Question 1

The potential buyer of a house has less information about the house than the seller of the house.This is a case of

Accepted Answer

A)  externality information. 
B)  free ridership. 
C)  asymmetric information. 
D)  biased information. 
E)  a public good not being a private good. 
A)  externality information. 
B)  free ridership. 
C)  asymmetric information. 
D)  biased information. 
E)  a public good not being a private good.

Question 2

To a bank,a loan the bank has made to its borrowers is classified as

Accepted Answer

A)  an asset. 
B)  a liability. 
C)  vault cash. 
D)  excess reserves. 
E)  bank capital. 
A)  an asset. 
B)  a liability. 
C)  vault cash. 
D)  excess reserves. 
E)  bank capital.

Question 3

Total bank reserves equal

Accepted Answer

A)  checkable deposits + vault cash + traveler's checks. 
B)  vault cash + currency in the hands of the nonbanking public. 
C)  bank deposits at the Federal Reserve. 
D)  bank deposits at the Federal Reserve + vault cash. 
A)  checkable deposits + vault cash + traveler's checks. 
B)  vault cash + currency in the hands of the nonbanking public. 
C)  bank deposits at the Federal Reserve. 
D)  bank deposits at the Federal Reserve + vault cash.

Question 4

Which of the following statements is false?

Accepted Answer

A)  Money is the only good that can (or does) serve as a store of value. 
B)  In a barter economy, there is no good that serves as a unit of account. 
C)  There are higher transaction costs of making exchanges in a barter economy than in a money economy. 
D)  Money functions as a medium of exchange, unit of account, and store of value. 
A)  Money is the only good that can (or does) serve as a store of value. 
B)  In a barter economy, there is no good that serves as a unit of account. 
C)  There are higher transaction costs of making exchanges in a barter economy than in a money economy. 
D)  Money functions as a medium of exchange, unit of account, and store of value.

Question 5

Describe the differences between M1 and M2.

Accepted Answer

M1 is the narrow definition of the money

Question 6

To an economist,the terms "money" and "wealth" are synonyms.

Accepted Answer

A) True 
 B)False

Question 7

A medium of exchange is

Accepted Answer

A)  anything that is generally accepted in exchange for goods and services. 
B)  a common measurement in which relative values are expressed. 
C)  an item's ability to hold value over time. 
D)  the exchange of goods and services for other goods and services. 
E)  both a and d 
A)  anything that is generally accepted in exchange for goods and services. 
B)  a common measurement in which relative values are expressed. 
C)  an item's ability to hold value over time. 
D)  the exchange of goods and services for other goods and services. 
E)  both a and d

Question 8

Banks in the United States operate under a fractional reserve system,which means they must maintain only a fraction of their deposits in the form of

Accepted Answer

A)  debt. 
B)  loans. 
C)  an insurance policy. 
D)  reserves. 
A)  debt. 
B)  loans. 
C)  an insurance policy. 
D)  reserves.

Question 9

Historically,which of the following goods have evolved into money?

Accepted Answer

A)  gold 
B)  salt 
C)  cattle 
D)  cocoa beans 
E)  all of the above 
A)  gold 
B)  salt 
C)  cattle 
D)  cocoa beans 
E)  all of the above

Question 10

When economists say that banks must hold a percentage of their total deposits in reserve form,what does this mean?

Accepted Answer

A)  It means that banks must hold a fraction of their customers' deposits either as bank deposits at the Federal Reserve, or as vault cash, or both. 
B)  It means that banks reserve the right to turn away customers a certain percentage of the time. 
C)  It means that the fraction of vault cash a bank has cannot be greater than the fraction of bank deposits (it has) at the Federal Reserve. 
D)  Essentially, it means that total reserves are greater than required reserves. 
E)  none of the above 
A)  It means that banks must hold a fraction of their customers' deposits either as bank deposits at the Federal Reserve, or as vault cash, or both. 
B)  It means that banks reserve the right to turn away customers a certain percentage of the time. 
C)  It means that the fraction of vault cash a bank has cannot be greater than the fraction of bank deposits (it has) at the Federal Reserve. 
D)  Essentially, it means that total reserves are greater than required reserves. 
E)  none of the above

Question 11

Bank A has checkable deposits of $10 million and total reserves of $1 million.The required reserve ratio is 9 percent.The bank has excess reserves of

Accepted Answer

A)  $910,000. 
B)  $91,000. 
C)  $100,000. 
D)  $10,000. 
E)  There is not enough information provided to answer this question. 
A)  $910,000. 
B)  $91,000. 
C)  $100,000. 
D)  $10,000. 
E)  There is not enough information provided to answer this question.

