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11 Cards in this Set
- Front
- Back
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Money a. is a perfect store of value. b. is the most liquid asset. c. has intrinsic value, regardless of which form it takes. d. All of the above are correct. |
B |
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Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate? a. store of value b. medium of exchange c. unit of account d. None of the above is correct. |
A |
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Which of the following is not included in either M1 or M2? a. U.S. Treasury bills b. small time deposits c. demand deposits d. money market mutual funds |
A |
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The members of the Fed’s Board of Governors a. are appointed by the president of the U.S. and confirmed by the U.S. Senate. b. serve six-year terms. c. are also the presidents of the regional Federal Reserve banks. d. share power equally, with no governor having any more influence or power than any other governor. |
A |
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Which of the following does the Federal Reserve not do? a. conduct monetary policy b. act as a lender of last resort c. convert Federal Reserve Notes into gold d. serve as a bank regulator |
C |
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Suppose banks desire to hold no excess reserves. If the reserve requirement is 10 percent and if a bank receives a new deposit of $10, then this bank a. must increase its required reserves by $1. b. will initially see its total reserves increase by $1. c. will be able to make new loans up to a maximum of $1. d. All of the above are correct. |
A |
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The Fed’s control of the money supply is not precise because a. Congress can also make changes to the money supply. b. there are not always government bonds available for purchase when the Fed wants to perform open-market operations. c. the Fed does not know where all U.S. currency is located. d. the amount of money in the economy depends in part on the behavior of depositors and bankers. |
D |
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Today, bank runs are not a major problem for the U.S. banking system because a. bank runs are now illegal. b. banks now hold 100 percent of their deposits in reserve. c. banks are now all government-operated. d. the federal government now guarantees the safety of deposits at most banks. |
D |
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If the reserve ratio for all banks is 5 percent, then $2,500 of additional reserves can create up to a. $62,500 of new money. b. $50,000 of new money. c. $45,600 of new money. d. $37,500 of new money. |
B |
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To decrease the money supply, the Fed could a. sell government bonds. b. increase the discount rate. c. increase the reserve requirement. d. All of the above are correct. |
D |
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During recessions, banks typically choose to hold more excess reserves relative to their deposits. This action a. increases the money multiplier and increases the money supply. b. decreases the money multiplier and decreases the money supply. c. does not change the money multiplier, but increases the money supply. d. does not change the money multiplier, but decreases the money supply. |
B |
