1. If an individual bank receives $100,000 in new deposits and the required reserve ratio is 10 percent, the bank must keep the following amount of required reserves with the Fed?

$90,000.

Zero.

$10,000.

$1,000,000.

2. Assume that the Fed purchases $10 million in bonds from a bank, the monetary base will:

Increase by $10 million.

Decrease by $10 million.

Increase by $5 million.

Remain unchanged.

3. When we say that money has a function as a medium of exchange, this implies that:

Money is used to purchase goods and services rather than resorting to barter.

Money is backed by the gold standard.

Money must be in the form of a precious metal such as gold.

Money must be set at a fixed exchange rate in international currency markets.