1、1950Chapter 29 The Monetary SystemTRUE/FALSE1. In an economy that relies on barter, trade requires a double-coincidence of wants.ANS: T DIF: 1 REF: 29-0NAT: Analytic LOC: The role of money TOP: BarterMSC: Definitional2. Joe wants to trade eggs for sausage. Lashonda wants to trade sausage for eggs. J
2、oe and Lashonda have a double-coincidence of wants.ANS: T DIF: 1 REF: 29-0NAT: Analytic LOC: The role of money TOP: BarterMSC: Definitional3. The use of money allows trade to be roundabout.ANS: T DIF: 1 REF: 29-0NAT: Analytic LOC: The role of money TOP: Money | TradeMSC: Definitional4. Roundabout tr
3、ade is beneficial for an economy.ANS: T DIF: 1 REF: 29-0NAT: Analytic LOC: The role of money TOP: Money | TradeMSC: Definitional5. Money allows people to specialize in what they do best, thereby raising everyones standard of living.ANS: T DIF: 2 REF: 29-0NAT: Analytic LOC: The role of money TOP: Mon
4、eyMSC: Interpretive6. When money functions as a unit of account, then it cannot be commodity money.ANS: F DIF: 2 REF: 29-1NAT: Analytic LOC: The role of money TOP: MoneyMSC: Interpretive7. Demand deposits are balances in bank accounts that depositors can access by writing a check.ANS: T DIF: 1 REF:
5、29-1NAT: Analytic LOC: The role of money TOP: Demand depositsMSC: Definitional8. According to economists, a collection of valuable jewels is not money.ANS: T DIF: 2 REF: 29-1NAT: Analytic LOC: The Study of economics, and the definitions of economicsTOP: Money MSC: Interpretive9. A debit card is more
6、 similar to a credit card than to a check.ANS: F DIF: 2 REF: 29-1NAT: Analytic LOC: The Study of economics, and the definitions of economicsTOP: Money MSC: Interpretive10. Garys wealth is $1 million. Economists would say that Gary has $1 million worth of money.ANS: F DIF: 1 REF: 29-1NAT: Analytic LO
7、C: The role of money TOP: MoneyMSC: Definitional11. Marc puts prices on surfboards and skateboards at his sporting goods store. He is using money as a unit of account.ANS: T DIF: 1 REF: 29-1NAT: Analytic LOC: The role of money TOP: MoneyMSC: DefinitionalChapter 29 /The Monetary System 195112. Sandra
8、 routinely uses currency to purchase her groceries. She is using money as a unit of account.ANS: F DIF: 1 REF: 29-1NAT: Analytic LOC: The role of money TOP: MoneyMSC: Definitional13. Bottles of very fine wine are less liquid than demand deposits.ANS: T DIF: 1 REF: 29-1NAT: Analytic LOC: The role of
9、money TOP: LiquidityMSC: Interpretive14. U.S. dollars are an example of commodity money and hides used to make trades are an example of fiat money.ANS: F DIF: 1 REF: 29-1NAT: Analytic LOC: The role of money TOP: Commodity moneyMSC: Definitional15. When the Soviet Union began breaking up in the late
10、1980s, cigarettes began replacing the ruble as the medium of exchange even though the ruble was legal tender. The cigarettes provide an example of fiat money.ANS: F DIF: 1 REF: 29-1NAT: Analytic LOC: The role of money TOP: Commodity moneyMSC: Interpretive16. In order for currency to be widely used a
11、s a medium of exchange, it is sufficient for the government to designate it as legal tender.ANS: F DIF: 1 REF: 29-1NAT: Analytic LOC: The role of money TOP: CurrencyMSC: Definitional17. M1 includes savings deposits.ANS: F DIF: 1 REF: 29-1NAT: Analytic LOC: The role of money TOP: Money supplyMSC: Def
12、initional18. M2 is both larger and more liquid than M1.ANS: F DIF: 1 REF: 29-1NAT: Analytic LOC: The role of money TOP: Money supply | LiquidityMSC: Interpretive19. Credit cards are a medium of exchange.ANS: F DIF: 2 REF: 29-1NAT: Analytic LOC: The role of money TOP: Medium of exchangeMSC: Definitio
