曼昆经济学题库chapter21

Chapter21

TheMonetarySystem

MULTIPLECHOICE

1.

Money

a.ismoreefficientthanbarter.

b.makestradeseasier.

c.allowsgreaterspecialization.

d.Alloftheabovearecorrect.

ANSWER:d.

Alloftheabovearecorrect.

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2.

Papermoney

a.hasahighintrinsicvalue.

b.isusedinabartereconomy.

c.isvaluablebecauseitisgenerallyacceptedintrade.

d.isvaluableonlybecauseofthelegaltenderrequirement.

ANSWER:c.

isvaluablebecauseitisgenerallyacceptedintrade.

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3.

Barter

a.requiresadouble-coincidenceofwants.

b.islessefficientthanmoney.

c.isthetradingofgoodsforgoods.

d.Alloftheabovearecorrect.

ANSWER:d.

Alloftheabovearecorrect.

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4.

WhenArnoldusedollarstorecordhisincomeandexpenses,heisusingmoneyasa

a.unitofaccount.

b.meansofpayment.

c.storeofvalue.

d.mediumofexchange.

ANSWER:a.

unitofaccount.

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5.

Whichofthefollowingisastoreofvalue?

a.currency

b.U.S.governmentbonds

c.fineart

d.Alloftheabovearecorrect.

ANSWER:d.

Alloftheabovearecorrect.

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6.

Whichofthefollowingbestillustratestheunitofaccountfunctionofmoney?

a.YoulistpricesforcandysoldonyourWebsite,,indollars.

b.YoupayforyourWNBAticketswithdollars.

c.Youkeep$10inyourbackpackforemergencies.

d.Noneoftheaboveiscorrect.

ANSWER:a.

YoulistpricesforcandysoldonyourWebsite,,indollars.

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431

432Chapter16/TheMonetarySystem

7.

Miaputsmoneyintoapiggybanksoshecanspenditlater.Whatfunctionofmoneydoesthisillustrate?

a.storeofvalue

b.mediumofexchange

c.unitofaccount

d.Noneoftheaboveiscorrect.

ANSWER:a.

storeofvalue

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8.

Whichofthefollowingbestillustratesthemediumofexchangefunctionofmoney?

a.Youkeepsomemoneyhiddeninyourshoe.

b.Youkeeptrackofthevalueofyourassetsintermsofcurrency.

c.Youpayforyourdoublelatteusingcurrency.

d.Noneoftheaboveiscorrect.

ANSWER:c.

Youpayforyourdoublelatteusingcurrency.

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9.

Economistsusetheword“money”toreferto

a.incomegeneratedbytheproductionofgoodsandservices.

b.thoseassetsregularlyusedtobuygoodsandservices.

c.thevalueofaperson’sassets.

d.thevalueofstocksandbonds.

ANSWER:b.

thoseassetsregularlyusedtobuygoodsandservices.

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10.

Liquidityrefersto

a.theeasewithwhichanassetisconvertedtothemediumofexchange.

b.ameasurementoftheintrinsicvalueofcommoditymoney.

c.thesuitabilityofanassettoserveasastoreofvalue.

d.howmanytimeadollarcirculatesinagivenyear.

ANSWER:a.

theeasewithwhichanassetisconvertedtothemediumofexchange.

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11.

Whichlistranksassetsfrommosttoleastliquid?

a.currency,fineart,stocks

b.currency,stocks,fineart

c.fineart,currency,stocks

d.fineart,stocks,currency

ANSWER:b.

currency,stocks,fineart

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12.

CurrentU.S.currencyis

a.fiatmoneywithintrinsicvalue.

b.fiatmoneywithnointrinsicvalue.

moditymoneywithintrinsicvalue.

moditymoneywithnointrinsicvalue.

ANSWER:b.

fiatmoneywithnointrinsicvalue.

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13.

Fiatcurrency

a.hasnointrinsicvalue.

b.isbackedbygold.

c.hasintrinsicvalueequaltoitsvalueinexchange.

d.isanyclosesubstituteforcurrencysuchascheckabledeposits.

