to be 10,it means:

Correct AnswerverifiedShow Answer

If the Fed wanted to increase the money supply,they could:

Correct AnswerverifiedShow Answer

When the economy experiences inflation,people demand a:

Correct AnswerverifiedShow Answer

The twin responsibilities of the Federal Reserve is called the:

Correct AnswerverifiedShow Answer

One reason we use paper money instead of gold coins in the Unites States today is because:

Correct AnswerverifiedShow Answer

The Board of Governors:

Correct AnswerverifiedShow Answer

If the economy is in a recession,the Fed could:

Correct AnswerverifiedShow Answer

The narrowest definition of money:

Correct AnswerverifiedShow Answer

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