13、nal20. The series of bank failures in 1907 occurred despite the creation of the Federal Reserve many years earlier.ANS: F DIF: 1 REF: 29-2NAT: Analytic LOC: The role of money TOP: Federal Reserve SystemMSC: Interpretive21. Federal Reserve governors are given long terms to insulate them from politics
14、.ANS: T DIF: 2 REF: 29-2NAT: Analytic LOC: Monetary and fiscal policy TOP: Federal Reserve SystemMSC: Interpretive22. The Federal Reserve is a privately operated commercial bank.ANS: F DIF: 1 REF: 29-2NAT: Analytic LOC: Monetary and fiscal policy TOP: Federal Reserve SystemMSC: Definitional23. The F
15、ederal Reserve was created in 1913 after a series of bank failures in 1907.ANS: T DIF: 1 REF: 29-2NAT: Analytic LOC: Monetary and fiscal policy TOP: Federal Reserve SystemMSC: Definitional1952 Chapter 29 /The Monetary System24. Members of the Board of Governors are appointed by the president of the
16、U.S. and confirmed by the U.S. Senate.ANS: T DIF: 1 REF: 29-2NAT: Analytic LOC: Monetary and fiscal policy TOP: Federal Reserve SystemMSC: Definitional25. Monetary policy is determined by a committee whose voting members include all the presidents of the regional Federal Reserve Banks.ANS: F DIF: 1
17、REF: 29-2NAT: Analytic LOC: Monetary and fiscal policyTOP: Federal Open Market Committee MSC: Definitional26. The Federal Reserve primarily uses open-market operations to change the money supply.ANS: T DIF: 1 REF: 29-3NAT: Analytic LOC: Monetary and fiscal policy TOP: Open-market operationsMSC: Defi
18、nitional27. If the Fed buys bonds in the open market, the money supply decreases.ANS: F DIF: 1 REF: 29-3NAT: Analytic LOC: Monetary and fiscal policy TOP: Open-market operationsMSC: Applicative28. Banks cannot influence the money supply if they hold all deposits in reserve.ANS: T DIF: 2 REF: 29-3NAT
19、: Analytic LOC: Monetary and fiscal policy TOP: Banks | Money supplyMSC: Interpretive29. Banks still could contribute to changes in the money supply, even if they were required to hold all deposits in reserve.ANS: F DIF: 1 REF: 29-3NAT: Analytic LOC: Monetary and fiscal policy TOP: Fractional-reserv
20、e bankingMSC: Applicative30. If banks hold any amount of their deposits in reserve, then they do not have the ability to influence the money supply.ANS: F DIF: 2 REF: 29-3NAT: Analytic LOC: The role of money TOP: Reserves | Money supplyMSC: Interpretive31. When the Federal Reserve decreases the disc
21、ount rate, the quantity of reserves increases and the money supply increases.ANS: T DIF: 2 REF: 29-3NAT: Analytic LOC: Monetary and fiscal policyTOP: Discount rate | Reserves | Money supply MSC: Interpretive32. The money multiplier equals 1/(1 - R), where R represents the reserve ratio.ANS: F DIF: 1
22、 REF: 29-3NAT: Analytic LOC: Monetary and fiscal policy TOP: Money multiplierMSC: Definitional33. Assume that when $100 of new reserves enter the banking system, the money supply ultimately increases by $625. Assume also that no banks hold excess reserves and that the entire money supply consists of
23、 bank deposits. If, at a point in time, reserves for all banks amount to $500, then at that same point in time, loans for all banks amount to $2,625.ANS: T DIF: 3 REF: 29-3NAT: Analytic LOC: Monetary and fiscal policy TOP: Money multiplierMSC: AnalyticalChapter 29 /The Monetary System 195334. Assume
24、 that when $100 of new reserves enter the banking system, the money supply ultimately increases by $800. Assume also that no banks hold excess reserves and that the entire money supply consists of bank deposits. If, at a point in time, reserves for all banks amount to $750, then at that same point i
25、n time, loans for all banks amount to $6,000.ANS: F DIF: 3 REF: 29-3NAT: Analytic LOC: Monetary and fiscal policy TOP: Money multiplierMSC: Analytical35. As banks create money, they create wealth.ANS: F DIF: 1 REF: 29-3NAT: Analytic LOC: The role of money TOP: Banks | MoneyMSC: Definitional36. The m
