Question 1

Money is defined by economists as

Accepted Answer

A)  the market value of an asset. 
B)  the funds one receives during a specified period of time. 
C)  any good that is widely accepted in exchange and for the repayment of debts. 
D)  both b and c 
E)  all of the above 
A)  the market value of an asset. 
B)  the funds one receives during a specified period of time. 
C)  any good that is widely accepted in exchange and for the repayment of debts. 
D)  both b and c 
E)  all of the above

Question 2

Changing from a barter economy to a money economy can reduce transaction costs.

Accepted Answer

A) True 
 B)False

Question 3

Discuss some of the economic symbolism thought by many to be contained in L.Frank Baum's book The Wonderful Wizard of Oz.

Accepted Answer

Many people believe that Baum's well-kno

Question 4

The M2 money supply

Accepted Answer

A)  includes M1. 
B)  is commonly referred to as the broad definition of the money supply. 
C)  includes savings deposits. 
D)  is larger than M1. 
E)  all of the above 
A)  includes M1. 
B)  is commonly referred to as the broad definition of the money supply. 
C)  includes savings deposits. 
D)  is larger than M1. 
E)  all of the above

Question 5

List and describe the three functions of money.

Accepted Answer

Money serves as a medium of exchange,a u

Question 6

If reserves equal $59 million and vault cash equals $29 million,it follows that

Accepted Answer

A)  bank deposits at the Federal Reserve equal $29 million. 
B)  currency in the hands of the public equals $29 million. 
C)  excess reserves equal $30 million. 
D)  bank deposits at the Federal Reserve equal $30 million. 
E)  There is not enough information to answer the question. 
A)  bank deposits at the Federal Reserve equal $29 million. 
B)  currency in the hands of the public equals $29 million. 
C)  excess reserves equal $30 million. 
D)  bank deposits at the Federal Reserve equal $30 million. 
E)  There is not enough information to answer the question.

Question 7

In direct finance,funds are loaned and borrowed through a financial intermediary.

Accepted Answer

A) True 
 B)False

Question 8

According to the text,in the book version of The Wonderful Wizard of Oz,Dorothy's slippers are

Accepted Answer

A)  gold. 
B)  silver. 
C)  ruby. 
D)  paper. 
A)  gold. 
B)  silver. 
C)  ruby. 
D)  paper.

Question 9

Bank A has checkable deposits of $900,000 and total reserves of $112,000.If the required reserve ratio is 12 percent,the bank has excess reserves of

Accepted Answer

A)  $4,000. 
B)  $44,000. 
C)  $13,440. 
D)  $2,000. 
A)  $4,000. 
B)  $44,000. 
C)  $13,440. 
D)  $2,000.

Question 10

In June 2012,M1 in the United States was approximately

Accepted Answer

A)  $1.2 billion. 
B)  $9.9 billion. 
C)  $1.0 billion. 
D)  $2.2 billion. 
A)  $1.2 billion. 
B)  $9.9 billion. 
C)  $1.0 billion. 
D)  $2.2 billion.

Question 11

Moral hazard occurs when the parties on once side of the market,who have information not known to others,self select in a way that adversely affects the parties on the other side of the market.

Accepted Answer

A) True 
 B)False

Question 12

A unit of account is

Accepted Answer

A)  a bank account. 
B)  a savings account. 
C)  a common measurement in which values are expressed. 
D)  the same as a medium of exchange. 
E)  none of the above 
A)  a bank account. 
B)  a savings account. 
C)  a common measurement in which values are expressed. 
D)  the same as a medium of exchange. 
E)  none of the above

Question 13

Money's basic advantage as compared to barter is that

Accepted Answer

A)  everybody has money but not everyone has the opportunity to barter. 
B)  a money system relies on a double coincidence of wants. 
C)  money reduces transaction costs. 
D)  money is the only medium you can use to store your wealth. 
A)  everybody has money but not everyone has the opportunity to barter. 
B)  a money system relies on a double coincidence of wants. 
C)  money reduces transaction costs. 
D)  money is the only medium you can use to store your wealth.

Question 14

Saying that it takes twice as many dollars to buy one ticket for a concert than two tickets for a movie refers to the use of money as a

Accepted Answer

A)  medium of exchange. 
B)  unit of account. 
C)  store of value. 
D)  means of achieving the double coincidence of wants. 
A)  medium of exchange. 
B)  unit of account. 
C)  store of value. 
D)  means of achieving the double coincidence of wants.