ANSWER:a.

hasnointrinsicvalue.

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Chapter16/TheMonetarySystem433

14.

Commoditymoneyis

a.backedbygold.

b.theprincipaltypeofmoneyinusetoday.

c.moneywithintrinsicvalue.

d.receiptscreatedininternationaltradethatareusedasamediumofexchange.

ANSWER:c.moneywithintrinsicvalue.

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15.

Fiatmoney

a.isworthless.

b.hasnointrinsicvalue.

c.maybeusedasamediumofexchange,butisnotlegaltender.

d.performsallthefunctionsofmoneyexceptprovidingaunitofaccount.

ANSWER:b.

hasnointrinsicvalue.

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16.

Whichtypeofcurrencyhasintrinsicvalue?

moditymoney

b.fiatmoney

c.bothcommoditymoneyandfiatmoney

d.neithercommoditymoneynorfiatmoney

ANSWER:a.

commoditymoney

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17.

Thelegaltenderrequirementmeansthat

a.peoplearemorelikelytoacceptthedollarasamediumofexchange.

b.thegovernmentmustholdenoughgoldtoredeemallcurrency.

c.peoplemaynotmaketradeswithanythingelse.

d.Alloftheabovearecorrect.

ANSWER:a.

peoplearemorelikelytoacceptthedollarasamediumofexchange.

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18.

M1includes

a.currency.

b.demanddeposits.

ers’checks.

d.Alloftheabovearecorrect.

ANSWER:d.

Alloftheabovearecorrect.

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19.

WhichofthefollowingisnotincludedinM1?

a.currency

b.demanddeposits

c.savingsdeposits

ers’checks

ANSWER:c.

savingsdeposits

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20.

WhichofthefollowingisincludedinM2butnotinM1?

a.currency

b.demanddeposits

c.savingsdeposits

d.AlloftheaboveareincludedinbothM1andM2

ANSWER:c.

savingsdeposits

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434Chapter16/TheMonetarySystem

21.

WhichofthefollowingisincludedinM2butnotinM1?

a.demanddeposits

b.corporatebonds

c.largetimedeposits

d.moneymarketmutualfunds

ANSWER:d.

moneymarketmutualfunds

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22.

WhichofthefollowingisincludedintheM2definitionofthemoneysupply?

a.creditcards

b.moneymarketmutualfunds

c.corporatebonds

d.largetimedeposits

ANSWER:b.

moneymarketmutualfunds

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23.

Moneymarketmutualfundsareincludedin

a.M1butnotM2.

b.M1andM2.

c.M2butnotM1.

d.neitherM1orM2.

ANSWER:c.

M2butnotM1.

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24.

Demanddepositsareincludedin

a.M1butnotM2.

b.M2butnotM1.

c.M1andM2.

d.neitherM1norM2.

ANSWER:c.

M1andM2.

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25.

Creditcardbalancesareincludedin

a.M1butnotM2.

b.M2butnotM1.

c.M1andM2.

d.neitherM1norM2.

ANSWER:d.

neitherM1norM2.

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26.

M1is

a.smallerandlessliquidthanM2.

b.smallerbutmoreliquidthanM2.

c.largerthanandlessliquidthanM2.

d.largerthanbutmoreliquidthanM2.

ANSWER:b.

smallerbutmoreliquidthanM2.

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27.

Savingsdepositsareincludedin

a.M1butnotM2.

b.M2butnotM1.

c.M1andM2.

d.neitherM1norM2.

ANSWER:b.

M2butnotM1.

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Chapter16/TheMonetarySystem435

28.

Creditcardsare

a.usedasamethodofpayment.

b.partoftheM1moneysupply.

c.amethodofdeferringpayment.

d.aunitofaccount.

ANSWER:c.

amethodofdeferringpayment.

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29.

Creditcards

a.deferpayments.

b.areastoreofvalue.

c.haveledtowideruseofcurrency.

d.arepartofthemoneysupply.

ANSWER:a.

deferpayments.

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30.

