1/Membership in the Federal Reserve System A/is held by state-owned banks only.

Question

1/Membership in the Federal Reserve System
A/is held by state-owned banks only.
B/is held collectively by all banks in the banking system.
C/is held by only a minority of banks in the banking system.
D/is held by banks that also have branches outside the United States.

2/When the Fed sells government bonds it ____ reserves and ______ the money supply.
A/increases; increases
B/decreases; increases
C/decreases; decreases
D/increases; decreases

3/Linda sells her Economics textbook to Ejere for $40. Ejere pays Linda with a check, which she deposits in her checking account in West Bank. Which statement below describes the check-clearing process?
A/Linda's bank gains $40 in checkable deposits and loses $40 in reserves. Ejere's bank gains $40 in reserves and loses $40 in deposits.
B/Linda's bank loses $40 in checkable deposits and gains $40 in reserves. Ejere's bank gains $40 in checkable deposits and loses $10,000 in reserves.
C/Ejere's bank loses $40 in both reserves and checkable deposits. Linda's bank gains $40 in both checkable deposits and reserves.
D/Ejere's bank loses $40 in reserves and gains $10,000 in checkable deposits. Linda's bank loses $40 in both reserves and checkable deposits.

4/Which of the following equations is correct?
A/assets = liabilities - net worth
B/assets = liabilities + net worth
C/liabilities = assets + net worth
D/net worth = liabilities + assets

5/Which of the following statements is false about M1 and M2?
A/M2 is a broader measure of the money supply than M1.
B/M2 contains assets that are less liquid than those in M1.
C/All the assets included in M1 are also included in M2.
D/All the assets included in M2 are also included in M1.

Explanation / Answer

b c b a d

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