Question 1

Which of the following is not included in either M1 or M2?

Accepted Answer

A)  money market deposit accounts
B)  large time deposit
C)  demand deposits
D)  money market mutual fundsE) B) and C)
F) A) and B)

Question 2

In order for currency to be widely used as a medium of exchange,it is sufficient for the government to designate it as legal tender.

Accepted Answer

A) True 
 B)False

Question 3

Explain how each of the following changes the money supply.
a.the Fed buys bonds
b.the Fed auctions credit
c.the Fed raises the discount rate
d.the Fed raises the reserve requirement

Accepted Answer

a.
If the Fed buys bonds,it pays for th...

Question 4

Bank runs

Accepted Answer

A)  will affect neither the money supply nor the money multiplier.
B)  are only a problem for insolvent banks.
C)  can be neither prevented nor mitigated by the Federal Reserve.
D)  are a problem because banks only hold a fraction of deposits as reserves.E) A) and C)
F) A) and B)

Question 5

The discount rate is the interest rate that

Accepted Answer

A)  banks charge one another for loans.
B)  banks charge the Fed for loans.
C)  the Fed charges banks for loans.
D)  the Fed charges Congress for loans.E) All of the above
F) C) and D)

Question 6

Which of the following best illustrates the medium of exchange function of money?

Accepted Answer

A)  You keep some money hidden in your shoe.
B)  You keep track of the value of your assets in terms of currency.
C)  You pay for your oil change using currency.
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 7

Roundabout trade decreases production.

Accepted Answer

A) True 
 B)False

Question 8

When we measure and record economic value,we use money as the

Accepted Answer

A)  liquid asset.
B)  medium of exchange.
C)  unit of account.
D)  store of value.E) C) and D)
F) B) and D)

Question 9

The money supply increases when the Fed

Accepted Answer

A)  buys bonds.The increase will be larger,the smaller is the reserve ratio.
B)  buys bonds.The increase will be larger,the larger is the reserve ratio.
C)  sells bonds.The increase will be larger,the smaller is the reserve ratio.
D)  sells bonds.The increase will be larger,the larger is the reserve ratio.E) C) and D)
F) A) and B)

Question 10

M1 includes

Accepted Answer

A)  currency.
B)  demand deposits.
C)  traveler's checks.
D)  All of the above are correct.E) B) and C)
F) A) and D)

Question 11

Other things the same,if banks decide to hold a smaller part of their deposits as excess reserves,the money supply will fall.

Accepted Answer

A) True 
 B)False

Question 12

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Accepted Answer

A) True 
 B)False

Question 13

Credit cards

Accepted Answer

A)  defer payments.
B)  are a store of value.
C)  have led to wider use of currency.
D)  are part of the money supply.E) B) and C)
F) A) and D)

Question 14

Money is the only asset that functions as a store of value.

Accepted Answer

A) True 
 B)False

Question 15

Demand deposits are a type of

Accepted Answer

A)  checking account.
B)  time deposit.
C)  money market mutual fund.
D)  savings deposit.E) A) and B)
F) C) and D)

Question 16

Which of the following is correct?

Accepted Answer

A)  A bank's deposits at the Federal Reserves counts as part of the bank's reserves.The Federal Reserve pays interest on these deposits.
B)  A bank's deposits at the Federal Reserves counts as part of the bank's reserves.The Federal Reserve does not pay interest on these deposits.
C)  A bank's deposits at the Federal Reserves does not count as part of the bank's reserves.The Federal Reserve pays interest on these deposits.
D)  A bank's deposits at the Federal Reserves does not counts as part of the bank's reserves.The Federal Reserve does not pay interest on these deposits.E) B) and C)
F) A) and D)

Question 17

The money multiplier equals 1/(1 - R),where R represents the reserve ratio.

Accepted Answer

A) True 
 B)False

Question 18

To increase the money supply,the Fed could

Accepted Answer

A)  sell government bonds.
B)  increase the discount rate.
C)  decrease the reserve requirement.
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 19

A debit card is more similar to a credit card than to a check.

Accepted Answer

A) True 
 B)False

Exam 30: The Monetary System

Money is the only asset that functions as a store of value.

Correct Answer
verified

The money supply increases when the Fed

Correct Answer
verified

Other things the same,if banks decide to hold a smaller part of their deposits as excess reserves,the money supply will fall.

Correct Answer
verified

Which of the following best illustrates the medium of exchange function of money?

Correct Answer
verified

Roundabout trade decreases production.

Correct Answer
verified

Explain how each of the following changes the money supply. a.the Fed buys bonds b.the Fed auctions credit c.the Fed raises the discount rate d.the Fed raises the reserve requirement

Correct Answer
verified
a.
If the Fed buys bonds,it pays for th...
View Answer

The discount rate is the interest rate that

Correct Answer
verified

Which of the following is not included in either M1 or M2?

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

In order for currency to be widely used as a medium of exchange,it is sufficient for the government to designate it as legal tender.

Correct Answer
verified

Bank runs

Correct Answer
verified

To increase the money supply,the Fed could

Correct Answer
verified

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Correct Answer
verified

When we measure and record economic value,we use money as the

Correct Answer
verified

A debit card is more similar to a credit card than to a check.

Correct Answer
verified

Credit cards

Correct Answer
verified

M1 includes

Correct Answer
verified

Demand deposits are a type of

Correct Answer
verified

The money multiplier equals 1/(1 - R),where R represents the reserve ratio.

Correct Answer
verified

Exam 30: The Monetary System

Money is the only asset that functions as a store of value.

Correct AnswerverifiedShow Answer

The money supply increases when the Fed

Correct AnswerverifiedShow Answer

Other things the same,if banks decide to hold a smaller part of their deposits as excess reserves,the money supply will fall.

Correct AnswerverifiedShow Answer

Which of the following best illustrates the medium of exchange function of money?

Correct AnswerverifiedShow Answer

Roundabout trade decreases production.

Correct AnswerverifiedShow Answer

Explain how each of the following changes the money supply. a.the Fed buys bonds b.the Fed auctions credit c.the Fed raises the discount rate d.the Fed raises the reserve requirement

Correct Answerverifieda. If the Fed buys bonds,it pays for th...View AnswerShow Answer

The discount rate is the interest rate that

Correct AnswerverifiedShow Answer

Which of the following is not included in either M1 or M2?

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

In order for currency to be widely used as a medium of exchange,it is sufficient for the government to designate it as legal tender.

Correct AnswerverifiedShow Answer

Bank runs

Correct AnswerverifiedShow Answer

To increase the money supply,the Fed could

Correct AnswerverifiedShow Answer

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Correct AnswerverifiedShow Answer

When we measure and record economic value,we use money as the

Correct AnswerverifiedShow Answer

A debit card is more similar to a credit card than to a check.

Correct AnswerverifiedShow Answer

Credit cards

Correct AnswerverifiedShow Answer

M1 includes

Correct AnswerverifiedShow Answer

Demand deposits are a type of

Correct AnswerverifiedShow Answer

The money multiplier equals 1/(1 - R),where R represents the reserve ratio.

Correct AnswerverifiedShow Answer

Correct Answer
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a.
If the Fed buys bonds,it pays for th...
View Answer

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