In a fractional reserve banking system

banks can create money through the lending process

if the fed wants to discourage commercial bank lending, it will:

increase the interest paid on reserves held at the fed

the monetary authorities want to reduce the monetary multiplier, they should:

raise the required reserve ratio

open-market operations refer to:

the purchase or sale of government securities by the fed

excess reserves refer to the:

difference between actual reserves and required reserves

when the reciepts given by goldsmiths to depositors were used to make purchases:

the receipts became in effect paper money

stabilizing a nations price level and purchasing power of its money can be achieved:

with both fiscal and monetary policy

banks create money when they:

buy government bonds from households or commercial banks

the amount of reserves a commercial bank is required to hold is = to

its checkable deposits multiplied by the reserve requirements

the money supply is backed:

by the gov ability to control the supply of money and keep its value stable

which of the following is correct

granting a bank loan creates $; repaying a bank loan destroys $

an increase in the legal reserve ratio:

decreases the $ supply by decreasing excess reserves&decreasing monetary X

which of the following describes the cause-effect chain of an expansionary monetary policy

a↑$supply will↓interest rate,↑investment spending, ↑aggregate demand & GDP

the 4 main tools of monetary policy are:

discount rate,reserve ratio, interest on reserves, open market operations

in defining money as M1 economists exclude time deposits because:

they are not directly or immediately a medium of exchange

the discount rate is the interest:

rate at which the fed reserve banks lend to commercial banks

in the united states, the money supply (m1) is compromised of:

coins, paper currency, and checkable deposits

the greater the required reserve ratio, the:

lower is the monetary multiplier

the asset demand for money:

varies inversely with the rate of interest

which of the following statements is correct

interest rates and bond prices vary inversely

the equilibrium rate of interest in the market for money is determined by the intersection of the:

supply-of-money curve and the total-demand-for-money curve

the members of the federal reserve board:

