Question 1

Barter

Accepted Answer

A) Is the direct exchange of one good for another. 
B) Is considered to be an efficient process for an economy. 
C) Makes market transactions easier and less time-consuming. 
D) Requires that gold be used to assess value. 
A) Is the direct exchange of one good for another. 
B) Is considered to be an efficient process for an economy. 
C) Makes market transactions easier and less time-consuming. 
D) Requires that gold be used to assess value.

Question 2

Assume a new bank has just opened for business.It has deposits of $1,000,000 and a required reserve ratio of 15 percent.How much can this bank lend,and why?

Accepted Answer

This bank is required to hold 15 percent

Question 3

Table 13.2 ABC Bank Balance Sheet
  Refer to Table 13.2.With total reserves of $80,000 and a required reserve ratio of 25 percent,ABC Bank could support maximum transactions account balances of

Accepted Answer

A) $20,000. 
B) $320,000. 
C) $50,000. 
D) $2,000,000. 
A) $20,000. 
B) $320,000. 
C) $50,000. 
D) $2,000,000.

Question 4

Suppose Jason takes $150 he had in his wallet and deposits it into his checking account.The immediate result of this transaction is that M1

Accepted Answer

A) Increases by $150 and M2 remains the same. 
B) Decreases by $150 and M2 remains the same. 
C) And M2 do not change. 
D) Remains the same and M2 increases by $150. 
A) Increases by $150 and M2 remains the same. 
B) Decreases by $150 and M2 remains the same. 
C) And M2 do not change. 
D) Remains the same and M2 increases by $150.

Question 5

The minimum amount of reserves a bank is required to hold is known as

Accepted Answer

A) The money multiplier. 
B) Total reserves. 
C) Excess reserves. 
D) Required reserve ratio. 
A) The money multiplier. 
B) Total reserves. 
C) Excess reserves. 
D) Required reserve ratio.

Question 6

If the banking system has a required reserve ratio of 20 percent,the money multiplier is

Accepted Answer

A) 0.2. 
B) 0.8. 
C) 1.25. 
D) 5.0. 
A) 0.2. 
B) 0.8. 
C) 1.25. 
D) 5.0.

Question 7

Money is functioning as a store of value when you

Accepted Answer

A) Use it to compare the cost of tuition 10 years ago to the cost today. 
B) Take out a student loan to buy books. 
C) Save your cash to pay for tuition next semester. 
D) Pay your tuition in installments rather than all at one time. 
A) Use it to compare the cost of tuition 10 years ago to the cost today. 
B) Take out a student loan to buy books. 
C) Save your cash to pay for tuition next semester. 
D) Pay your tuition in installments rather than all at one time.

Question 8

An essential function for a bank is to

Accepted Answer

A) Maximize its assets. 
B) Create money through lending. 
C) Lend all of its deposits. 
D) Minimize its reserve ratio. 
A) Maximize its assets. 
B) Create money through lending. 
C) Lend all of its deposits. 
D) Minimize its reserve ratio.

Question 9

The measure of the money supply M1 includes all of the following except

Accepted Answer

A) Balances in savings accounts. 
B) Currency in circulation. 
C) Balances in transactions accounts. 
D) Travelers checks. 
A) Balances in savings accounts. 
B) Currency in circulation. 
C) Balances in transactions accounts. 
D) Travelers checks.

Question 10

Suppose a bank has $200,000 in deposits and a required reserve ratio of 15 percent.Then required reserves are

Accepted Answer

A) $3,000. 
B) $1,333,333. 
C) $3,000,000. 
D) $30,000. 
A) $3,000. 
B) $1,333,333. 
C) $3,000,000. 
D) $30,000.

Question 11

Bradley digs out $50 from his cookie jar and deposits it in his checking account.The immediate result of this transaction is that M1 has

Accepted Answer

A) Not changed. 
B) Increased by more than $50. 
C) Increased by less than $50. 
D) Increased by $50. 
A) Not changed. 
B) Increased by more than $50. 
C) Increased by less than $50. 
D) Increased by $50.

