ECO4223 Final Exam Review: Questions & Answers A+GRADED GUARANTEE PASS….
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Course
ECO4223
Institution
ECO4223
ECO4223 Final Exam Review: Questions & Answers
A+GRADED GUARANTEE PASS….
If currency held by the public equals $100 billion, reserves held by banks equal $50
billion, and bank deposits equal $500 billion, then the money supply equals:
A. 150 billion
B. 650 Billion - CORRECT ANSWE...
ECO4223 Final Exam Review: Questions & Answers
A+GRADED GUARANTEE PASS….
If currency held by the public equals $100 billion, reserves held by banks equal $50
billion, and bank deposits equal $500 billion, then the money supply equals:
A. 150 billion
B. 650 Billion - CORRECT ANSWER -- A
In a system with fractional-reserve banking:
A. All banks must hold reserves equal to a fraction of their loans
B. All banks must hold reserves equal to a fraction of their deposits - CORRECT
ANSWER -- B
In a 100% reserve banking system, if a customer deposits $100 currency into a
bank, then the money supply:
A. increases $100
B. remains the same - CORRECT ANSWER -- B
If the ratio of reserves to deposits (rr) increases, while the ratio of currency to
deposits (cr) is constant, and the monetary base (B) is constant, then:
A. The money supply increases
B. The money supply decreases - CORRECT ANSWER -- B
To reduce the money supply, the Fed:
A. buys government bonds
B. sells government bonds - CORRECT ANSWER -- B
When the Fed makes and open-market sale, it:
A. increases the monetary base
B. decreases the monetary base - CORRECT ANSWER -- B
To prevent banks from using excess reserves to make loans that would increase the
money supply, the Fed could conduct open-market _______ and ______ the interest
rate paid on bank reserves:
A. Sales; raise
B. purchases; lower - CORRECT ANSWER -- A
If the fed wishes to increase the money supply it should:
A. decrease the discount rate
B. increase the discount rate - CORRECT ANSWER -- A
Direct loans made to member banks by the Fed are called:
A. discount loans
B. federal funds loans - CORRECT ANSWER -- B
The interest rate charged on loans by the Federal Reserve to banks is called:
A. Federal funds rate
B. Discount rate - CORRECT ANSWER -- B
, If the monetary base fell and the currency-deposit ratio rose, but the reserve ratio
remained the same, then:
A. The money supply would fall but not by as much as it would have fallen if the
reserve-deposit ratio has risen
B. The money supply would fall but not by as much as it would have fallen if the
reserve-deposit ratio has fallen - CORRECT ANSWER -- A
The most frequently used tool for monetary policy:
A. open-market operations
B. changes in discount rate - CORRECT ANSWER -- A
When the Fed increases the interest rate, it pays banks on their reserves and:
A. the reserve-deposit ratio increases
B. the money supply increases - CORRECT ANSWER -- A
If many banks fail, this is likely to:
A. cause surviving banks to lower their ratios of reserves to deposits
B. cause surviving banks to raise their ratios to deposits - CORRECT ANSWER -- B
In a fractional- banking system, banks create money when they:
A. make loans
B. accept deposits - CORRECT ANSWER -- A
If there is no currency and the proceeds of all loans are deposited somewhere in the
banking system and if rr denotes the reserve-deposit ratio, then the total money
supply is:
A. reserves divided by rr
B. reserves divided by (1-rr) - CORRECT ANSWER -- A
To increase the monetary base, the Fed can:
A. conduct open-market sales
B. conduct open-market purchases - CORRECT ANSWER -- B
If many banks fail, this is likely to:
A. decrease the ratio of currency to deposits
B. increase the ratio of currency to deposits - CORRECT ANSWER -- B
If the Fed increases the rate paid on reserves, banks will tend to hold ___ excess
reserves, which will _____ the money multiplier
A. more; increase
B. more; decrease - CORRECT ANSWER -- B
The money supply will increase if the:
A. monetary base increases
B. currency-deposit ratio increases - CORRECT ANSWER -- A
We can interpret the monetary base as the:
A. total value of assets in an economy
B. liabilities of the fed to the private sector - CORRECT ANSWER -- B
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