are appointed for 14-year terms

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macro final exam 4 SHOAF

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Questions 40

Answers

1
money is destroyed when:
the net worth of the banking system declines
checks are written on one bank are deposited in another bank
loans are made
loans are repaid
2
the number appropriate for space y is
24,000
96,000
32,000
48,000
3
In a fractional reserve banking system
the federal reserve has no control over the amount of money in circulation
the monetary system must be backed by gold
banks can create money through the lending process
bank panics cannot occur
4
if the fed wants to discourage commercial bank lending, it will:
lower the federal funds rate target
buy government securities from commercial banks
increase the interest paid on reserves held at the fed
decrease the interest paid on reserves held at the fed
5
TARP, created in 2008, stands for:
Toxic Asset Reinvestment Policy
Toxic Asset Relief Program
Troubled Asset Relief Program
Troubled Asset Recovery Program
6
the amount that a commercial bank can lend is determined by its:
required reserves
outstanding loans
excess reserves
outstanding checkable deposits
7
the number appropriate for space x is
20,000
100,000
200,000
60,000
8
the monetary authorities want to reduce the monetary multiplier, they should:
raise the required reserve ratio
increase bank reserves
lower the required reserve ratio
lower interest rates
9
in the us economy, the money supply is controlled by the:
congress
senate committee on banking and finance
us treasury
federal reserve system
10
currency in circulation is part of:
both M1 & M2
neither M1 nor M2
M1 only
M2 not including M1
11
open-market operations refer to:
central bank lending to commercial banks
purchases of stocks in the New York Exchange
the purchase or sale of government securities by the fed
the specifying of loan maximums on stock purchases
12
which of the following tools of monetary policy is considered the most important on a day-to-day basis
the reserve ratio
open-market operations
the discount rate
paying interest on reserves
13
overnight loans from one bank to another for reserve purposes entail an interest rate called the:
federal funds rate
treasury bill rate
discount rate
prime rate
14
the board of governors of the federal reserve has ____ members
12
7
9
5
15
excess reserves refer to the:
minimum amount of actual reserves a bank must keep on hand to back deposits
difference between actual reserves and required reserves
diff between a bank’s vault cash and its reserves deposited at the fed bank
difference between actual reserves and loans
16
when the reciepts given by goldsmiths to depositors were used to make purchases:
existing banking laws were violated
the gold standard was created
a fractional reserve banking system was created
the receipts became in effect paper money
17
the total demand for money curve will shift to the right as a result of:
an increase in nominal GDP
varies directly with the level of nominal GDP
an increase in the interest rate
a decline in the interest rate
18
stabilizing a nations price level and purchasing power of its money can be achieved:
only with fiscal policy
with neither fiscal nor monetary policy
with both fiscal and monetary policy
only with monetary policy
19
the number appropriate for space w is
4
10
6
12
20
banks create money when they:
sell government bonds to households
accept deposits of cash
allow loans to mature
buy government bonds from households or commercial banks
21
the amount of reserves a commercial bank is required to hold is = to
its checkable deposits multiplied by the reserve requirements
its checkable deposits divided by its total assets
the sum of its checkable deposits and time deposits
the amount of its checkable deposits
22
the money supply is backed:
by the gov ability to control the supply of money and keep its value stable
by gov bonds
dollar-for-dollar by gold and silver
bygold reserves representing a fraction of the total value of $ circulating
23
which of the following is correct
granting a bank loan destroys $; repaying a bank loan creates $
both granting & repaying of bank loans expand the aggregate $ supply
granting a bank loan creates $; repaying a bank loan destroys $
granting bank loans does not affect the $ supply
24
the purchase of gov securities from the public or commercial banks by the fed will cause:
the interest rate to increase
commercial bank reserves to decrease
the money supply to increase
demand deposits to decrease
25
an increase in the legal reserve ratio:
increases the $ supply, increasing the excess reserves&monetary multiplier
decreases $ supply by increasing excess reserves&decreasing monetary multip
decreases the $ supply by decreasing excess reserves&decreasing monetary X
increases $ supply by decreasing excess reserves&decreasing monetary multip
26
a bank that has assets of 85 billion and a net worth of 10 billion must have:
excess reserves of 75 billion
excess reserves of 10 billion
liabilities of 75 billion
liabilities of 10 billion
27
money functions as:
a store of value
a medium of exchange
unit of account
all of these
28
the value of money varies:
directly with the interest rate
directly with the price level
inversely with price level
directly with volume of employment
29
which of the following describes the cause-effect chain of an expansionary monetary policy
a↓$supply ↑interest rate,↓investment spending, ↓ aggregate demand & GDP
a↑$supply will↓interest rate,↑investment spending, ↑aggregate demand & GDP
a ↓$ supply will↓interest rate↑investment spending&↑aggregate demand $ GDP
a↑$supply will ↑ interest rate, ↓investment spending,↓aggregate demand &GDP
30
the 4 main tools of monetary policy are:
tax rate changes, the discount rate, open-market operations, and fed funds
tax rate changes,changes in gov expenditures,open market, interest on reser
changes in gov expenditures, reserve ratio, fed funds rate, discount rate
discount rate,reserve ratio, interest on reserves, open market operations
31
the number appropriate for space z is
70,000
48,000
10,000
zero
32
in defining money as M1 economists exclude time deposits because:
they are not directly or immediately a medium of exchange
the purchasing power of time deposits is less than checkable deposits and $
they are not recognized by the federal government as a legal tender
the intrinsic value of time deposits is nil
33
the discount rate is the interest:
yield on long-term government bonds
rate at which commercial banks lend to the public
rate at which the fed reserve banks lend to commercial banks
rate at which the central banks lend to the us treasury
34
in the united states, the money supply (m1) is compromised of:
paper currency, coins, gold certificates, and time deposits
coins, paper currency, and checkable deposits
currency, checkable deposits, and series E bonds
coins, paper currency, checkable deposits, and credit balances with brokers
35
as it relates to federal reserve activities, the acronym FOMC describes the:
Federal Organization for Monetary Control
Federal Open Market Committee
Federal Options Market Committee
Federal Organization for Money Creation
36
the greater the required reserve ratio, the:
higher the spending multiplier
lower is the monetary multiplier
higher is the monetary multiplier
lower is the spending multiplier
37
the asset demand for money:
varies inversely with the rate of interest
varies directly with the level of nominal GDP
is unrelated to both the interest rate and the level of GDP
varies inversely with the level of real GDP
38
which of the following statements is correct
interest rates and bond prices are unrelated
interest rates and bond prices vary directly
interest rates and bond prices vary during inflations and inversely recess
interest rates and bond prices vary inversely
39
the equilibrium rate of interest in the market for money is determined by the intersection of the:
investment-demand curve and the total-demand-for-money curve
supply-of-money curve and the total-demand-for-money curve
supply-of-money curve and the transactions-demand-for-money curve
supply-of-money curve and the asset-demand-for-money curve
40
the members of the federal reserve board:
are elected by votes of the 12 presidents of the Federal Reserve Banks
serve 7 year terms
are appointed by the American Economic Association
are appointed for 14-year terms

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