Download Quiz #4 - Christopher R. Zapalski

Quiz #4
Student: ___________________________________________________________________________
1. Assume that the reserve ratio is 20 percent and banks were loaning out all their excess reserve. If people
collectively cash out $10 billion from their checking accounts, then the loaning ability of commercial banks has
been:
A. increased by $10 billion.
B. decreased by $10 billion.
C. decreased by $40 billion.
D. decreased by $50 billion.
2. U.S. paper money is also known as:
A. U.S. Treasury Notes.
B. Federal Government Notes.
C. commodity money.
D. Federal Reserve Notes.
3. If the required reserve ratio is 20 percent and commercial bankers decide to hold additional excess reserves
equal to 5 percent of any newly acquired checkable deposits, then the effective monetary multiplier for the
banking system will be:
A. 3.
B. 4.
C. 5.
D. 6.
4. If commercial banks decide to hold more excess reserves, this would:
A. decrease the maximum checkable-deposit creation potential of the banking system.
B. increase the lending potential of the banking system.
C. increase checkable deposits held by the banking system.
D. decrease the reserve ratio of the banking system.
Use the following table to answer the next question(s) about the money supply.
Items
1. Money market mutual funds
2. Savings deposits, including money market deposit accounts
3. Large time deposits
4. Currency held by the public
5. Small time deposits
6. Checkable deposits
5. Refer to the above table. The M2 money supply is composed of items:
A. 1, 2, 3, 4, 5, and 6.
B. 1, 2, 4, 5, and 6.
C. 1, 2, 4, and 6.
D. 2, 4, 5, and 6.
6. A checkable deposit at a commercial bank is a(n):
A. liability to the depositor and an asset to the bank.
B. liability to both the depositor and the bank.
C. asset to the depositor and a liability to the bank.
D. asset to both the depositor and the bank.
7. Bank net worth is the:
A. measure of the profitability of the bank.
B. value of the bank's vault cash and loan portfolio.
C. claims of the owners of the bank against bank assets.
D. claims of the nonowners of the bank against bank assets.
8. Without an acceptable domestic currency to serve as a medium of exchange, a nation might try to substitute a
more stable currency from another nation.
True False
9. The Federal Reserve Banks are owned by the:
A. Federal government.
B. Board of Governors.
C. United States Treasury.
D. member banks.
10. Maximum checkable-deposit expansion is equal to the amount of actual reserves multiplied by the monetary
multiplier.
True False
11. Success in the 1990s at helping the economy maintain strong, noninflationary growth, bolstered the
reputation and strength of monetary policy.
True False
12. If the interest rate increases, there will be a(n):
A. decrease in the amount of money held as assets.
B. decrease in the transactions demand for money.
C. increase in the transactions demand for money.
D. increase in the amount of money held as assets.
13. A central bank's changing of the money supply to influence interest rates and assist the economy in
achieving price level stability, full-employment, and economic growth describes:
A. fiscal policy.
B. tax policy.
C. monetary policy.
D. treasury policy.
14. If the Board of Governors of the Federal Reserve System increases the legal reserve ratio, this change will:
A. increase the excess reserves of member banks and thus increase the money supply.
B. increase the excess reserves of member banks and thus decrease the money supply.
C. decrease the excess reserves of member banks and thus decrease the money supply.
D. decrease the excess reserves of member banks and thus increase the money supply.
15. A fundamental objective of monetary policy is to assist the economy in achieving:
A. a rapid pace of economic growth.
B. a money supply which is based on the gold standard.
C. a full-employment, noninflationary level of total output.
D. a balanced-budget consistent with full-employment.
16. Refer to the above graph. If the supply of money was $150 billion, the interest rate would be:
A. 2 percent.
B. 3 percent.
C. 4 percent.
D. 5 percent.
17. The major purpose of the Federal Reserve buying government securities in open market operations is to:
A. increase interest rates.
B. raise money for government spending.
C. reduce the excess reserves of banks.
D. allow banks to increase their lending.
18. When the Fed wants to raise the Federal funds rate, it:
A. sells bonds to banks and the public.
B. buys bonds from banks and the public.
C. decreases the reserve ratio.
D. decreases the discount rate.
19. What policy tool of the Federal Reserve relies on bank borrowing to be effective?
A. open-market operations
B. check collection
C. the reserve ratio
D. the discount rate
20. When the Fed wants to lower the Federal funds rate, it:
A. sells bonds to banks and the public.
B. buys bonds from banks and the public.
C. increases the reserve ratio.
D. increases the discount rate.
21. An antigrowth view would be that there may be a significant tradeoff between productivity and:
A. education.
B. employment.
C. economies of scale.
D. the quality of life.
22. All low-income countries suffer from a critical shortage of:
A. land.
B. population.
C. capital goods.
D. government regulation.
23. Historically, the total amount of real capital per worker in the United States has:
A. provided financing for the industrial expansion of business.
B. increased significantly and made labor more productive.
C. been the single most important determinant of economic growth.
D. remained relatively constant, although the quality of capital has improved dramatically.
24. Government can play a major positive role in the early stage of economic development by:
A. providing an adequate infrastructure.
B. establishing price controls for products.
C. promoting exports by subsidizing them.
D. creating marketing boards for export products.
25. One of the main arguments against further growth for industrialized nations focuses on the problem of:
A. technological knowledge.
B. environmental quality.
C. feedback mechanisms.
D. infrastructure.
26. A supply factor in economic growth would be:
A. a fall in the efficient use of resources.
B. a rise in the rate of resource depletion.
C. an increase in the quantity of labor.
D. an increase in consumption spending.
27. Which is best considered a supply factor for long-run economic growth?
A. government spending
B. the stock of capital goods
C. full employment of resources
D. personal consumption expenditures
28. Real GDP in any year is equal to:
A. the quantity of labor divided by resource outputs.
B. labor productivity multiplied by the quality of labor.
C. worker-hours divided by labor productivity.
D. worker-hours multiplied by labor productivity.
29. "Show me a pastoral society with an untouched environment, an abundance of leisure, and nonsecular
values, and I will show you an underdeveloped, poverty-ridden country." This statement is most likely to be
made by a(n):
A. advocate of learning by doing.
B. advocate of network effects.
C. proponent of economic growth.
D. critic of economic growth.
30. The shift of labor out of agriculture to industry in the United States has tended to:
A. reduce the rate of productivity growth.
B. increase unemployment in the agriculture sector.
C. reduce unemployment in the industrial sector.
D. increase labor productivity.