16. Anything can be money if it acts as a:

a. unit of account.

b. store of value.

c. medium of exchange.

d. All of the above.

17. Who is the current Chair of the Federal Reserve Board of Governors?

a. Robert Reich

b. Alan Greenspan

c. John Maynard Keynes

d. Jerome Powell

18. The Fed's principal decision-making body, which directs buying and selling of U.S. government securities, is known as the:

a. Federal Deposit Insurance Corporation.

b. District Board of Governors.

c. Federal Open Market Committee.

d. Reserve Requirement Regulation Conference.

19. Assume that Paris First National Bank is a thriving bank with deposits of $20 million. If the required reserve ratio is 20 percent and the bank is fully loaned out, the bank will keep what amount of required reserves?

a. $2 million.

b. $4 million.

c. $10 million.

d. $16 million.

e. $20 million

20. The required reserve ratio for a bank is set by:

a. Congress.

b. the bank itself.

c. the Treasury Department.

d. the Federal Reserve.

21. Imagine that Odyssey National is a brand new bank, and that its required reserve ratio is 10 percent. If it accepts a $1,000 deposit, then its required reserves balance will be:

a. $0

b. $90

c. $100

d. $900

e. $910

22. If the required-reserve ratio is a uniform 25 percent on all deposits, the money multiplier will be:

a. 4.00

b. 2.50

c. 0.40

d. 0.25

23. Assume a simplified banking system subject to a 10 percent required-reserve ratio. If there is an initial increase in excess reserves of $90,000 and all possible loans are made, the money supply:

a. increases $90,000.

b. increases $900,000.

c. increases $990,000.

d. decreases $90,000.

e. Stay at the current output; the firm is losing $200.

24. If the Fed wishes to increase the money supply then it should:

a. increase the required reserve ratio.

b. increase the discount rate.

c. buy government securities on the open market.

d. do -any of the above.

25. Which of the following policy actions by the Fed would cause the money supply to decrease?

a. An open-market purchase of government securities.

b. A decrease in required-reserve ratios.

c. An increase in the discount rate.

d. All of the above.

26. The interest rate that banks charge other banks for short-term loans is the:

a. discount rate.

b. prime rate.

c. treasury rate.

d. federal funds rate.

e. interbank rate.

27. When the Fed raises the required reserve ratio, then the:

a. ability of banks to make loans is restricted.

b. ability of banks to make loans is enhanced.

c. ability of banks to make loans is unaffected.

d. interest rate that banks pay to the Fed to borrow money is increased.

28. The speculative demand for money is the stock of money that people hold to:

a. pay their predictable, everyday expenses.

b. pay for any unexpected expenses that may occur.

c. buy stocks, bonds, and other financial assets.

d. buy the foreign currencies needed to purchase imports.

29. An increase in the money supply:

a. lowers the interest rate, causing a decrease in investment and an increase in GDP.

b. lowers the interest rate, causing a increase in investment and a decrease in GDP.

c. lowers the interest rate, causing an increase in investment and an increase in GDP.

d. raises the interest rate, causing an increase in investment and an increase in GDP.

e. raises the interest rate, causing a decrease in investment and a decrease in GDP.

30. According to the equation of exchange, if M=200, P=100, and Q=10, then V is:

a. 20

b. 2

c. 10

d. 5

e. 2,000