Question 1

M2 is comprised of

Accepted Answer

A)  small-denomination time deposits + savings deposits + money market accounts. 
B)  small-denomination time deposits + credit cards + money market accounts + gold deposits. 
C)  M1 + small-denomination time deposits + savings deposits + retail money market mutual funds. 
D)  M1 + small denomination time deposits + credit cards + money market accounts. 
A)  small-denomination time deposits + savings deposits + money market accounts. 
B)  small-denomination time deposits + credit cards + money market accounts + gold deposits. 
C)  M1 + small-denomination time deposits + savings deposits + retail money market mutual funds. 
D)  M1 + small denomination time deposits + credit cards + money market accounts. C

Question 2

A "money market deposit account" is a(n)

Accepted Answer

A)  checking account that pays no interest. 
B)  bank account with a specified maturity date. 
C)  store of Federal Reserve Notes held in bank vaults to cash checkable deposits on demand. 
D)  checking account created from an automatic transfer from a savings account. 
E)  interest-earning account at a bank or thrift institution that usually has a minimum balance requirement. 
A)  checking account that pays no interest. 
B)  bank account with a specified maturity date. 
C)  store of Federal Reserve Notes held in bank vaults to cash checkable deposits on demand. 
D)  checking account created from an automatic transfer from a savings account. 
E)  interest-earning account at a bank or thrift institution that usually has a minimum balance requirement. E

Question 3

The term federal reserve notes refers to coins minted by the U.S.Treasury.

Accepted Answer

A) True 
 B)False  False

Question 4

In a barter economy,

Accepted Answer

A)  money is a medium of exchange. 
B)  coins are used to facilitate trade. 
C)  money is a store of value. 
D)  goods and services are traded directly for each other. 
E)  the money supply consists entirely of coins and currency. 
A)  money is a medium of exchange. 
B)  coins are used to facilitate trade. 
C)  money is a store of value. 
D)  goods and services are traded directly for each other. 
E)  the money supply consists entirely of coins and currency.

Question 5

Which of the following statements is true?

Accepted Answer

A)  In June 2012, of the three components of M1, the checkable deposits component was the largest. 
B)  M1 is sometimes referred to as the "broad definition of the money supply". 
C)  Time deposits are a part of M1, but not M2. 
D)  M1 is a larger dollar amount than M2. 
A)  In June 2012, of the three components of M1, the checkable deposits component was the largest. 
B)  M1 is sometimes referred to as the "broad definition of the money supply". 
C)  Time deposits are a part of M1, but not M2. 
D)  M1 is a larger dollar amount than M2.

Question 6

Because money __________________,people are _________________ likely to specialize in their work in a money economy.

Accepted Answer

A)  is a store of value; less 
B)  eliminates the double coincidence of wants; more 
C)  is a unit of account; more 
D)  eliminates the need for holdings of precious metals; more 
A)  is a store of value; less 
B)  eliminates the double coincidence of wants; more 
C)  is a unit of account; more 
D)  eliminates the need for holdings of precious metals; more

Question 7

There was an economic depression in the U.S in 1893 that some people blamed on the gold standard.

Accepted Answer

A) True 
 B)False

Question 8

M1 is comprised of currency held outside banks + traveler's checks + __________.

Accepted Answer

A)  credit cards 
B)  savings deposits 
C)  gold 
D)  checkable deposits 
E)  money market mutual funds 
A)  credit cards 
B)  savings deposits 
C)  gold 
D)  checkable deposits 
E)  money market mutual funds

Question 9

If checkable deposits in Bank A total $300 million and the required reserve ratio is 10 percent,then required reserves at Bank A equal

Accepted Answer

A)  $3.0 million. 
B)  $30.0 million. 
C)  $3.3 million. 
D)  $300,000 
A)  $3.0 million. 
B)  $30.0 million. 
C)  $3.3 million. 
D)  $300,000

Question 10

Which of the following is not a component of M1?

Accepted Answer

A)  currency held outside banks 
B)  traveler's checks 
C)  savings deposits 
D)  checkable deposits 
A)  currency held outside banks 
B)  traveler's checks 
C)  savings deposits 
D)  checkable deposits

Question 11

The risk of specializing (in the production of one good or service)is

Accepted Answer

A)  lower in a barter economy than in a money economy. 
B)  lower in a money economy than in a barter economy. 
C)  the same in both a money and barter economy. 
D)  greater the less likely you and the person you want to trade with have a double coincidence of wants. 
E)  b and d 
A)  lower in a barter economy than in a money economy. 
B)  lower in a money economy than in a barter economy. 
C)  the same in both a money and barter economy. 
D)  greater the less likely you and the person you want to trade with have a double coincidence of wants. 
E)  b and d

Question 12

Which of the following is a correct listing of money's functions?

