Question 1

M2 includes M1 plus all of the following except

Accepted Answer

A)  savings deposits. 
B)  retail money market mutual funds. 
C)  short-term U.S. government securities. 
D)  small-denomination time deposits. 
A)  savings deposits. 
B)  retail money market mutual funds. 
C)  short-term U.S. government securities. 
D)  small-denomination time deposits.

Question 2

Your neighbor has knowledge of economics and you would like her to share it with you.You own a car,a CD player and a new pair of running shoes.You wish to make a trade,but the neighbor does not want what you have.The problem can be stated as follows: You are not satisfying the

Accepted Answer

A)  rule of transaction costs. 
B)  double coincidence of wants. 
C)  law of marketability. 
D)  terms of a common denominator. 
A)  rule of transaction costs. 
B)  double coincidence of wants. 
C)  law of marketability. 
D)  terms of a common denominator.

Question 3

Which of the following is false?

Accepted Answer

A)  Currency is money, but money is more than simply currency. 
B)  M1 is a component of M2. 
C)  Federal Reserve notes make up about 99 percent of the paper money in circulation. 
D)  Credit cards are money since they are widely accepted for purposes of exchange. 
E)  Money reduces the transaction costs of making exchanges. 
A)  Currency is money, but money is more than simply currency. 
B)  M1 is a component of M2. 
C)  Federal Reserve notes make up about 99 percent of the paper money in circulation. 
D)  Credit cards are money since they are widely accepted for purposes of exchange. 
E)  Money reduces the transaction costs of making exchanges.

Question 4

A financial system is a means of bringing together savers and borrowers.

Accepted Answer

A) True 
 B)False

Question 5

A bank has $10,000 in excess reserves and the required reserve ratio is 20 percent.This means the bank could have __________ in checkable deposit liabilities and __________ in total reserves.

Accepted Answer

A)  $80,000, $10,000 
B)  $100,000, $20,000 
C)  $50,000, $25,000 
D)  $100,000, $30,000 
A)  $80,000, $10,000 
B)  $100,000, $20,000 
C)  $50,000, $25,000 
D)  $100,000, $30,000

Question 6

If checkable deposits in Bank A total $620 million and the required reserve ratio is 9 percent,then required reserves at Bank A equal

Accepted Answer

A)  $564.2 million. 
B)  $468 million. 
C)  $28.8 million. 
D)  $55.8 million. 
E)  $558 million. 
A)  $564.2 million. 
B)  $468 million. 
C)  $28.8 million. 
D)  $55.8 million. 
E)  $558 million.

Question 7

Barter is

Accepted Answer

A)  the exchange of money for goods and then the exchange of those goods for money. 
B)  the exchange of money for money, or the exchange of money for stocks and bonds. 
C)  the exchange of goods and services for goods and services without the use of money. 
D)  any exchange, with or without the use of money, in which the participants negotiate (or barter) the price of the goods to be exchanged. 
A)  the exchange of money for goods and then the exchange of those goods for money. 
B)  the exchange of money for money, or the exchange of money for stocks and bonds. 
C)  the exchange of goods and services for goods and services without the use of money. 
D)  any exchange, with or without the use of money, in which the participants negotiate (or barter) the price of the goods to be exchanged.

Question 8

Fractional reserve banking originated

Accepted Answer

A)  when the United States Congress passed a law regarding the required reserve ratio. 
B)  when goldsmiths realized they could issue warehouse receipts beyond gold on deposits. 
C)  with the establishment of the Federal Reserve System. 
D)  in the United States with the Clayton Act. 
A)  when the United States Congress passed a law regarding the required reserve ratio. 
B)  when goldsmiths realized they could issue warehouse receipts beyond gold on deposits. 
C)  with the establishment of the Federal Reserve System. 
D)  in the United States with the Clayton Act.

Question 9

A house is $100,000,a computer is $2,000,and a car is $20,000.In this context,money is principally functioning as a

Accepted Answer

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

Question 10

Bank capital equals assets minus liabilities.

Accepted Answer

A) True 
 B)False

Question 11

The store of value function of money refers to the ability of money to

Accepted Answer

A)  facilitate the exchange of goods and services. 
B)  maintain its value over time. 
C)  express relative scarcity. 
D)  earn interest over time. 
E)  increase its value over time. 
A)  facilitate the exchange of goods and services. 
B)  maintain its value over time. 
C)  express relative scarcity. 
D)  earn interest over time. 
E)  increase its value over time.

Question 12

A savings deposit is a type of

Accepted Answer

A)  time deposit that is payable on demand. 
B)  time deposit that earns interest and allows the depositor to write checks payable to other persons. 
C)  time deposit that does not earn interest but does offer limited check-writing services. 
D)  interest-earning account at a bank or thrift institution in which funds can be withdrawn at any time without a penalty payment. 
E)  checkable deposit that also pays interest. 
A)  time deposit that is payable on demand. 
B)  time deposit that earns interest and allows the depositor to write checks payable to other persons. 
C)  time deposit that does not earn interest but does offer limited check-writing services. 
D)  interest-earning account at a bank or thrift institution in which funds can be withdrawn at any time without a penalty payment. 
E)  checkable deposit that also pays interest.

Question 13

In the Yap civilization of the South Pacific prior to 1920,large,heavy stones in the shape of a wheel were used as money.Which function of money was probably least served by this form of money?

