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2. The Monetary System 27 CLICKER QUESTIONS

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4. © 2013 Pearson CHECKPOINT 27.1 A.currency B.currency plus checking deposits C.currency plus credit cards D.anything accepted as a means of payment E.anything used as a store of value Question 1 Which of the following best defines what money is now and what it has been in the past?

5. © 2013 Pearson CHECKPOINT 27.1 A.$7,310 B.$5,800 C.$2,510 D.$1,510 E.$710 Question 2 Individuals and firms hold $800 billion in currency, $10 billion in traveler’s checks, and $700 billion in checkable deposits; savings deposits are $4,000 billion; small time deposits are $1,000 billion; and money market funds and other deposits are $800 billion, then M1 equals ____ billion.

6. © 2013 Pearson CHECKPOINT 27.1 A.always counted as money B.not money C.sometimes counted as money, depending on how they are used D.sometimes counted as money, depending on what is purchased E.sometimes counted as money, depending on what measure of money is being used Question 3 Credit cards, debit cards, and e-checks are ________.

7. © 2013 Pearson CHECKPOINT 27.2 A.the safe U.S. government bonds that it owns B.the provision of funds to businesses and individuals C.the currency in its vault plus the balance on its reserve account at a Federal Reserve Bank D.the savings and time deposits that it holds E.the loans it has made Question 4 A commercial bank’s reserves are _____.

8. © 2013 Pearson CHECKPOINT 27.2 A.liquid assets, loans, securities, and reserves B.reserves, savings deposits, securities, and loans C.reserves, securities, liquid assets, and savings deposits D.securities, reserves, checkable deposits, and liquid assets E.reserves, checkable deposits, securities, and loans Question 5 Banks’ assets include _______.

9. © 2013 Pearson CHECKPOINT 27.3 A.$765 billion B.$773 billion C.$776 billion D.$744 billion E.$1,509 billion Question 6 If Federal Reserve notes and coins are $765 billion, and banks’ reserves at the Fed are $8 billion, banks’ liquid assets are $11 billion, and the Fed owns $725 billion of government securities, the monetary base equals _______.

10. © 2013 Pearson CHECKPOINT 27.3 A.holding deposits for the U.S. government, reserve requirements, and the discount rate B.setting regulations for lending standards and extraordinary crisis measures C.supervision of the banking system and buying and selling commercial banks D.required reserve ratios, the discount rate, and open market operations, extraordinary crisis measures E.required reserve ratios, mortgage rates, and open market operations Question 7 The Fed’s policy tools include _________.

11. © 2013 Pearson CHECKPOINT 27.4 A.the composition of money changes but the quantity of money does not B.new bank reserves are created C.the quantity of money decreases D.bank reserves are destroyed E.banks’ excess reserves decrease Question 8 If the Fed buys government securities, then _______.

12. © 2013 Pearson CHECKPOINT 27.4 A.monetary base when the Fed purchases government securities B.quantity of money when the monetary base increases C.monetary base when the quantity of money increases D.quantity of money when the desired reserve ratio increases E.monetary base when the Fed sells government securities. Question 9 The money multiplier determines the increase in the _____.

13. © 2013 Pearson CHECKPOINT 27.4 A.$800,000 B.$333,333 C.$2,000,000 D.$618,605 E.$465,116 Question 10 The Fed makes an open market purchase, which increases the monetary base by $200,000. If the currency drain ratio is 33 percent of deposits and the desired reserve ratio is 10 percent, the quantity of money increases by ______.