Debitcards

a.deferpayments.

b.areequivalenttocreditcards.

c.areincludedinM2.

d.areusedasamethodofpayment.

ANSWER:d.

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Usethe(hypothetical)informationinthefollowingtabletoanswerthefollowingtwoquestions.

areusedasamethodofpayment.

TypeofMoney

Amount

Largetimedeposits

Smalltimedeposits

Demanddeposits

Othercheckabledeposits

Savingsdeposits

Travelers’checks

Moneymarketmutualfunds

Currency

$80billion

$75billion

$75billion

$40billion

$10billion

$1billion

$15billion

$100billion

$10billion

$25billion

SDRs

MiscellaneouscategoriesofM2

31.

WhatistheM1moneysupply?

a.$215billion

b.$216billion

c.$226billion

d.$301billion

ANSWER:b.

$216billion

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32.

WhatistheM2moneysupply?

a.$125billion

b.$341billion

c.$421billion

d.$431billion

ANSWER:b.$341billion

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436Chapter16/TheMonetarySystem

33.

TheamountofcurrencyperpersonintheUnitedStatesisabout

a.$200.

b.$800.

c.$1,600.

d.$2,800.

ANSWER:d.

$2,800.

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34.

WhichofthefollowingmightexplainwhytheUnitedStateshassomuchcurrencyperperson?

a.U.S.citizensareholdingalotofforeigncurrency.

b.Currencymaybeapreferablestoreofwealthforcriminals.

c.Peopleusecreditanddebitcardsmorefrequently.

d.Alloftheabovehelpexplaintheabundanceofcurrency.

ANSWER:b.Currencymaybeapreferablestoreofwealthforcriminals.

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35.

IntheUnitedStates,perperson

a.averagecurrencyholdingsareabout$800.Oneexplanationforthisrelativelysmallaverageisthatmoneypeople

usecreditanddebitcardstomaketransactions.

b.averagecurrencyholdingsareabout$800.OneexplanationforthisrelativelysmallaverageisthatU.S.citizens

holdalotofforeigncurrency.

c.averageholdingsofcurrencyareabout$2,800.Oneexplanationforthisrelativelylargeamountisthatcriminals

mayprefercurrencyasamediumofexchange.

d.averageholdingsareabout$2,800.OneexplanationforthisrelativelylargeaverageisthatU.S.citizensholdalot

offoreigncurrency.

ANSWER:c.

averageholdingsofcurrencyareabout$2,800.Oneexplanationforthisrelativelylargeamountisthat

criminalsmayprefercurrencyasamediumofexchange.

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36.

GiventhesizeoftheU.S.moneystock,itispuzzlingthat

a.banksholdsomuchcurrencyrelativetothepublic.

b.thepublicholdssomuchcurrencyrelativetobanks.

c.thereissolittlecurrencyperperson.

d.thereissomuchcurrencyperperson.

ANSWER:d.

thereissomuchcurrencyperperson.

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37.

TheagencyresponsibleforregulatingthemoneysupplyintheUnitedStatesis

a.theComptrolleroftheCurrency.

b.theU.S.Treasury.

c.theFederalReserve.

d.theU.S.Bank.

ANSWER:c.

theFederalReserve.

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38.

TheFederalReservedoesallexceptwhichofthefollowing?

a.controlthesupplyofmoney

b.controlthevalueofmoney

c.makeloanstoindividuals

d.regulatethebankingsystem

ANSWER:c.

makeloanstoindividuals

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Chapter16/TheMonetarySystem437

39.

MembersoftheBoardofGovernors

a.areappointedbytheU.S.president,whilepresidentsoftheFederalReserveregionalbanksareappointedbythe

banks’boardsofdirectors.

b.areappointedbythebanks’boardsofdirectorswhilethepresidentsoftheFederalReserveregionalbanksare

appointedbytheU.S.president.

c.andthepresidentsoftheFederalReserveregionalbanksareappointedbytheU.S.president.

d.andthepresidentsoftheFederalReserveregionalbanksareappointedbythebanks’boardsofdirectors.

