1. Which of the following is assets is the most liquid?
a) Checking account funds
b) Government bonds
c) Money market funds
d) Real estate
e) Rare stamps
2. Which of the following assets are included in the M1 measure of money supply?
a) Checking accounts funds
b) Cash in a bank's vault
c) Reserves that banks at the FED
d) All of these answers
e) None of these answers
3. Which of the following items would not be listed on a bank's balance sheet?
a) The banks net worth
b) The bank's income during the year
c) Property and buildings the bank owns
d) Loans the bank has made to others
e) Government bonds in the bank's possession
4. Which of the following is a member of the Federal Open Market Committee?
a) The Majority Leader of the U.S Senate
b) The President of the New York Federal Reserve Bank
c) The President of the United States
e) All of these answers
5) Which of the following would tend to increase the U.S money supply?
a) An increase in the discount rate
b) A decrease inthe required reserve ratio
c) A sale of government bonds by the FOMC
d) All of these answers
e) None of these answers
6. The M2 measure of the money supply contains all of the assets in M1, plus some additional assets.
a) True
b) False
7. A bank's balance sheet lists, among other items, the bank's income and expenses during the year.
a) True
b) False
8. The U.S President selects all of the members of the Federal Open Market Committee.
a) True
b) False
9. An important function of the Fed is to supervise and regulate commercial banks.
a) True
b) False
10. When the Fed sells government bonds, the money supply decreases.
a) True
b) False
11. If banks increase their holdings of excess reserves as the money supply expands, the demand deposit mutiplier will be larger than 1/RRR.
a) True
b) False
12. Most economists argue that FDIC protection alone cannot eliminate banking panics; we must also eliminate banking regulation.
a) True
b) False
13. The number of bank failures in the United States has steadily increased through the twentieth century.
a) True
b) False
14. If the required ratio is 0.10, and a bank has $10 million in customer demands deposits, then its required reserves is $1 million.
a) True
b) False
15. When a bank makes a loan, the balance sheet will not immediately show an increase and adecrease in assets.
a) True
b) False
16. Under the simple assumptions of the chapter (that the public does not change its holdings of cash, and that the banks do not hold reserves), if the required reserve ratio is 0.2, and the Fed purchases $10 million in government bonds, then the money supply will increase by $50 million.
a) True
b) False
17. One important reason that bank panics have been eliminated in the United States since the Great Depression is that banks are more free today than in the 1930s to lend as they see fit.
a) True
b) False
18. The most common method used by the Fed to change the money supply is alterations of the FDIC regulations.
a) True
b) False