Which list ranks assets from most to least liquid

Question 1. 1. Which of the following is an example of barter? (Points : 5)

A parent gives a teenager a $10 bill in exchange for her babysitting services. A homeowner gives an exterminator a check for $50 in exchange for extermination services. A barber gives a plumber a haircut in exchange for the plumber fixing the barber’s leaky faucet. All of the above are examples of barter.

Question 2. 2. Consider the following traders who meet.

Bob

has an apple

wants an orange

Ted

has an orange

wants a peach

Mary

has a pear

wants an apple

Alice

has a peach

wants an orange

Which, if any, pairs of traders has a double coincidence of wants? (Points : 5)

Bob with Alice Ted with Alice Bob with Mary, Ted with Bob, and Ted with Alice None of the pairs above has a double coincidence of wants.

Question 3. 3. Which of the following lists is included in what economists call “money”? (Points : 5)

cash cash and stocks and bonds cash and stocks and bonds and real estate cash and stocks and bonds and real estate and all other assets

Question 4. 4. As opposed to a payments system based on barter, a payments system based on money (Points : 5)

requires a double coincidence of wants. leads to less specialization. makes trades less costly. None of the above is correct.

Question 5. 5. Any item that people can use to transfer purchasing power from the present to the future is called (Points : 5)

a medium of exchange. a unit of account. a store of value. None of the above is correct.

Question 6. 6. Which of the following is a function of money? (Points : 5)

a unit of account a store of value medium of exchange All of the above are correct.

Question 7. 7. Which of the following is a store of value? (Points : 5)

cash and stocks cash but not stocks stocks but not cash neither cash nor stocks

Question 8. 8. Which of the following is a store of value? (Points : 5)

currency U.S. government bonds fine art All of the above are correct.

Question 9. 9. Which list ranks assets from most to least liquid? (Points : 5)

money, bonds, cars, houses money, cars, houses, bonds bonds, money, cars, houses bonds, cars, money, houses

Question 10. 10. M1 equals currency plus demand deposits plus (Points : 5)

nothing else. other checkable deposits. traveler's checks plus other checkable deposits. traveler's checks plus other checkable deposits plus savings deposits.

Question 11. 11. When in France you notice that prices are posted in euros, this best illustrates money’s function as (Points : 5)

a store of value. a medium of exchange. a unit of account. a method of barter.

Question 12. 12. Which of the following best illustrates the unit of account function of money? (Points : 5)

You list prices for candy sold on your Web site, www.sweettooth.com, in dollars. You pay for your theater tickets with dollars. You hold currency even though you don’t intend to spend it right away. None of the above is correct.

Question 13. 13. When we measure and record economic value, we use money as the (Points : 5)

liquid asset. medium of exchange. unit of account. store of value.

Question 14. 14. Liquidity refers to (Points : 5)

the ease with which an asset is converted to the medium of exchange. the measurement of the intrinsic value of commodity money. the measurment of the durability of a good. how many time a dollar circulates in a given year.

Question 15. 15. Which of the following is correct? (Points : 5)

The Federal Reserve has 14 regional banks. The Board of Governors has 12 members who serve 7-year terms. The Federal Reserve has 14 regional banks. The Board of Governors has 7 members who serve 14-year terms. The Federal Reserve has 12 regional banks. The Board of Governors has 12 members who serve 7-year terms. The Federal Reserve has 12 regional banks. The Board of Governors has 7 members who serve 14-year terms.

Question 16. 16. Which of the following is a liability of a bank and an asset of its customers? (Points : 5)

deposits of its customers and loans to it customers deposits of its customers but not loans to its customers loans of its customers but not the deposits of its customers neither the deposits of its customers nor the loans to its customers

Question 17. 17. In the United States, currency holdings per person average about (Points : 5)

$125; one explanation for this relatively small average is that many people use credit and debit cards to make transactions. $125; one explanation for this relatively small average is that U.S. citizens hold a lot of foreign currency. $3,700; one explanation for this relatively large amount is that criminals probably prefer currency as a medium of exchange. $3,700; one explanation for this relatively large average is that U.S. citizens hold a lot of foreign currency.