Question 12

A bank account that permits direct payment to a third party is a

Accepted Answer

A) Savings account. 
B) Transactions account. 
C) Money market mutual fund. 
D) Traveler's check. 
A) Savings account. 
B) Transactions account. 
C) Money market mutual fund. 
D) Traveler's check.

Question 13

If the banking system has demand deposits of $100,000,total reserves equal to $20,000,and a required reserve ratio of 20 percent,the banking system can increase the volume of loans by

Accepted Answer

A) $0. 
B) $20,000. 
C) $80,000. 
D) $100,000. 
A) $0. 
B) $20,000. 
C) $80,000. 
D) $100,000.

Question 14

When money is used to acquire goods and services,it is functioning as a

Accepted Answer

A) Medium of exchange. 
B) Store of value. 
C) Standard of account. 
D) Equation of value. 
A) Medium of exchange. 
B) Store of value. 
C) Standard of account. 
D) Equation of value.

Question 15

Without money,the process of acquiring goods and services would be much more efficient.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not included in any of the measures of the money supply?

Accepted Answer

A) Credit union share drafts. 
B) Cash in the vault of a commercial bank. 
C) Currency in circulation outside of commercial banks. 
D) Transactions account balances at mutual savings banks. 
A) Credit union share drafts. 
B) Cash in the vault of a commercial bank. 
C) Currency in circulation outside of commercial banks. 
D) Transactions account balances at mutual savings banks.

Question 17

Deposit creation occurs when

Accepted Answer

A) A bank lends money. 
B) A person takes money out of one bank and puts it in another bank. 
C) A bank borrows dollars from the Federal Reserve. 
D) A person takes money out of the banking system and holds it as cash. 
A) A bank lends money. 
B) A person takes money out of one bank and puts it in another bank. 
C) A bank borrows dollars from the Federal Reserve. 
D) A person takes money out of the banking system and holds it as cash.

Question 18

Which of the following is included in M1?

Accepted Answer

A) Balances in savings accounts. 
B) Certificates of deposit. 
C) Balances in transactions accounts. 
D) Treasury bills. 
A) Balances in savings accounts. 
B) Certificates of deposit. 
C) Balances in transactions accounts. 
D) Treasury bills.

Question 19

The banking system creates additional money by making loans equal to total reserves.

Accepted Answer

A) True 
 B)False

Question 20

If the minimum reserve ratio is 20 percent,then $1 of reserves can support a maximum of $10 more in transactions deposits.

Accepted Answer

A) True 
 B)False

Exam 13: Money and Banks

Barter

Assume a new bank has just opened for business.It has deposits of $1,000,000 and a required reserve ratio of 15 percent.How much can this bank lend,and why?

Table 13.2 ABC Bank Balance Sheet Refer to Table 13.2.With total reserves of $80,000 and a required reserve ratio of 25 percent,ABC Bank could support maximum transactions account balances of

Suppose Jason takes $150 he had in his wallet and deposits it into his checking account.The immediate result of this transaction is that M1

The minimum amount of reserves a bank is required to hold is known as

If the banking system has a required reserve ratio of 20 percent,the money multiplier is

Money is functioning as a store of value when you

An essential function for a bank is to

The measure of the money supply M1 includes all of the following except

Suppose a bank has $200,000 in deposits and a required reserve ratio of 15 percent.Then required reserves are

Bradley digs out $50 from his cookie jar and deposits it in his checking account.The immediate result of this transaction is that M1 has

A bank account that permits direct payment to a third party is a

If the banking system has demand deposits of $100,000,total reserves equal to $20,000,and a required reserve ratio of 20 percent,the banking system can increase the volume of loans by

When money is used to acquire goods and services,it is functioning as a

Without money,the process of acquiring goods and services would be much more efficient.

Which of the following is not included in any of the measures of the money supply?

Deposit creation occurs when

Which of the following is included in M1?

The banking system creates additional money by making loans equal to total reserves.

If the minimum reserve ratio is 20 percent,then $1 of reserves can support a maximum of $10 more in transactions deposits.

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

International Trade

International Finance

Global Poverty

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