Question 12

If M1 is $1,200 billion,currency held outside banks is $400 billion,and traveler's checks is $10 billion,then small-denomination time deposits equal

Accepted Answer

A)  $790 billion. 
B)  $390 billion. 
C)  $800 billion. 
D)  $1,190 billion. 
E)  There is not information to answer the question. 
A)  $790 billion. 
B)  $390 billion. 
C)  $800 billion. 
D)  $1,190 billion. 
E)  There is not information to answer the question.

Question 13

To an economist,money is a synonym for which of the following?

Accepted Answer

A)  income 
B)  credit 
C)  wealth 
D)  salary 
E)  none of the above 
A)  income 
B)  credit 
C)  wealth 
D)  salary 
E)  none of the above

Question 14

Ninth National Bank holds $200 million in checkable deposits and $18,000,000 in total reserves.With a required reserve ratio of 8 percent,how much in excess reserves is Ninth National holding?

Accepted Answer

A)  $1,440,000 
B)  $218,000,000 
C)  $17,440,000 
D)  $16,000,000 
E)  $2,000,000 
A)  $1,440,000 
B)  $218,000,000 
C)  $17,440,000 
D)  $16,000,000 
E)  $2,000,000

Question 15

A bank has $7 million in checkable deposits and $1.2 million in total reserves.If the required reserve ratio is 10 percent,then the bank has

Accepted Answer

A)  required reserves of $700,000. 
B)  excess reserves of $500,000. 
C)  excess reserves of $1,080,000. 
D)  required reserves of $120,000. 
E)  a and b 
A)  required reserves of $700,000. 
B)  excess reserves of $500,000. 
C)  excess reserves of $1,080,000. 
D)  required reserves of $120,000. 
E)  a and b

Question 16

Money evolved out of the self-interested actions of

Accepted Answer

A)  economists. 
B)  governments. 
C)  a few kings and queens. 
D)  individuals. 
A)  economists. 
B)  governments. 
C)  a few kings and queens. 
D)  individuals.

Question 17

The requirement of a "double coincidence of wants" is the chief __________ of the __________ exchange system.

Accepted Answer

A)  advantage; barter 
B)  advantage; monetary 
C)  disadvantage; barter 
D)  disadvantage; monetary 
A)  advantage; barter 
B)  advantage; monetary 
C)  disadvantage; barter 
D)  disadvantage; monetary

Question 18

Bank A holds $1 million in required reserves and the required reserve ratio is 9 percent.It follows that Bank A holds checkable deposit liabilities that total approximately

Accepted Answer

A)  $111 million. 
B)  $11.11 million. 
C)  $90 million. 
D)  $900 million. 
A)  $111 million. 
B)  $11.11 million. 
C)  $90 million. 
D)  $900 million.

Question 19

The amount of required reserves a bank holds depends on the

Accepted Answer

A)  required reserve ratio. 
B)  demand-deposit ratio. 
C)  excess-reserve ratio. 
D)  currency ratio. 
A)  required reserve ratio. 
B)  demand-deposit ratio. 
C)  excess-reserve ratio. 
D)  currency ratio.

Question 20

Required reserves are a set percentage of total reserves that must be held in cash in a bank's vault or in the bank's reserve account at the Fed.

Accepted Answer

A) True 
 B)False

Exam 12: Money, Banking,and the Financial System

The potential buyer of a house has less information about the house than the seller of the house.This is a case of

To a bank,a loan the bank has made to its borrowers is classified as

Total bank reserves equal

Which of the following statements is false?

Describe the differences between M1 and M2.

To an economist,the terms "money" and "wealth" are synonyms.

A medium of exchange is

Banks in the United States operate under a fractional reserve system,which means they must maintain only a fraction of their deposits in the form of

Historically,which of the following goods have evolved into money?

When economists say that banks must hold a percentage of their total deposits in reserve form,what does this mean?

Bank A has checkable deposits of $10 million and total reserves of $1 million.The required reserve ratio is 9 percent.The bank has excess reserves of

If M1 is $1,200 billion,currency held outside banks is $400 billion,and traveler's checks is $10 billion,then small-denomination time deposits equal

To an economist,money is a synonym for which of the following?

Ninth National Bank holds $200 million in checkable deposits and $18,000,000 in total reserves.With a required reserve ratio of 8 percent,how much in excess reserves is Ninth National holding?

A bank has $7 million in checkable deposits and $1.2 million in total reserves.If the required reserve ratio is 10 percent,then the bank has

Money evolved out of the self-interested actions of

The requirement of a "double coincidence of wants" is the chief __________ of the __________ exchange system.

Bank A holds $1 million in required reserves and the required reserve ratio is 9 percent.It follows that Bank A holds checkable deposit liabilities that total approximately

The amount of required reserves a bank holds depends on the

Required reserves are a set percentage of total reserves that must be held in cash in a bank's vault or in the bank's reserve account 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

The requirement of a "double coincidence of wants" is the chief of the exchange system.