ANSWER:a.

areappointedbytheU.S.president,whilepresidentsoftheFederalReserveregionalbanksare

appointedbythebanks’boardsofdirectors.

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40.

WhichofthefollowingpairscorrectlylistsafunctionoftheFedandthepartoftheFeddirectlyresponsibleforthat

action?

a.incometaxpolicy—BoardofGovernors

b.conductopenmarketoperations—NewYorkFederalReserveBank

c.lenderoflastresort—TheFOMC

d.Noneoftheaboveiscorrect.

ANSWER:b.

conductopenmarketoperations—NewYorkFederalReserveBank

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41.

WhatpartoftheFedmeetseverysixweekstodiscusschangesintheeconomyanddeterminemonetarypolicy?

a.theBoardofGovernors

b.theFOMC

c.theregionalFederalReserveBankpresidents

d.theCentralBankPolicyCommission.

ANSWER:b.

theFOMC

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42.

TheNewYorkFederalReserveBank

a.presidentalwaysgetstovoteattheFOMCmeetings.

b.conductsopenmarkettransactions.

c.islocatedinthetraditionalfinancialcenteroftheUnitedStates.

d.Alloftheabovearecorrect.

ANSWER:d.

Alloftheabovearecorrect.

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43.

TheBoardofGovernors

a.iscurrentlychairedbyPaulVolcker.

b.areappointedbythepresidentandconfirmedbytheSenate.

c.hastwelvemembers.

d.Alloftheabovearecorrect.

ANSWER:b.

areappointedbythepresidentandconfirmedbytheSenate.

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44.

Whichofthefollowingiscorrect?

a.TheFederalReservehas14regionalbanks.TheBoardofGovernorshas12memberswhoserve7-yearterms.

b.TheFederalReservehas12regionalbanks.TheBoardofGovernorshas7memberswhoserve14-yearterms.

c.TheFederalReservehas12regionalbanks.TheBoardofGovernorshas14memberswhoserve7-yearterms.

d.Noneoftheaboveiscorrect.

ANSWER:b.

TheFederalReservehas12regionalbanks.TheBoardofGovernorshas7memberswhoserve14-year

terms.

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45.

WhichofthefollowingstatementsabouttheFederalReserveisincorrect?

a.ThemembersoftheBoardofGovernorsarealsopresidentsoftheFederalReserve’sregionalbanks.

b.TheFederalOpenMarketCommitteemakesmonetarypolicy.

c.AllmembersoftheBoardofGovernorssitontheFederalOpenMarketCommittee.

d.TheFederalReserveregulatesbanks.

ANSWER:a.

ThemembersoftheBoardofGovernorsarealsopresidentsoftheFederalReserve’sregionalbanks.

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438Chapter16/TheMonetarySystem

46.

Whichofthefollowinghasafour-yearterm?

a.themembersoftheBoardofGovernors

b.theChairoftheBoardofGovernors

c.themembersoftheFOMC

d.Alloftheabovearecorrect.

ANSWER:b.

theChairoftheBoardofGovernors

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47.

The12regionalFederalReserveBanks

a.maynotmakeloanstobanksintheirdistricts.

b.regulatebanksintheirdistricts.

c.sendrepresentativestotheFOMCandhaveamajorityvote.

d.allvoteonpolicydirectives.

ANSWER:b.

regulatebanksintheirdistricts.

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48.

TheFeddoesallexceptwhichofthefollowing?

a.conductmonetarypolicy

b.actasalenderoflastresort

c.convertFederalReserveNotesintogold

d.TheFeddoesalloftheabove.

ANSWER:c.

convertFederalReserveNotesintogold

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49.

TheFederalOpenMarketCommitteeismadeupof

a.5ofthe12presidentsoftheFederalReserveRegionalbanks,andthe7membersoftheBoardofGovernors.

b.7ofthe12presidentsoftheFederalReserveRegionalbanks,andthe5membersoftheBoardofGovernors.

c.the12presidentsoftheFederalReserveRegionalbanks,andtheChairoftheBoardofGovernors.

d.the12presidentsoftheFederalReserveRegionalbanks,andthe7membersoftheBoardofGovernors.