Question 18. 18. Under a fractional-reserve banking system, banks (Points : 5)

hold more reserves than deposits. generally lend out a majority of the funds deposited. cause the money supply to fall by lending out reserves. All of the above are correct.

Question 19. 19. Which of the following is not included in M1? (Points : 5)

a $5 bill in your wallet $100 in your checking account $500 in your savings account All of the above are included in M1.

Question 20. 20. Which of the following is not included in M1? (Points : 5)

currency demand deposits traveler’s checks credit cards

21. If the Federal Open Market Committee decides to increase the money supply, then the Federal Reserve (Points : 5)

creates dollars and uses them to purchase government bonds from the public. sells government bonds from its portfolio to the public. creates dollars and uses them to purchase various types of stocks and bonds from the public. sells various types of stocks and bonds from its portfolio to the public.

Question 22. 22. Which of the following items is included in M2? (Points : 5)

credit cards money market mutual funds corporate bonds corporate bonds

Question 23. 23. The Fed’s policy decisions have an important influence on (Points : 5)

inflation in the long run and employment and production in the short run. inflation in the long run and employment and production in the long run. inflation in the short run and employment and production in the short run. inflation in the short run and employment and production in the long run.

Question 24. 24. When conducting an open-market purchase, the Fed (Points : 5)

buys government bonds, and in so doing increases the money supply. buys government bonds, and in so doing decreases the money supply. sells government bonds, and in so doing increases the money supply. sells government bonds, and in so doing decreases the money supply.

Question 25. 25. Which of the following is correct concerning the FOMC? (Points : 5)

the members of the Board of Governors have the majority of the votes the New York Federal Reserve Bank District President is always a voting member all Federal Reserve Bank presidents attend the meetings All of the above are correct.

Question 26. 26. Monetary policy affects employment (Points : 5)

only in the long run. only in the short run. in both the long run and the short run. in neither the long run nor the short run.

Question 27. 27. A bank has $10,000 in deposits and $8,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is (Points : 5)

2 percent. 12.5 percent. 20 percent. 80 percent.

Question 28. 28. The manager of the bank where you work tells you that your bank has $10 million in excess reserves. She also tells you that the bank has $400 million in deposits and $355 million dollars in loans. Given this information you find that the reserve requirement must be (Points : 5)

35/355. 45/355. 35/400. 45/400.

Question 29. 29. A bank has a 10 percent reserve requirement, $4,000 in deposits, and has loaned out all it can given the reserve requirement. (Points : 5)

It has $40 in reserves and $3,960 in loans. It has $400 in reserves and $3,600 in loans. It has $444 in reserves and $3,556 in loans. None of the above is correct.

Question 30. 30. If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 10 percent receives a deposit of $400 it has a (Points : 5)

$400 increase in excess reserves and no increase in required reserves. $400 increase in required reserves and no increase in excess reserves. $360 increase in excess reserves and a $40 increase in required reserves. $40 increase in excess reserves and a $360 increase in required reserves.

Question 31. 31. In the special case of the 100 percent-reserve banking the money multiplier is (Points : 5)

1 and banks create money. 1 and banks do not create money. 2 and banks create money 2 and banks do not create money.

Question 32. 32. Table 16-5 . Bank of Pleasantville

Assets

Liabilities

Reserves

$2,000

Deposits

$20,000

Loans

18,000

Refer to Table 16-5. If the Fed’s reserve requirement is 9 percent, then what quantity of excess reserves does the Bank of Pleasantville now hold? (Points : 5)

$200 $250 $400 $1,000

Question 33. 33. Table 16-3 . The First Bank of Fairfield

Assets

Liabilities

Reserves $2,000

Deposits $10,000

Loans 8,000

Refer to Table 16-3. Starting from the situation as depicted by the T-account, if someone deposits $500 into the First Bank of Fairfield, and if the bank makes new loans so as to keep its reserve ratio unchanged, then the amount of new loans that it makes will be (Points : 5)

$320. $400. $680. $750.

Question 34. 34. If the reserve ratio is 12.5 percent, then $2,000 of additional reserves can create up to (Points : 5)

$8,000 of new money. $16,000 of new money. $32,000 of new money. None of the above is correct.

