1. If the required reserve ratio is 10 percent, a bank with a new deposit of $1,000
a. must keep $100 on reserve and can make up to $900 in new loans.
b. must keep $200 on reserve and can make up to $800 in new loans.
c. must keep $900 on reserve and can make up to $100 in new loans.
d. must keep $1,000 on reserve and can make no additional loans.

2. Which one of the following is incorrect regarding money?
a. Money is a medium of exchange.
b. Money is a store of value.
c. Money serves as a unit of account.
d. The value of money is dependent on the quantity of gold held by the Federal Reserve.

3. Which of the following are changes altering the nature of money and the usefulness of the money supply figures?
a. the widespread holding of U.S. currency outside the country by foreigners
b. the increasing availability of stock and bond mutual funds
c. the use of debit cards and electronic money
d. all of the above

4. Which of the following is primarily responsible for controlling the money supply in the United States?
a. the U.S. Congress
b. the Council of Economic Advisors
c. the U.S. Treasury
d. the Board of Governors of the Federal Reserve System

5. If the Fed wanted to use all three of its major monetary control tools to decrease the money supply, it would
a. buy bonds, reduce the discount rate, and reduce reserve requirements.
b. sell bonds, reduce the discount rate, and reduce reserve requirements.
c. sell bonds, reduce the discount rate, and increase reserve requirements.
d. sell bonds, increase the discount rate, and increase reserve requirements.

6. If a decrease in the money supply were desired to slow inflation, the Federal Reserve might
a. increase the reserve requirements.
b. sell U.S. securities on the open market.
c. raise the discount rate.
d. buy U.S. securities directly from the Treasury.

7. The Federal Reserve's most frequently used monetary tool is
a. the discount rate.
b. the reserve requirements.
c. moral persuasion.
d. open market operations.

8. Suppose the Fed purchases $100 million of U.S. securities from the public. The reserve requirement is 20 percent and all banks have zero excess reserves. The total impact of this action on the money supply will be a
a. $100 million decrease in the money supply.
b. $100 million increase in the money supply.
c. $200 million increase in the money supply.
d. $500 million increase in the money supply.

9. A reserve requirement of 20 percent implies a potential money deposit multiplier of
a. 4.
b. 5.
c. 20.
d. 25.

10. A bank receives a demand deposit of $1,000. The bank loans out $600 of this deposit and increases its excess reserves by $300. What is the legal reserve requirement?
a. 10 percent
b. 20 percent
c. 60 percent
d. 70 percent