Review packet for Chapters 29, 30 & 31Multiple ChoiceIdentify the letter of the choice that best completes the statement or answers the question.Consider the following traders who meet.Bob has an apple wants an orangeTed has an orange wants a peachMary has a pear wants an appleAlice has a peach wants an orange____ 1. The existence of money leads to a. greater specialization in production, but not a higher standard of living.b. a higher standard of living, but not greater specialization.c. greater specialization and a higher standard of living.d. neither greater specialization or a higher standard of living.____ 2. Changes in the quantity of money affecta. interest ratesb. pricesc. productiond. All of the above are correct____ 3. Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate?a. store of valueb. medium of exchangec. unit of accountd. None of the above is correct.____ 4. Which list ranks assets from most to least liquid?a. currency, fine art, stocksb. currency, stocks, fine artc. fine art, currency, stocksd. fine art, stocks, currency____ 5. Fiat moneya. has no intrinsic value.b. is backed by gold.c. has intrinsic value equal to its value in exchange.d. is any close substitute for currency such as checkable deposits.____ 6. Which of the following is included in M2 but not in M1?a. currencyb. demand depositsc. savings depositsd. All of the above are included in both M1 and M2____ 7. Which of the following is included in M2 but not in M1?a. demand depositsb. corporate bondsc. large time depositsd. money market mutual funds____ 8. Credit cardsa. defer payments.b. are a store of value.c. have led to wider use of currency.d. are part of the money supply.____ 9. Credit cardsa. are included in M1 but not M2.b. are included in M1 and M2.c. are included in M2 but not M1d. are not included in any measure of the money supply.____ 10. Which of the following defer payments?a. credit cards and debit cardsb. neither credit cards or debit cardsc. credit cards but not debit cardsd. debit cards but not credit cardsUse the (hypothetical) information in the following table to answer the following Questions.Table 29-1Type of Money AmountLarge time deposits $80 billionSmall time deposits $75 billionDemand deposits $75 billionOther checkable deposits $40 billionSavings deposits $10 billionTravelers' checks $1 billionMoney market mutual funds $15 billionCurrency $100 billionSDRs $10 billionMiscellaneous categories of M2 $25 billion____ 11. Refer to Table 29-1. What is the M2 money supply?a. $125 billionb. $341 billionc. $421 billiond. $431 billion____ 12. Which of the following might explain why the United States has so much currency per person?a. U.S. citizens are holding a lot of foreign currency.b. Currency may be a preferable store of wealth for criminals.c. People use credit and debit cards more frequently.d. All of the above help explain the abundance of currency.____ 13. One puzzle about the U.S. money stock is thata. banks hold so much currency relative to the public.b. the public holds so much currency relative to banks.c. there is so little currency per person.d. there is so much currency per person.____ 14. Which of the following executes open-market operations?a. Board of Governorsb. New York Federal Reserve Bankc. The FOMCd. None of the above is correct.____ 15. The Board of Governorsa. is currently chaired by Paul Volcker.b. are appointed by the president and confirmed by the Senate.c. has twelve members.d. All of the above are correct.____ 16. The Federal Open Market Committee is made up of a. 5 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors.b. 5 Federal Reserve Regional Bank Presidents and 5 members of the Board of Governors.c. 12 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors.d. 12 Federal Reserve Regional Bank Presidents and 5 members of the Board of Governors.____ 17. When the Fed conducts open-market sales,a. it sells Treasury securities, which increases the money supply.b. it sells Treasury securities, which decreases the money supply.c. it borrows from member banks, which increases the money supply.d. it lends money to member banks, which decreases the money supply.____ 18. When the Fed conducts open-market purchases,a. it buys Treasury securities, which increases the money supply.b. it buys Treasury securities, which decreases the money supply.c. banks buy Treasury securities from Fed, which increases the money supply.d. banks buy Treasury securities from the Fed, which decreases the money supply.____ 19. The Fed can increase the price level by conducting open marketa. sales and raising the discount rate.b. sales and lowering the discount rate.c. purchases and raising the discount rate.d. purchases and lowering the discount rate.____ 20. There is aa. short-run tradeoff between inflation and unemployment.b. short-run tradeoff between an increase in the money supply and inflation.c. long-run tradeoff between inflation and unemployment.d. long-run tradeoff between an increase in the money supply and inflation.____ 21. A bank’s assets includea. both its reserves and the deposits of its customers.b. neither its reserves nor the deposits of its customers.c. its reserves, but not the deposits of its customers.d. the deposits of its customers, but not its reserves.____ 22. Suppose a bank has $200,000 in deposits and $190,000 in loans. It has loaned out all it can. It has a reserve ratio ofa. 2.5 percent.b. 5 percent.c. 9.5 percent.d. 10 percent.____ 23. When a bank loans out $1,000, the money supplya. does not change.b. decreases.c. increases.d. may do any of the above.____ 24. Under a fractional reserve banking system, banksa. hold more reserves than deposits.b. generally lend out a majority of the funds deposited.c. cause the money supply to fall by lending out reserves.d. All of the above are correct.____ 25. Suppose the Fed requires banks to hold 10% of their deposits as reserves. A bank has $20,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have to lend out if it decides to hold only required reserves?a. $29,000b. $28,100c. $19,100d. $11,000Use the balance sheet for the following questions.Table 29-3Last Bank of Cedar BendAssets LiabilitiesReserves $25,000 Deposits $150,000Loans $125,000____ 26. Refer to Table 29-3. If the reserve requirement is 20 percent, this banka. has $10,000 of excess