Question 1

Excess reserves are

Accepted Answer

A) Total reserves less required reserves. 
B) Total reserves less transactions account balances. 
C) Required reserves less demand deposits. 
D) Bank reserves in excess of vault cash. 
A) Total reserves less required reserves. 
B) Total reserves less transactions account balances. 
C) Required reserves less demand deposits. 
D) Bank reserves in excess of vault cash.

Question 2

Which of the following reflects the concept of required reserves?

Accepted Answer

A) The money multiplier is greater than 1. 
B) Excess reserves are equal to 0. 
C) Required reserves are equal to total reserves. 
D) Banks can lend only their required reserves. 
A) The money multiplier is greater than 1. 
B) Excess reserves are equal to 0. 
C) Required reserves are equal to total reserves. 
D) Banks can lend only their required reserves.

Question 3

When you pay off a loan at a bank,the money supply becomes smaller.

Accepted Answer

A) True 
 B)False

Question 4

To calculate required reserves,you must multiply the required reserve ratio by the amount of transactions account balances on the bank's balance sheet.

Accepted Answer

A) True 
 B)False

Question 5

A single bank with $20,000 of reserves and a reserve ratio of 5 percent could support total transactions account balances of at most

Accepted Answer

A) $400,000. 
B) $1,000. 
C) $100,000. 
D) $20,000. 
A) $400,000. 
B) $1,000. 
C) $100,000. 
D) $20,000.

Question 6

Which of the following is true about the quantity of money in the U.S.economy?

Accepted Answer

A) It is equal to the amount of currency in circulation. 
B) It is much greater than the amount of currency in circulation. 
C) It is equal to the value of the government's gold reserves. 
D) It is equal to the total amount of income. 
A) It is equal to the amount of currency in circulation. 
B) It is much greater than the amount of currency in circulation. 
C) It is equal to the value of the government's gold reserves. 
D) It is equal to the total amount of income.

Question 7

Only the federal government can create money.

Accepted Answer

A) True 
 B)False

Question 8

If the banking system has demand deposits of $200,000,total reserves equal to $60,000,and a required reserve ratio of 25 percent,the banking system can increase the volume of loans by a maximum of

Accepted Answer

A) $40,000. 
B) $60,000. 
C) $10,000. 
D) $200,000. 
A) $40,000. 
B) $60,000. 
C) $10,000. 
D) $200,000.

Question 9

Suppose a banking system has a required reserve ratio of 10 percent.What is the maximum possible increase in the money supply in response to a $2 billion increase in excess reserves for the whole banking system?

Accepted Answer

A) $20 billion. 
B) $2 billion. 
C) $200 million. 
D) $210 billion. 
A) $20 billion. 
B) $2 billion. 
C) $200 million. 
D) $210 billion.

Question 10

NOW and ATS accounts are included in

Accepted Answer

A) M1 only. 
B) M2 only. 
C) Both M1 and M2. 
D) None of the choices are correct. 
A) M1 only. 
B) M2 only. 
C) Both M1 and M2. 
D) None of the choices are correct.

Question 11

When cash or coins are deposited in a transactions account at a bank,the money supply immediately increases by the amount of the deposit multiplied by the money multiplier.

Accepted Answer

A) True 
 B)False

Question 12

Table 13.1 XYZ Bank Balance Sheet
  Refer to Table 13.1.With a required reserve ratio of 20 percent,XYZ Bank could support maximum transactions account balances of

Accepted Answer

A) $20,000. 
B) $80,000. 
C) $300,000. 
D) $500,000. 
A) $20,000. 
B) $80,000. 
C) $300,000. 
D) $500,000.

Question 13

The basic money supply or M1 includes

Accepted Answer

A) Currency in circulation,transactions accounts,and traveler's checks. 
B) Currency in circulation,transactions accounts,and savings accounts. 
C) Currency in circulation,transactions accounts,traveler's checks,and money market mutual funds. 
D) Currency in circulation,savings accounts,and credit card balances. 
A) Currency in circulation,transactions accounts,and traveler's checks. 
B) Currency in circulation,transactions accounts,and savings accounts. 
C) Currency in circulation,transactions accounts,traveler's checks,and money market mutual funds. 
D) Currency in circulation,savings accounts,and credit card balances.