ANSWER:a.

5ofthe12presidentsoftheFederalReserveRegionalbanks,andthe7membersoftheBoardof

Governors.

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50.

WhichofthefollowingisnotalwaysavotingmemberoftheFOMC?

a.thepresidentoftheNewYorkFederalReserveDistrictBank

b.theChairmanoftheBoardofGovernors

c.thenewestmemberoftheBoardofGovernors

d.thepresidentoftheBostonFederalReserveDistrictBank.

ANSWER:d.

thepresidentoftheBostonFederalReserveDistrictBank.

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51.

Fedpolicydecisionshaveanimportantinfluenceon

a.boththerateofinflationandthelevelofemploymentintheshortrun

b.therateofinflationinthelongrunandthelevelofemploymentintheshortrun.

c.therateofinflationintheshortrunandthelevelofemploymentinthelongrun.

d.boththerateofinflationandthelevelofemploymentinboththeshortrunandthelongrun.

ANSWER:b.

therateofinflationinthelongrunandthelevelofemploymentintheshortrun.

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52.

WhentheFedwantstochangethemoneysupply,itmostfrequently

a.changesthediscountrate.

b.changesthereserverequirement.

c.conductsopenmarketoperations.

d.issuesFederalReservenotes.

ANSWER:c.

conductsopenmarketoperations.

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Chapter16/TheMonetarySystem439

53.

WhentheFederalReserveconductsopenmarkettransactions,it

a.issuesFederalReservenotes.

b.buysorsellsgovernmentbondsfromthepublic.

c.lowersthediscountrate.

d.increasesitslendingtomemberbanks.

ANSWER:b.

buysorsellsgovernmentbondsfromthepublic.

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54.

WhentheFedconductsopenmarketpurchases,

a.itbuysTreasurysecurities,whichincreasesthemoneysupply.

b.itbuysTreasurysecurities,whichdecreasesthemoneysupply.

c.itborrowsfrommemberbanks,whichincreasesthemoneysupply.

d.itlendsmoneytomemberbanks,whichdecreasesthemoneysupply.

ANSWER:a.

itbuysTreasurysecurities,whichincreasesthemoneysupply.

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55.

WhentheFedconductsopenmarketsales,

a.itsellsTreasurysecurities,whichincreasesthemoneysupply.

b.itsellsTreasurysecurities,whichdecreasesthemoneysupply.

c.itborrowsfrommemberbanks,whichincreasesthemoneysupply.

d.itlendsmoneytomemberbanks,whichdecreasesthemoneysupply.

ANSWER:b.

itsellsTreasurysecurities,whichdecreasesthemoneysupply.

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56.

WhentheFedconductsopenmarketpurchases,

a.itbuysTreasurysecurities,whichincreasesthemoneysupply.

b.itbuysTreasurysecurities,whichdecreasesthemoneysupply.

c.itsellsTreasurysecurities,whichincreasesthemoneysupply.

d.itsellsTreasurysecurities,whichdecreasesthemoneysupply.

ANSWER:a.

itbuysTreasurysecurities,whichincreasesthemoneysupply.

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57.

TheFedcanincreasethemoneysupplybyconductingopenmarket

a.salesandraisingthediscountrate.

b.salesandloweringthediscountrate.

c.purchasesandraisingthediscountrate.

d.purchasesandloweringthediscountrate.

ANSWER:d.

purchasesandloweringthediscountrate.

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58.

TheFedcanincreasethepricelevelbyconductingopenmarket

a.salesandraisingthediscountrate.

b.salesandloweringthediscountrate.

c.purchasesandraisingthediscountrate.

d.purchasesandloweringthediscountrate.

ANSWER:d.

purchasesandloweringthediscountrate.

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59.

TheFedcaninfluenceunemploymentin

a.theshortandlongrun.

b.theshortrun,butnotthelongrun.

c.thelongrun,butnottheshortrun.

d.neithertheshortnorlongrun.

