Money and the Federal Reserve Quiz 2023 Questions and
Answers Graded A+
Determine which of the Federal Reserve entities controls each of the following
policy tools.
a. The reserve requirement is determined by the:
b. Open market operations are determined by the:
Board of Governors.
Federal Open Market Committee.
Use the following table to determine the levels of M1 and M2 in the United States.
Money Categories in the United States
Asset Amount (billions of dollars)
Currency $82
Demand deposits 80
Money market funds 44
Other checkable deposits 37
Savings deposits 460
Small time deposits 22
Traveler's checks 4
a. Calculate the M1 money supply.
b. Calculate the M2 money supply.
203 billion
729 billion
Money is:
anything that both buyers and sellers will accept in exchange for goods and services.
Suppose that Ava withdraws $300 from her savings account at Second Bank. The
reserve requirement facing Second Bank is 10%. Assume the bank does not wish
to hold any excess reserves of new deposits.
, Use this information to complete the balance sheet below to show how Second
Bank's assets and liabilities change when Ava withdraws the $300 from the bank.
Change in Reserves: $ -30
Change in Loans: $ -270
Change in Deposits: $ -300
The part of the Federal Reserve that determines and implements the nation's
monetary policy and controls the money supply to promote stable prices and
economic growth is the:
Federal Open Market Committee.
Explain the changes in M1 and M2 for each of the following scenarios.
When Lily transfers $100 from her savings account into her checking account, M1
_______ and M2 __________
If Miguel deposits $200 cash into his money market mutual fund, M1 ___________
and M2 ___________
If Sam takes $1,000 from his savings account to purchase Microsoft stock, M1
________ and M2 ___________
increases by $100; remains the same
decreases by $200; remains the same
remains the same; decreases by $1,000
Suppose the Federal Reserve increases the amount of reserves by $100 million
and the total money supply increases by $500 million.
a. What is the money multiplier?
b. Using the money multiplier from part a, how much will the money supply
change if the Federal Reserve increases reserves by $50 million?
5
$ 250 million
Assets of the commercial banking system include
reserves and loans.
Other things being equal, an expansion of commercial bank lending
increases the money supply.
If you put a $20 bill in the pocket of your winter coat at the beginning of spring so
that you will be surprised when you find it again next winter, you are using money
as
a store of value.
The Federal Reserve System consists of which of the following?
Answers Graded A+
Determine which of the Federal Reserve entities controls each of the following
policy tools.
a. The reserve requirement is determined by the:
b. Open market operations are determined by the:
Board of Governors.
Federal Open Market Committee.
Use the following table to determine the levels of M1 and M2 in the United States.
Money Categories in the United States
Asset Amount (billions of dollars)
Currency $82
Demand deposits 80
Money market funds 44
Other checkable deposits 37
Savings deposits 460
Small time deposits 22
Traveler's checks 4
a. Calculate the M1 money supply.
b. Calculate the M2 money supply.
203 billion
729 billion
Money is:
anything that both buyers and sellers will accept in exchange for goods and services.
Suppose that Ava withdraws $300 from her savings account at Second Bank. The
reserve requirement facing Second Bank is 10%. Assume the bank does not wish
to hold any excess reserves of new deposits.
, Use this information to complete the balance sheet below to show how Second
Bank's assets and liabilities change when Ava withdraws the $300 from the bank.
Change in Reserves: $ -30
Change in Loans: $ -270
Change in Deposits: $ -300
The part of the Federal Reserve that determines and implements the nation's
monetary policy and controls the money supply to promote stable prices and
economic growth is the:
Federal Open Market Committee.
Explain the changes in M1 and M2 for each of the following scenarios.
When Lily transfers $100 from her savings account into her checking account, M1
_______ and M2 __________
If Miguel deposits $200 cash into his money market mutual fund, M1 ___________
and M2 ___________
If Sam takes $1,000 from his savings account to purchase Microsoft stock, M1
________ and M2 ___________
increases by $100; remains the same
decreases by $200; remains the same
remains the same; decreases by $1,000
Suppose the Federal Reserve increases the amount of reserves by $100 million
and the total money supply increases by $500 million.
a. What is the money multiplier?
b. Using the money multiplier from part a, how much will the money supply
change if the Federal Reserve increases reserves by $50 million?
5
$ 250 million
Assets of the commercial banking system include
reserves and loans.
Other things being equal, an expansion of commercial bank lending
increases the money supply.
If you put a $20 bill in the pocket of your winter coat at the beginning of spring so
that you will be surprised when you find it again next winter, you are using money
as
a store of value.
The Federal Reserve System consists of which of the following?