Question 14

Which of the following is not included in M2?

Accepted Answer

A) All of the items in M1. 
B) All of the items in M2. 
C) Time deposits greater than $100,000. 
D) Treasury bills. 
A) All of the items in M1. 
B) All of the items in M2. 
C) Time deposits greater than $100,000. 
D) Treasury bills.

Question 15

One In the News article titled "CDs Not Paying Much" suggests that

Accepted Answer

A) Interest rates fall the larger the CD. 
B) Interest rates on CDs are not much higher than for checking accounts. 
C) The size of the CD has no bearing on the interest rates. 
D) None of the choices are correct. 
A) Interest rates fall the larger the CD. 
B) Interest rates on CDs are not much higher than for checking accounts. 
C) The size of the CD has no bearing on the interest rates. 
D) None of the choices are correct.

Question 16

The direct exchange of one good for another

Accepted Answer

A) Is barter. 
B) Is most efficient for an economy. 
C) Facilitates specialization in production. 
D) Facilitates market exchanges. 
A) Is barter. 
B) Is most efficient for an economy. 
C) Facilitates specialization in production. 
D) Facilitates market exchanges.

Question 17

Which of the following is not included in transactions accounts?

Accepted Answer

A) A checking account at a commercial bank. 
B) A money market mutual fund. 
C) A credit union share draft. 
D) A demand deposit account at a mutual savings bank. 
A) A checking account at a commercial bank. 
B) A money market mutual fund. 
C) A credit union share draft. 
D) A demand deposit account at a mutual savings bank.

Question 18

When someone takes out a loan at a bank,the money supply becomes smaller.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following explains why banks try to keep their holdings of excess reserves low?

Accepted Answer

A) To maximize profits. 
B) To keep the money multiplier low. 
C) To escape Fed penalties. 
D) To please bank examiners. 
A) To maximize profits. 
B) To keep the money multiplier low. 
C) To escape Fed penalties. 
D) To please bank examiners.

Question 20

Banks make loans to which of the following?

Accepted Answer

A) Businesses for new plants and equipment. 
B) Consumers for new homes and cars. 
C) The government for its projects. 
D) All of the choices are correct. 
A) Businesses for new plants and equipment. 
B) Consumers for new homes and cars. 
C) The government for its projects. 
D) All of the choices are correct.

Exam 13: Money and Banks

Excess reserves are

Which of the following reflects the concept of required reserves?

When you pay off a loan at a bank,the money supply becomes smaller.

To calculate required reserves,you must multiply the required reserve ratio by the amount of transactions account balances on the bank's balance sheet.

A single bank with $20,000 of reserves and a reserve ratio of 5 percent could support total transactions account balances of at most

Which of the following is true about the quantity of money in the U.S.economy?

Only the federal government can create money.

If the banking system has demand deposits of $200,000,total reserves equal to $60,000,and a required reserve ratio of 25 percent,the banking system can increase the volume of loans by a maximum of

Suppose a banking system has a required reserve ratio of 10 percent.What is the maximum possible increase in the money supply in response to a $2 billion increase in excess reserves for the whole banking system?

NOW and ATS accounts are included in

When cash or coins are deposited in a transactions account at a bank,the money supply immediately increases by the amount of the deposit multiplied by the money multiplier.

Table 13.1 XYZ Bank Balance Sheet Refer to Table 13.1.With a required reserve ratio of 20 percent,XYZ Bank could support maximum transactions account balances of

The basic money supply or M1 includes

Which of the following is not included in M2?

One In the News article titled "CDs Not Paying Much" suggests that

The direct exchange of one good for another

Which of the following is not included in transactions accounts?

When someone takes out a loan at a bank,the money supply becomes smaller.

Which of the following explains why banks try to keep their holdings of excess reserves low?

Banks make loans to which of the following?

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

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