A critical assumption for the simple money multiplier (1/ rrd) to hold is that
a. banks do not hold excess reserves.
b. the public does not increase their level of currency holdings.
c. the required reserve ratio has to be greater than one.
d. both a and b.
e. all of the above.
Question 2Even though government-operated firms do not have to make a profit, they usually operate efficiently.
Indicate whether the statement is true or false
Question 3Railroads had advantages over canals in all respects except
(a) year-around service.
(b) speed of delivery.
(c) full access to shipping points.
(d) there is no except; all of the above were advantages of railroads.
Question 4A fall in which of the following would increase the money multiplier?
a. The monetary base
b. A change in M1
c. The level of Federal Reserve open market purchases
d. An increase in the currency to checkable deposit ratio
e. All of the above
Question 5Private initiative and financing were most important in
(a) the canal system of transportation.
(b) the steamboat system.
(c) the railroad system.
(d) none of the transportation systems.
Question 6Assuming the Federal Reserve makes an open-market purchase of a government security worth 10,000 . By writing a check to pay for this security, the Federal Reserve
a. reduces the balance of its assets by 10,000.
b. reduces the balance of its liabilities by 10,000.
c. neither reduces the balance of its assets nor the balance of its liabilities by 10,000.
d. creates a new 10,000 liability against itself.
e. both c and d are correct.
Question 7The Board of Governors of the Federal Reserve System is responsible for
a. approving changes in the discount rate.
b. controlling monetary policy.
c. administering discount lending.
d. Both a and b
e. All of the above
Question 8The U.S. experience with the rise and fall of its railroad industry illustrates that central planners are less likely than private investors to allocate investment funds into wealth-creating projects.
Indicate whether the statement is true or false
Question 9Which of the following statements is supported by the research of economic historians?
(a) Canals and railroads were built with a mixture of private and public enterprise and
financing.
(b) Canals and railroads were built largely without U.S. government participation.
(c) Canals were built with public assistance, but railroads were built with almost no
government assistance.
(d) Railroads were built with public assistance, but canals were built by private enterprise.
Question 10Lender of last resort means that the central bank
a. has to lend money to failing banks.
b. should lend money to individuals if their bankruptcy would threaten the banking system.
c. should lend money to banks that are suffering short-term liquidity shortages.
d. should lend money to pay for government deficits.
e. None of the above
Question 11Interstate Commerce Commission (ICC) Act of 1887 gave the federal government rate-setting powers.
Indicate whether the statement is true or false
Question 12The organized groups of people who favor government intervention do so at the expense of other groups because even government resources are limited.
Indicate whether the statement is true or false
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