ANSWER:b.

theshortrun,butnotthelongrun.

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440Chapter16/TheMonetarySystem

60.

Thereisa

a.short-runtradeoffbetweeninflationandunemployment.

b.short-runtradeoffbetweenanincreaseinthemoneysupplyandinflation.

c.long-runtradeoffbetweeninflationandunemployment.

d.long-runtradeoffbetweenanincreaseinthemoneysupplyandinflation.

ANSWER:a.

short-runtradeoffbetweeninflationandunemployment.

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61.

Ina100-percent-reservebankingsystem,

a.bankscancreatemoneybyissuingcurrency.

b.bankscancreatemoneybylendingoutreserves.

c.theFedcanincreasethemoneysupplywithopenmarketsales.

d.banksholdasmanyreservesastheyholddeposits.

ANSWER:d.

banksholdasmanyreservesastheyholddeposits.

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62.

Onabank’sT-account,

a.bothdepositsandreservesareassets.

b.bothdepositsandreservesareliabilities.

c.depositsareassets,reservesareliabilities.

d.reservesareassets,depositsareliabilities.

ANSWER:d.

reservesareassets,depositsareliabilities.

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63.

Supposethatthereserveratiois5percentandthatabankhas$1,000indeposits.Itsrequiredreservesare

a.$5.

b.$50.

c.$95.

d.$950.

ANSWER:b.

$50.

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64.

Supposethatthereserveratiois10percentandthatabankhas$2,000indeposits.Itsrequiredreservesare

a.$20.

b.$200.

c.$1,880.

d.$1,800.

ANSWER:b.$200.

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65.

Supposeabankhasa10percentreserveratio,$5,000indeposits,anditloansoutallitcangiventhereserveratio.

a.Ithas$50inreservesand$4,950inloans.

b.Ithas$500inreservesand$4,500inloans.

c.Ithas$555inreservesand$4,445inloans.

d.Noneoftheaboveiscorrect.

ANSWER:b.

Ithas$500inreservesand$4,500inloans.

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66.

Supposeabankhasa10percentreserveratio,$4,000indeposits,anditloansoutallitcangiventhereserveratio.

a.Ithas$40inreservesand$3,960inloans.

b.Ithas$400inreservesand$3,600inloans.

c.Ithas$444inreservesand$3,556inloans.

d.Noneoftheaboveiscorrect.

ANSWER:b.

Ithas$400inreservesand$3,600inloans.

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Chapter16/TheMonetarySystem441

67.

Supposeabankhas$10,000indepositsand$8,000inloans.Ithasareserveratioof

a.2percent.

b.12.5percent

c.20percent.

d.80percent.

ANSWER:c.

20percent.

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68.

Supposeabankhas$200,000indepositsand$190,000inloans.Ithasareserveratioof

a.5percent

b.9.5percent

c.10percent

d.Noneoftheaboveiscorrect.

ANSWER:a.

5percent

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69.

Ifyoudeposit$100intoademanddepositatabank,thisactionbyitself

a.doesnotchangethemoneysupply.

b.increasesthemoneysupply.

c.decreasesthemoneysupply.

d.hasanindeterminateeffectonthemoneysupply.

ANSWER:a.

doesnotchangethemoneysupply.

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70.

Whenabankloansout$1,000,themoneysupply

a.doesnotchange.

b.decreases.

c.increases.

d.maydoanyoftheabove.

ANSWER:c.

increases.

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71.

Underafractionalreservebankingsystem,banks

a.holdmorereservesthandeposits.

b.generallylendoutamajorityofthefundsdeposited.

c.causethemoneysupplytofallbylendingoutreserves.

d.Alloftheabovearecorrect.

ANSWER:b.

generallylendoutamajorityofthefundsdeposited.

TYPE:MDIFFICULTY:1SECTION:16.3

72.

Ifthereserveratiois5percentandabankreceivesanewdepositof$500,thisbank

a.mustincreaseitsrequiredreservesby$25.

b.willinitiallyseeitstotalreservesincreaseby$500.

c.willbeabletomakeanewloanof$475.

d.Alloftheabovearetrue.