26、oney supply of Hooba is $10,000 in a 100-percent-reserve banking system. If Hooba decreases the reserve requirement to 10 percent, the money supply could increase by no more than $9,000.ANS: F DIF: 2 REF: 29-3NAT: Analytic LOC: Monetary and fiscal policy TOP: Money multiplierMSC: Applicative37. If t
27、he Fed decreases reserve requirements, the money supply will increase.ANS: T DIF: 1 REF: 29-3NAT: Analytic LOC: Monetary and fiscal policy TOP: Reserve requirementsMSC: Applicative38. An increase in reserve requirements increases reserves and decreases the money supply.ANS: F DIF: 2 REF: 29-3NAT: An
28、alytic LOC: Monetary and fiscal policy TOP: Reserve requirementsMSC: Applicative39. Just after the terrorist attack on September 11, 2001, the Fed stood ready to lend financial institutions funds. When the Fed did this, it was acting in its role of lender of last resort.ANS: T DIF: 1 REF: 29-3NAT: A
29、nalytic LOC: Monetary and fiscal policy TOP: Lender of last resortMSC: Definitional40. Because of the multiple tools at its disposal, the Fed can control the money supply very precisely.ANS: F DIF: 2 REF: 29-3NAT: Analytic LOC: Monetary and fiscal policy TOP: Federal Reserve SystemMSC: Interpretive4
30、1. In the months of November and December, people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays. As a result, other things the same the money supply increases.ANS: F DIF: 2 REF: 29-3NAT: Analytic LOC: Monetary a
31、nd fiscal policy TOP: Currency | Money multiplierMSC: Applicative42. Other things the same, if banks decide to hold a smaller part of their deposits as excess reserves, the money supply will fall.ANS: F DIF: 2 REF: 29-3NAT: Analytic LOC: Monetary and fiscal policy TOP: ReservesMSC: Applicative43. Ba
32、nk runs and the accompanying increase in the money multiplier caused the U.S. money supply to rise by 28 percent from 1929 to 1933.ANS: F DIF: 2 REF: 29-3NAT: Analytic LOC: Monetary and fiscal policy TOP: Banks | Money multiplierMSC: Definitional1954 Chapter 29 /The Monetary SystemSHORT ANSWER1. Eco
33、nomists argue that the move from barter to money increased trade and production. How is this possible?ANS:The use of money allows people to trade more easily. When it is easier to trade, specialization increases. Increased specialization increases production and the standard of living.DIF: 2 REF: 29
34、-1 NAT: AnalyticLOC: The role of money TOP: Barter | MoneyMSC: Interpretive2. What is the difference between money and wealth?ANS:Money is defined as the set of assets in the economy that people regularly use to buy goods and services from other people. Wealth includes all assets, both monetary and
35、nonmonetary.DIF: 2 REF: 29-1 NAT: AnalyticLOC: The role of money TOP: Money MSC: Definitional3. Which of the three functions of money are commonly met by each of the following assets in the U.S. economy?a. paper dollarb. precious metalsc. collectibles such as baseball cards, stamps, and antiquesANS:
36、a. medium of exchange, store of value, unit of accountb. store of valuec. store of valueDIF: 1 REF: 29-1 NAT: AnalyticLOC: The role of money TOP: Money MSC: Interpretive4. Are credit cards and debit cards money? Whats the difference between credit and debit cards?ANS:Neither credit cards nor debit c
37、ards are money, but credit cards are very different from debit cards. Credit cards are not a medium of exchange, but are a means of deferring payment. Debit cards allow the user immediate access to deposits in a bank account. These deposits are part of the money supply.DIF: 2 REF: 29-1 NAT: Analytic