Question 15

If excess reserves are $10 million,(total)reserves are $14 million,and the required reserve ratio is 10%,then required reserves equal ________________ and checkable deposits equal ____________________.

Accepted Answer

A)  $4 million; $40 million 
B)  $40 million; $4 million 
C)  $24 million; $240 million 
D)  $7 million; $70 million 
A)  $4 million; $40 million 
B)  $40 million; $4 million 
C)  $24 million; $240 million 
D)  $7 million; $70 million

Question 16

Bank deposits at the Federal Reserve = $40 billion,vault cash = $2 billion,the required reserve ratio = 0.10,and total checkable deposits = $400 billion.It follows that required reserves equal __________ billion,(total)reserves equal __________ billion and excess reserves equal __________ billion.

Accepted Answer

A)  $42; $42; $2 
B)  $42; $40; $2 
C)  $2; $40; $38 
D)  $38; $40; $2 
E)  $40; $42; $2 
A)  $42; $42; $2 
B)  $42; $40; $2 
C)  $2; $40; $38 
D)  $38; $40; $2 
E)  $40; $42; $2

Question 17

Total reserves are

Accepted Answer

A)  equal to required reserves plus excess reserves. 
B)  equal to vault cash plus bank deposits at the Federal Reserve. 
C)  an asset to banks. 
D)  both b and c 
E)  all of the above 
A)  equal to required reserves plus excess reserves. 
B)  equal to vault cash plus bank deposits at the Federal Reserve. 
C)  an asset to banks. 
D)  both b and c 
E)  all of the above

Question 18

To a bank,checkable deposits are classified as a liability.

Accepted Answer

A) True 
 B)False

Question 19

If reserves equal $29 million and vault cash equals $29 million,it follows that

Accepted Answer

A)  bank deposits at the Federal Reserve equal $29 million. 
B)  currency in the hands of the public equals $29 million. 
C)  excess reserves equal $10 million. 
D)  bank deposits at the Federal Reserve equal $0. 
E)  There is not enough information to answer the question. 
A)  bank deposits at the Federal Reserve equal $29 million. 
B)  currency in the hands of the public equals $29 million. 
C)  excess reserves equal $10 million. 
D)  bank deposits at the Federal Reserve equal $0. 
E)  There is not enough information to answer the question.

Question 20

Reserves held beyond the required amount are called __________ reserves.

Accepted Answer

A)  redundant 
B)  precautionary 
C)  excess 
D)  surplus 
A)  redundant 
B)  precautionary 
C)  excess 
D)  surplus

Exam 12: Money, Banking,and the Financial System

Money is defined by economists as

Changing from a barter economy to a money economy can reduce transaction costs.

Discuss some of the economic symbolism thought by many to be contained in L.Frank Baum's book The Wonderful Wizard of Oz.

The M2 money supply

List and describe the three functions of money.

If reserves equal $59 million and vault cash equals $29 million,it follows that

In direct finance,funds are loaned and borrowed through a financial intermediary.

According to the text,in the book version of The Wonderful Wizard of Oz,Dorothy's slippers are

Bank A has checkable deposits of $900,000 and total reserves of $112,000.If the required reserve ratio is 12 percent,the bank has excess reserves of

In June 2012,M1 in the United States was approximately

Moral hazard occurs when the parties on once side of the market,who have information not known to others,self select in a way that adversely affects the parties on the other side of the market.

A unit of account is

Money's basic advantage as compared to barter is that

Saying that it takes twice as many dollars to buy one ticket for a concert than two tickets for a movie refers to the use of money as a

If excess reserves are $10 million,(total)reserves are $14 million,and the required reserve ratio is 10%,then required reserves equal ________________ and checkable deposits equal ____________________.

Bank deposits at the Federal Reserve = $40 billion,vault cash = $2 billion,the required reserve ratio = 0.10,and total checkable deposits = $400 billion.It follows that required reserves equal __________ billion,(total)reserves equal __________ billion and excess reserves equal __________ billion.

Total reserves are

To a bank,checkable deposits are classified as a liability.

If reserves equal $29 million and vault cash equals $29 million,it follows that

Reserves held beyond the required amount are called __________ reserves.

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

If excess reserves are $10 million,(total)reserves are $14 million,and the required reserve ratio is 10%,then required reserves equal and checkable deposits equal ____.

Bank deposits at the Federal Reserve = $40 billion,vault cash = $2 billion,the required reserve ratio = 0.10,and total checkable deposits = $400 billion.It follows that required reserves equal billion,(total)reserves equal billion and excess reserves equal __ billion.