ANSWER:d.

Alloftheabovearetrue.

TYPE:MDIFFICULTY:2SECTION:16.2

73.

Ifthereserveratiois10percentandabankreceivesanewdepositof$10,thisbank

a.mustincreaserequiredreservesby$1.

b.willinitiallyseeitstotalreservesincreaseby$1.

c.willbeabletomakenewloansuptoamaximumof$1.

d.Alloftheabovearetrue.

ANSWER:a.

mustincreaserequiredreservesby$1.

TYPE:MDIFFICULTY:2SECTION:16.2

442Chapter16/TheMonetarySystem

74.

Ifthereserveratiois5percentandabankreceivesanewdepositof$200,it

a.mustincreaserequiredreservesby$190.

b.willinitiallyseereservesincreaseby$190.

c.willbeabletomakenewloansuptoamaximumof$190.

d.Noneoftheaboveistrue.

ANSWER:c.

willbeabletomakenewloansuptoamaximumof$190.

TYPE:MDIFFICULTY:2SECTION:16.2

75.

Ifyoudeposit$3,000intoFirstHawkeyeBank,the

a.bank’srequiredreservesincreasebythereserveratiotimes$3,000.

b.bankwillbeabletolendout$3,000timesthereserveratio.

c.bankinitiallyseesreservesincreaseby$0.

d.Alloftheabovearecorrect.

ANSWER:a.

banksrequiredreservesincreasebythereserveratiotimes$3,000.

TYPE:MDIFFICULTY:2SECTION:16.2

76.

In1991theFederalReserveloweredthereserverequirementratiofrom12percentto10percent.Otherthingsthe

samethisshouldhave

a.increasedboththemoneymultiplierandthemoneysupply.

b.decreasedboththemoneymultiplierandthemoneysupply.

c.increasedthemoneymultiplieranddecreasedthemoneysupply.

d.decreasedthemoneymultiplierandincreasedthemoneysupply.

ANSWER:a.

increasedboththemoneymultiplierandthemoneysupply.

TYPE:MDIFFICULTY:2SECTION:16.2

Usethebalancesheetforthefollowingthreequestions.

FirstBankofMasonCity

Assets

RequiredReserves

Loans

Liabilities

Deposits

$20.00

$80.00

$100.00

77.

Thereserveratiois

a.0percent.

b.20percent.

c.80percent.

d.100percent.

ANSWER:b.

20percent.

TYPE:MDIFFICULTY:1SECTION:16.3

78.

If$1,000isdepositedintotheFirstBankofMasonCity,

a.totalreserveswillinitiallyincreaseby$200.

b.liabilitieswilldecreaseby$1,000.

c.assetswillincreaseby$1,000.

d.requiredreserveswillincreaseby$800.

ANSWER:c.

assetswillincreaseby$1,000.

TYPE:MDIFFICULTY:1SECTION:16.3

79.

If$400isdepositedintotheFirstBankofMasonCity,

a.thebankwillbeabletomakeadditionalloanstotaling$320.

b.excessreservesinitiallyincreaseby$320.

c.requiredreservesinitiallyincreaseby$80.

d.Alloftheabovearetrue.

ANSWER:d.

Alloftheabovearetrue.

TYPE:MDIFFICULTY:1SECTION:16.3

Chapter16/TheMonetarySystem443

Usethebalancesheetforthefollowingquestions.

LastBankofCedarBend

Assets

Reserves

Loans

Liabilities

Deposits

$25,000

$125,000

$150,000

80.

Ifthereserverequirementis10percent,thisbank

a.isinapositiontomakeanewloanof$15,000.

b.haslessreservesthanrequired.

c.hasexcessreservesoflessthan$15,000.

d.Noneoftheabovearecorrect.

ANSWER:c.

hasexcessreservesoflessthan$15,000.

TYPE:MDIFFICULTY:1SECTION:16.3

81.

Ifthereserverequirementis10percentandthensomeonedeposits