Question 1

The M1 classification of money includes:

Accepted Answer

A)   cash and checking account balances.
B)   hard money and savings account balances.
C)   cash and savings account balances.
D)   cash, checking accounts, savings accounts, and other financial instruments where money is locked away for a specified period of time.E) A) and C)
F) C) and D)

Question 2

If money has intrinsic value, it has value:

Accepted Answer

A)   unrelated to its use as money.
B)   only as its use as money.
C)   that determines how often people use it.
D)   based on how often people use it for payment.E) None of the above
F) A) and C)

Question 3

In order to change the money supply, the Fed might use all of the following tools except:

Accepted Answer

A)   the discount window.
B)   the reserve requirement.
C)   open market operations.
D)   deficit spending.E) A) and D)
F) B) and C)

Question 4

If the Fed wanted to decrease the money supply, one way to make an enormous impact would be to _______ the reserve requirement, which would _______ the money multiplier.

Accepted Answer

A)   increase; decrease
B)   decrease; decrease
C)   increase; increase
D)   decrease; increaseE) None of the above
F) All of the above

Question 5

What is the essential function of any central bank? I. Managing the money supply
II. Acting as a lender of last resort
III. Overseeing major business transactions
IV. Preventing the formulation of monopolies
V. Collecting taxes

Accepted Answer

A)   I and II only
B)   I and III only
C)   I, II, III, and IV
D)   I, II, III, IV, and VE) A) and B)
F) B) and C)

Question 6

The cash you have in your wallet would be counted in which measure of money?

Accepted Answer

A)   The monetary base
B)   M1
C)   M2
D)   The monetary base, M1, and M2E) B) and C)
F) B) and D)

Question 7

Which of the following is a good with no intrinsic value?

Accepted Answer

A)   Gold
B)   Paper dollar bills
C)   Cigarettes
D)   Hershey chocolateE) A) and B)
F) None of the above

Question 8

Banks create money in the economy by:

Accepted Answer

A)   loaning out part of each deposit, which will be redeposited by someone else.
B)   charging higher interest on loans than savings.
C)   charging higher interest on savings than loans.
D)   loaning out all of their deposits to borrowers.E) A) and C)
F) C) and D)

Question 9

Suppose a bank operates in a country with a 10 percent reserve requirement, and someone deposits $5,000 into a savings account. Including the deposit, how much money has been created in this economy?

Accepted Answer

A)   $45,000
B)   $5,500
C)   $50,000
D)   $9,500E) A) and B)
F) None of the above

Question 10

The amount that a 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 C)

Question 11

If the reserve ratio is 20 percent, the money multiplier will be:

Accepted Answer

A)   20.
B)   5.
C)   10.
D)   2.E) A) and D)
F) C) and D)

Question 12

The money supply is the amount of money:

Accepted Answer

A)   available in the economy.
B)   available for banks to lend.
C)   that banks keep on hand beyond the reserve requirement.
D)   None of these are true.E) A) and D)
F) B) and D)

Question 13

We say that money is a medium of exchange because it:

Accepted Answer

A)   represents a certain amount of purchasing power held over time.
B)   can be used to purchase goods and services.
C)   holds a fixed value over time.
D)   provides a standard unit of comparison.E) C) and D)
F) B) and D)

Question 14

If we wanted to consider all the money that had been "multiplied" in the economy, we would use:

Accepted Answer

A)   the monetary base.
B)   M1.
C)   M2.
D)   None of these would be used.E) B) and C)
F) A) and B)

Question 15

Contractionary monetary policy involves actions that _______ the money supply in order to _______ aggregate demand.

Accepted Answer

A)   decrease; decrease
B)   increase; decrease
C)   decrease; increase
D)   increase; increaseE) B) and C)
F) A) and D)

Question 16

If someone deposits $10,000 into a savings account and the amount of money in the economy increases by $40,000, what is the size of the reserve requirement?

Accepted Answer

A)   20 percent
B)   25 percent
C)   30 percent
D)   40 percentE) All of the above
F) A) and B)

Question 17

The Federal Reserve:

Accepted Answer

A)   is fairly independent from the rest of the government.
B)   is only active in the economy during times of recession.
C)   is easily swayed by political pressure.
D)   has generally been unable to control inflation.E) B) and C)
F) All of the above

Question 18

Wide acceptance of money without intrinsic value comes largely from the fact that it:

Accepted Answer

A)   has a stable value.
B)   does not change value very often.
C)   is hard to counterfeit.
D)   can be used domestically and internationally.E) All of the above
F) A) and C)

Question 19

Which of the following would not make a good currency?

Accepted Answer

A)   Platinum
B)   Flowers
C)   Cigarettes
D)   Paper moneyE) A) and B)
F) B) and C)

Question 20

The main financial operations of the United States government are conducted by:

Accepted Answer

A)   the Consumer Financial Protection Bureau.
B)   the Treasury Department.
C)   the Federal Reserve.
D)   Congress.E) C) and D)
F) None of the above

Exam 15: Moneyand the Monetary System

The cash you have in your wallet would be counted in which measure of money?

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Contractionary monetary policy involves actions that _______ the money supply in order to _______ aggregate demand.

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The Federal Reserve:

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What is the essential function of any central bank? I. Managing the money supply II. Acting as a lender of last resort III. Overseeing major business transactions IV. Preventing the formulation of monopolies V. Collecting taxes

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Wide acceptance of money without intrinsic value comes largely from the fact that it:

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Which of the following would not make a good currency?

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If money has intrinsic value, it has value:

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If we wanted to consider all the money that had been "multiplied" in the economy, we would use:

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Banks create money in the economy by:

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In order to change the money supply, the Fed might use all of the following tools except:

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Which of the following is a good with no intrinsic value?

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If the Fed wanted to decrease the money supply, one way to make an enormous impact would be to _______ the reserve requirement, which would _______ the money multiplier.

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If someone deposits $10,000 into a savings account and the amount of money in the economy increases by $40,000, what is the size of the reserve requirement?

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The M1 classification of money includes:

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If the reserve ratio is 20 percent, the money multiplier will be:

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

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The money supply is the amount of money:

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Suppose a bank operates in a country with a 10 percent reserve requirement, and someone deposits $5,000 into a savings account. Including the deposit, how much money has been created in this economy?

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The main financial operations of the United States government are conducted by:

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We say that money is a medium of exchange because it:

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Contractionary monetary policy involves actions that _ the money supply in order to _ aggregate demand.

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If the Fed wanted to decrease the money supply, one way to make an enormous impact would be to _ the reserve requirement, which would _ the money multiplier.

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