Accepted Answer

A)  source of credit, value of transaction costs, unit of barter 
B)  medium of barter, medium of exchange, medium of transactions 
C)  unit of barter, unit of account, a unit of income 
D)  store of value, store of exchange, measure of account 
E)  store of value, medium of exchange, unit of account 
A)  source of credit, value of transaction costs, unit of barter 
B)  medium of barter, medium of exchange, medium of transactions 
C)  unit of barter, unit of account, a unit of income 
D)  store of value, store of exchange, measure of account 
E)  store of value, medium of exchange, unit of account

Question 13

A savings account functions as

Accepted Answer

A)  a unit of account. 
B)  a store of value. 
C)  a medium of exchange. 
D)  none of the above 
A)  a unit of account. 
B)  a store of value. 
C)  a medium of exchange. 
D)  none of the above

Question 14

A bank's assets are $500 million and its liabilities are $380 million,which means that the bank's net worth (bank capital)is ____________________. If the bank's assets then rise by 6 percent at the same time that its liabilities rise by 5 percent,the percentage change in the bank's net worth will be approximately _______________ percent.

Accepted Answer

A)  $440 million; 10.2% 
B)  $120 million; 1.0% 
C)  $100 million; 11.0% 
D)  $120 million; 9.2 
A)  $440 million; 10.2% 
B)  $120 million; 1.0% 
C)  $100 million; 11.0% 
D)  $120 million; 9.2

Question 15

In June 2012,the largest component of M1 was _________; the smallest was _________.

Accepted Answer

A)  currency (held outside banks); traveler's checks 
B)  checkable deposits; traveler's checks 
C)  currency (held outside banks); checkable deposits 
D)  checkable deposits; overnight Eurodollar deposits 
E)  none of the above 
A)  currency (held outside banks); traveler's checks 
B)  checkable deposits; traveler's checks 
C)  currency (held outside banks); checkable deposits 
D)  checkable deposits; overnight Eurodollar deposits 
E)  none of the above

Question 16

Bank A has $75,000 in total reserves,and zero excess reserves.The required reserve ratio is 12 percent.Bank A has checkable deposits of

Accepted Answer

A)  $84,000. 
B)  $62,500. 
C)  $625,000. 
D)  $6,250,000. 
E)  $840,000 
A)  $84,000. 
B)  $62,500. 
C)  $625,000. 
D)  $6,250,000. 
E)  $840,000

Question 17

Bank A has $25,500 in required reserves.The required reserve ratio is 10 percent.Bank A has checkable deposits of

Accepted Answer

A)  $2,550. 
B)  $255,000. 
C)  $2,550,000. 
D)  $25,500. 
A)  $2,550. 
B)  $255,000. 
C)  $2,550,000. 
D)  $25,500.

Question 18

According to the text,the good that emerged as money in World War II POW camps was

Accepted Answer

A)  tinned beef. 
B)  toilet paper. 
C)  cigarettes. 
D)  cheese. 
A)  tinned beef. 
B)  toilet paper. 
C)  cigarettes. 
D)  cheese.

Question 19

If checkable deposits rise,it follows that the

Accepted Answer

A)  required reserve ratio will fall. 
B)  dollar amount of reserves will rise. 
C)  dollar amount of vault cash will rise. 
D)  required reserve ratio will rise. 
E)  none of the above 
A)  required reserve ratio will fall. 
B)  dollar amount of reserves will rise. 
C)  dollar amount of vault cash will rise. 
D)  required reserve ratio will rise. 
E)  none of the above

Question 20

When a bank makes a loan to one of its customers,to the bank the loan is classified as

Accepted Answer

A)  an asset. 
B)  a liability. 
C)  neither an asset nor a liability. 
D)  an asset in some cases and a liability in other cases, depending on the type of loan. 
A)  an asset. 
B)  a liability. 
C)  neither an asset nor a liability. 
D)  an asset in some cases and a liability in other cases, depending on the type of loan.

Exam 12: Money, Banking,and the Financial System

M2 is comprised of

A "money market deposit account" is a(n)

The term federal reserve notes refers to coins minted by the U.S.Treasury.

In a barter economy,

Which of the following statements is true?

Because money __________________,people are _________________ likely to specialize in their work in a money economy.

There was an economic depression in the U.S in 1893 that some people blamed on the gold standard.

M1 is comprised of currency held outside banks + traveler's checks + __________.

If checkable deposits in Bank A total $300 million and the required reserve ratio is 10 percent,then required reserves at Bank A equal

Which of the following is not a component of M1?

The risk of specializing (in the production of one good or service)is

Which of the following is a correct listing of money's functions?

A savings account functions as

In June 2012,the largest component of M1 was _________; the smallest was _________.

Bank A has $75,000 in total reserves,and zero excess reserves.The required reserve ratio is 12 percent.Bank A has checkable deposits of

Bank A has $25,500 in required reserves.The required reserve ratio is 10 percent.Bank A has checkable deposits of

According to the text,the good that emerged as money in World War II POW camps was

If checkable deposits rise,it follows that the

When a bank makes a loan to one of its customers,to the bank the loan is classified as

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, Controlled, and Relative

Supply, Demand, and Price: Applications

Macroeconomic Measurements: Prices and Unemployment

Macroeconomic Measurements: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability: A Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, Technology, Ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,Unions,and Labor

The Distribution of Income and Poverty

Interest, Rent, and Profit

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case For and Against Government: Five Topics Considered

Stocks, Bonds, Futures, and Options

Agriculture: Problems, Policies, and Unintended Effects

Filters

Because money __,people are _ likely to specialize in their work in a money economy.

In June 2012,the largest component of M1 was _; the smallest was _.