Monetary System And The Federal Reserve

20 Questions | Total Attempts: 526

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Federal Reserve System Quizzes & Trivia

Complete 10 questions. Your initial score will be the only score counted. Complete this quiz before class on Monday.


Questions and Answers
  • 1. 
    The group responsible for setting policy on buying and selling government securities (bills, notes, and bonds) is the:
    • A. 

      Securities and Exchange Commission

    • B. 

      U.S. Treasury Board

    • C. 

      Federal Open Market Committee

    • D. 

      12 Federal Reserve Bank presidents

  • 2. 
    Which of the following most accurately describes the status of the U.S. Federal Reserve System?
    • A. 

      It is a publicly owned and managed agency of the federal government

    • B. 

      It is privately owned but publicly managed

    • C. 

      It is owned by a group of large private banks and managed for their profit

    • D. 

      It is a publicly owned agency of the federal government, managed for profit by private banks

  • 3. 
    Which of the following is included in M2 but not M1?
    • A. 

      Currency held by banks

    • B. 

      Small time deposits (less than $100,000)

    • C. 

      Credit card balances

    • D. 

      Large time deposits (at least $100,000)

  • 4. 
    Writing a check to purchase a new computer is an example of using money primarily as a:
    • A. 

      Unit of account

    • B. 

      Standard of value

    • C. 

      Unit of account

    • D. 

      Medium of exchange

  • 5. 
    Use the following to answer the next question:Item Billions of dollars Checkable deposits $2,500 Currency held by the public 50 Currency held by banks 25 Small time deposits 400 Savings deposits and money market deposit accounts 1,200 Money market mutual funds 700 Large time deposits 1,400 Refer to the table. The size of the M2 money supply is:
    • A. 

      $2,950 billion

    • B. 

      $4,850 billion

    • C. 

      $4, 875 billion

    • D. 

      $6,275 billion

  • 6. 
    The U.S. money supply is "backed" by:
    • A. 

      Gold

    • B. 

      Silver

    • C. 

      A joint committee of the Federal Deposit Insurance Corporation and the National Credit Union Administration

    • D. 

      The ability of the government to maintain its value

  • 7. 
    Suppose the required reserve ratio is 10% and the banking system initially has no excess reserves. If $20 billion in new currency is deposited into the system, these new deposits will initially create excess reserves of:
    • A. 

      $2 billion

    • B. 

      $18 billion

    • C. 

      $20 billion

    • D. 

      $200 billion

  • 8. 
    Sam draws a $100 check on his account at Bank A which is then deposited in Bank B. When this check is cleared:
    • A. 

      Neither Bank A's nor Bank B's deposits or reserves are affected

    • B. 

      Bank A gains reserves equal to $100 and Bank B gains deposits equal to $100

    • C. 

      Bank A loses reserves and deposits equal to $100

    • D. 

      Bank B loses reserves and deposits equal to $100

  • 9. 
    Suppose a bank has checkable deposits of $1,000,000 and the legal reserve ratio is 5 percent. If the institution has excess reserves of $5,000, then its actual reserves are:
    • A. 

      $45,000

    • B. 

      $50,000

    • C. 

      $55,000

    • D. 

      $5,000

  • 10. 
    Assume that SIC, Inc. writes a $50,000 check on its account at Metro National Bank to repay the balance on a loan issued by this bank. As a result of this transaction:
    • A. 

      The money supply declines by $50,000

    • B. 

      The money supply increases by $50,000

    • C. 

      The bank's excess reserves will decrease by $50,000

    • D. 

      The bank's required reserves will increase by $50,000

  • 11. 
    Money is created when:
    • A. 

      Loans are repaid

    • B. 

      The net worth of the banking system is increased

    • C. 

      Banks exchange some of the state and local bonds in their portfolio for federal government bonds

    • D. 

      Banks make additional loans

  • 12. 
    Assume the banking system has no excess reserves with a reserve requirement of 20%. The reserve requirement is then dropped to 10%. As a result of this reduction:
    • A. 

      The money multiplier will decrease

    • B. 

      Bank profitability will likely decrease

    • C. 

      Banks will be forced to accumulate reserves by reducing their lending activity

    • D. 

      The money supply will likely increase

  • 13. 
    The monetary multiplier is equal to:
    • A. 

      One

    • B. 

      The inverse of actual reserves minus required reserves

    • C. 

      The inverse of one minus the required reserve ratio

    • D. 

      The inverse of the required reserve ratio

  • 14. 
    Hassan deposits $50,000 in a commercial bank that is required to retain 20% in reserve. The deposit increases the lending capacity of the bank by:
    • A. 

      $5,000

    • B. 

      $10,000

    • C. 

      $40,000

    • D. 

      $50,000

  • 15. 
    The purchasing power of the dollar:
    • A. 

      Increases with the rate of inflation

    • B. 

      Is inversely related to the price level

    • C. 

      Is directly related to the supply of money

    • D. 

      Is directly related to the price level

  • 16. 
    Other things equal, a dramatic decrease in the money supply would:
    • A. 

      Increase the price level

    • B. 

      Reduce the purchasing power of each dollar

    • C. 

      Increase the purchasing power of each dollar

    • D. 

      Have an ambiguous impact on the purchasing power of each dollar

  • 17. 
    Money velocity is
    • A. 

      The speed in which M0 reaches the bank from

    • B. 

      Average frequency with which a unit of money is spent in a specific period of time

    • C. 

      Strongly correlated to the real GDP

    • D. 

      A statistic heavily observed by the judicial branch

  • 18. 
    The significance of MV=PQ is that
    • A. 

      It shows the total final goods and services produced in a country

    • B. 

      It shows an identity correlation to the money supply times velocity and the real GDP

    • C. 

      It shows an identity correlation to the money supply times velocity and the nominal GDP

    • D. 

      It shows an increase in the overall money supply when there are excess reserves in banks

  • 19. 
    A T-Chart (T-Account) includes the following areas EXCEPT
    • A. 

      Assets

    • B. 

      Reserves

    • C. 

      Loans

    • D. 

      Interest

  • 20. 
    Refer to the T-account provided.  What is the reserve requirement ratio for Bank Z? Bank Z Assets Liabilities Reserves: $55,000 Deposits: 275,000 Loans: $220,000  
    • A. 

      10%

    • B. 

      15%

    • C. 

      20%

    • D. 

      25%

    • E. 

      30%

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