Accepted Answer

A)  medium of exchange 
B)  store of value 
C)  unit of account 
D)  store of wealth 
A)  medium of exchange 
B)  store of value 
C)  unit of account 
D)  store of wealth

Question 14

In a barter economy,people are _________ to specialize in the production of one good or service,compared to in a money economy.

Accepted Answer

A)  more likely 
B)  less likely 
C)  equally likely 
D)  almost always going 
A)  more likely 
B)  less likely 
C)  equally likely 
D)  almost always going

Question 15

When people in a barter economy began to accept the good that had greater acceptability than all other goods,they weren't trying to create the institution of money.They were simply trying to __________.

Accepted Answer

A)  get along with their neighbors. 
B)  become rich. 
C)  make trading easier for themselves. 
D)  pay lower prices. 
E)  none of the above 
A)  get along with their neighbors. 
B)  become rich. 
C)  make trading easier for themselves. 
D)  pay lower prices. 
E)  none of the above

Question 16

Required reserves are the amount of

Accepted Answer

A)  reserves a bank must hold against its deposits as mandated by the Federal Reserve. 
B)  cash a bank must hold against its deposits as mandated by the Federal Reserve. 
C)  checkable deposits a bank must hold against all other deposits as mandated by the U.S. Treasury. 
D)  reserves a bank must hold against all its assets as mandated by the Federal Reserve. 
A)  reserves a bank must hold against its deposits as mandated by the Federal Reserve. 
B)  cash a bank must hold against its deposits as mandated by the Federal Reserve. 
C)  checkable deposits a bank must hold against all other deposits as mandated by the U.S. Treasury. 
D)  reserves a bank must hold against all its assets as mandated by the Federal Reserve.

Question 17

The unit of account function of money refers to the

Accepted Answer

A)  fact that money and income are the same thing. 
B)  common denominator of measurement provided by money. 
C)  characteristic that all money is intrinsically valuable. 
D)  all of the above 
A)  fact that money and income are the same thing. 
B)  common denominator of measurement provided by money. 
C)  characteristic that all money is intrinsically valuable. 
D)  all of the above

Question 18

Which set of prices would you expect to see (posted,quoted)in a barter economy?

Accepted Answer

A)  1 horse = 10 pieces of gold; 1 kettle = 1 piece of gold 
B)  1 horse = 10 kettles; 1 kettle = 1/10 horse 
C)  1 horse = $200; 1 kettle = $20 
D)  1 horse = 10 kettles; 1 kettle = 10 apples; 1 apple = 1 orange 
E)  b and d 
A)  1 horse = 10 pieces of gold; 1 kettle = 1 piece of gold 
B)  1 horse = 10 kettles; 1 kettle = 1/10 horse 
C)  1 horse = $200; 1 kettle = $20 
D)  1 horse = 10 kettles; 1 kettle = 10 apples; 1 apple = 1 orange 
E)  b and d

Question 19

Which of the following statements is true?

Accepted Answer

A)  A savings deposit is not counted in the most basic, or narrow, definition of the money supply. 
B)  M1 is sometimes referred to as transactions money. 
C)  Money reduces the transaction costs of making exchanges. 
D)  b and c 
E)  a, b, and c 
A)  A savings deposit is not counted in the most basic, or narrow, definition of the money supply. 
B)  M1 is sometimes referred to as transactions money. 
C)  Money reduces the transaction costs of making exchanges. 
D)  b and c 
E)  a, b, and c

Question 20

The Fed pays banks interest on bank deposits held on reserve at the Fed.

Accepted Answer

A) True 
 B)False

Exam 12: Money, Banking,and the Financial System

M2 includes M1 plus all of the following except

Your neighbor has knowledge of economics and you would like her to share it with you.You own a car,a CD player and a new pair of running shoes.You wish to make a trade,but the neighbor does not want what you have.The problem can be stated as follows: You are not satisfying the

Which of the following is false?

A financial system is a means of bringing together savers and borrowers.

A bank has $10,000 in excess reserves and the required reserve ratio is 20 percent.This means the bank could have __________ in checkable deposit liabilities and __________ in total reserves.

If checkable deposits in Bank A total $620 million and the required reserve ratio is 9 percent,then required reserves at Bank A equal

Barter is

Fractional reserve banking originated

A house is $100,000,a computer is $2,000,and a car is $20,000.In this context,money is principally functioning as a

Bank capital equals assets minus liabilities.

The store of value function of money refers to the ability of money to

A savings deposit is a type of

In the Yap civilization of the South Pacific prior to 1920,large,heavy stones in the shape of a wheel were used as money.Which function of money was probably least served by this form of money?

In a barter economy,people are _________ to specialize in the production of one good or service,compared to in a money economy.

When people in a barter economy began to accept the good that had greater acceptability than all other goods,they weren't trying to create the institution of money.They were simply trying to __________.

Required reserves are the amount of

The unit of account function of money refers to the

Which set of prices would you expect to see (posted,quoted)in a barter economy?

Which of the following statements is true?

The Fed pays banks interest on bank deposits held on reserve at the Fed.

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

A bank has $10,000 in excess reserves and the required reserve ratio is 20 percent.This means the bank could have in checkable deposit liabilities and in total reserves.