38、LOC: The role of money TOP: Money MSC: Interpretive5. What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?ANS:Commodity money has “intrinsic value,“ or value in uses other than as money. Fiat money is established as money by
39、the government. It has very little, if any, intrinsic value. Although fiat money has no intrinsic value, people accept it in trade when they are confident that others will also accept it. The governments decree that fiat currency serves as legal tender increases this confidence.DIF: 2 REF: 29-1 NAT:
40、 AnalyticLOC: The role of money TOP: Commodity moneyMSC: Definitional6. What does the text mean by the question, “Where Is All the Currency?“ How does it answer the question?ANS:The amount of currency per person is nearly $3,300. Most people carry far less than this. The question is, “where is the r
41、est of the currency?“ Foreigners and criminals hold some. In some foreign countries, people have more confidence in the U.S. dollar than in their own currency. Criminals use currency because it makes it harder for the government to trace their activities than if they used bank accounts. So they may
42、hold above average amounts of currency.DIF: 2 REF: 29-1 NAT: AnalyticLOC: The role of money TOP: Currency MSC: DefinitionalChapter 29 /The Monetary System 19557. What is meant by the term “lender of last resort?“ In what circumstances might the Fed be a lender of last resort?ANS:A “lender of last re
43、sort“ is a lender to those who cannot borrow anywhere else. The Fed might loan funds to a solvent bank that is experiencing a bank run and so doesnt currently have enough cash on hand to meet depositors demands.DIF: 1 REF: 29-2 NAT: AnalyticLOC: Monetary and fiscal policy TOP: Lender of last resortM
44、SC: Interpretive8. Compare the Board of Governors and the Federal Open Market Committee.ANS:The Board of Governors runs the Federal Reserve. It has seven members who are appointed by the U.S. president with the advice and consent of the Senate. The voting members of the Federal Open Market Committee
45、 include the 7 members of the Board of Governors and 5 of the 12 regional bank presidents, rotated among the 12 regional presidents, but always including the president of the New York Fed. The chair of the BOG also serves as chair of the FOMC. The FOMC meets about every six weeks in Washington, D.C.
46、 to discuss the condition of the economy and to consider changes in monetary policy.DIF: 1 REF: 29-2 NAT: AnalyticLOC: Monetary and fiscal policy TOP: Federal Reserve SystemMSC: Definitional9. What makes the New York Federal Reserve regional bank so important?ANS:The president of the New York Federa
47、l Reserve regional bank is the only regional bank president who is always a voting member of the FOMC, the committee that determines monetary policy. New York is the traditional financial center of the U.S. economy and the New York Federal Reserve Bank conducts all open-market transactions.DIF: 1 RE
48、F: 29-2 NAT: AnalyticLOC: Monetary and fiscal policy TOP: Federal Reserve SystemMSC: Definitional10. Designers of the Federal Reserve System were concerned that the Fed might form policy favorable to one part of the country or to a particular party. What are some ways that the organization of the Fe
49、d reflects such concerns?ANS:1. The president appoints the Board of Governors, but the Senate must approve them.2. The seven members of the Board of Governors serve 14-year terms, so it is unlikely that a single president will have appointed most of them.3. The Federal Reserve has 12 regional banks.4. The presidents of the regional banks serve as voting members of the FOMC on a rotating basis.DIF: 2 REF: 29-2 NAT: AnalyticLOC: Monetary and fiscal policy TOP: Federal Reserve SystemMSC: Interpretive11. Which two of the Ten Principles of Economics imply that the Fed can profoundly