Question 35. 35. If the reserve ratio is 10 percent, $1,000 of additional reserves can create up to (Points : 5)

$100 of new money. $1,000 of new money. $10,000 of new money. None of the above is correct.

Question 36. 36. If the reserve requirement is 10 percent and banks desire to hold no excess reserves, when a bank receives a new deposit of $100, (Points : 5)

it must increase its required reserves by $10. its total reserves initially increase by $10. it will be able to make new loans up to a maximum of $10. None of the above is correct.

Question 37. 37. If the reserve ratio is 2.5 percent, then the money multiplier is (Points : 5)

40. 25. 2.5. 1.25.

Question 38. 38. The discount rate is (Points : 5)

the rate at which public banks lend to other public banks. the rate at which the Fed lends to banks. the percentage difference between the face value of a Treasury bond and what the Fed pays for it. the percentage of deposits banks hold as excess reserves.

Question 39. 39. The interest rate that the Fed charges banks that borrow reserves from it is the (Points : 5)

federal funds rate. federal funds rate. reserve requirement. prime rate.

Question 40. 40. If R represents the reserve ratio for all banks in the economy, then the money multiplier is (Points : 5)

1/(1-R). 1/R. 1/(1+R). (1+R)/R.

Question 41. 41. Table 16-4 . The First Bank of Roswell

Assets

Liabilities

Reserves $25,000

Deposits $150,000

Loans 125,000

Refer to Table 16-4. If the bank faces a reserve requirement of 20 percent, then it (Points : 5)

has $10,000 of excess reserves. needs $10,000 more reserves to meet its reserve requirements. needs $5,000 more reserves to meet its reserve requirements. just meets its reserve requirement.

Question 42. 42. If the discount rate is raised then banks borrow (Points : 5)

more from the Fed so reserves increase. more from the Fed so reserves decrease. less from the Fed so reserves increase. less from the Fed so reserves decrease.

Question 43. 43. In 1991, the Federal Reserve lowered the reserve requirement from 12 percent to 10 percent. Other things the same this should have (Points : 5)

increased both the money multiplier and the money supply. decreased both the money multiplier and the money supply. increased the money multiplier and decreased the money supply. decreased the money multiplier and increased the money supply.

Question 44. 44. Table 16-6 . Bank of Springfield

Assets

Liabilities

Reserves

$19,200

Deposits

$240,000

Loans

228,000

Refer to Table 16-6. Assuming the Bank of Springfield and all other banks have the same reserve ratio, then what is the value of the money multiplier? (Points : 5)

5.0 7.5 10.00 12.5

Question 45. 45. If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold (Points : 5)

fewer reserves, so the reserve ratio will fall. fewer reserves, so the reserve ratio will rise. more reserves, so the reserve ratio will fall. more reserves, so the reserve ratio will rise.

Question 46. 46. The Fed increases the reserve requirement, but it wants to offset the effects on the money supply. Which of the following should it do? (Points : 5)

sell bonds to increase reserves sell bonds to decrease reserves buy bonds to increase reserves buy bonds to decrease reserves

Question 47. 47. If the central bank in some country lowered the reserve requirement, then the money multiplier for that coun-try (Points : 5)

would increase. would not change. would decrease. could do any of the above.

Question 48. 48. The manager of the bank where you work tells you that the bank has $400 million in deposits and $340 mil-lion dollars in loans. The Fed then raises the reserve requirement from 10 percent to 15 percent. Assuming everything else stays the same, how much is the bank holding in excess reserves after the increase in the re-serve requirement? (Points : 5)

$0 $20 million $40 million $60 million

Question 49. 49. If the money multiplier decreased from 20 to 12.5, then (Points : 5)

the Fed increased the reserve ratio from 5 percent to 8 percent. the Fed increased the fed funds rate from 5 percent to 8 percent.. the Fed decreased the reserve ratio from 8 percent to 5 percent. the Fed decreased the fed funds rate from 8 percent to 5 percent.

Question 50. 50. The Fed sets the interest that borrowers pay on loans from (Points : 5)

the discount window and the term auction facility the discount window but not the term auction facility the term auction facility but not the discount window neither the discount window nor the term auction facility

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