Question 1

Suppose the required reserve ratio is 20%. A $5 million deposit allows commercial banks to create a maximum total of _______ in deposits.

Accepted Answer

A)  $25 million 
B)  $10 million 
C)  $20 million 
D)  $50 million 
A)  $25 million 
B)  $10 million 
C)  $20 million 
D)  $50 million

Question 2

Which of the following assets is easiest to make transactions with?

Accepted Answer

A)  checking deposits 
B)  time deposits 
C)  individual retirement accounts 
D)  money market mutual funds 
A)  checking deposits 
B)  time deposits 
C)  individual retirement accounts 
D)  money market mutual funds

Question 3

Which of the following is considered a liability to a bank?

Accepted Answer

A)  the bank's loans 
B)  customer deposits 
C)  the bank's buildings and equipment 
D)  reserves 
A)  the bank's loans 
B)  customer deposits 
C)  the bank's buildings and equipment 
D)  reserves

Question 4

The Federal Open Market Committee consists of the:

Accepted Answer

A)  7 members selected by the President and a chairperson selected by the Board of Governors of the Federal Reserve System. 
B)  12 district Federal Reserve Bank presidents, the 7 governors from the Board of Governors, and the Treasury secretary. 
C)  9 directors each elected by a district Federal Reserve Bank and 3 members selected by the Treasury secretary. 
D)  none of the above 
A)  7 members selected by the President and a chairperson selected by the Board of Governors of the Federal Reserve System. 
B)  12 district Federal Reserve Bank presidents, the 7 governors from the Board of Governors, and the Treasury secretary. 
C)  9 directors each elected by a district Federal Reserve Bank and 3 members selected by the Treasury secretary. 
D)  none of the above

Question 5

The problem that can arise in a barter system where one person may not have what the other person desires is called:

Accepted Answer

A)  medium of exchange. 
B)  double coincidence of wants. 
C)  market failure. 
D)  bank run. 
A)  medium of exchange. 
B)  double coincidence of wants. 
C)  market failure. 
D)  bank run.

Question 6

What is the difference between the medium of exchange and unit of account functions of money?

Accepted Answer

A medium of exchange is an ass

Question 7

-Refer to Table 13.2. The required reserve ratio is 20%. If the First Charter Bank is meeting its reserve requirement and has no excess reserves, its loans equal:

Accepted Answer

A)  $460. 
B)  $550. 
C)  $760. 
D)  $710. 
A)  $460. 
B)  $550. 
C)  $760. 
D)  $710.

Question 8

How many individuals are included in the Federal Open Market Committee (FOMC)?

Accepted Answer

A)  8 
B)  10 
C)  12 
D)  16 
A)  8 
B)  10 
C)  12 
D)  16

Question 9

Dena won $1,000 at a bingo game. She deposits her $1,000 winnings into a money market fund so that she can use the money next year to pay for her tuition. This is an example of money serving as a (an):

Accepted Answer

A)  unit of account. 
B)  investment good. 
C)  store of value. 
D)  medium of exchange. 
A)  unit of account. 
B)  investment good. 
C)  store of value. 
D)  medium of exchange.

Question 10

Owners' equity is:

Accepted Answer

A)  assets + liabilities. 
B)  assets - capital. 
C)  assets + capital. 
D)  assets - liabilities. 
A)  assets + liabilities. 
B)  assets - capital. 
C)  assets + capital. 
D)  assets - liabilities.

Question 11

Recall Application 1, "City-Issued Money in the Great Depression," to answer the following questions:
-According to the application, why were the cities forced to issue their own currency during the Great Depression?

Accepted Answer

A)  There was a shortage of currency as a result of bank failures. 
B)  Most of the US currency and banknotes were used by the government in anticipation of World War II. 
C)  Congress did not allow the Federal Reserve to print any more money. 
D)  US dollar notes were burned by angry Americans. 
A)  There was a shortage of currency as a result of bank failures. 
B)  Most of the US currency and banknotes were used by the government in anticipation of World War II. 
C)  Congress did not allow the Federal Reserve to print any more money. 
D)  US dollar notes were burned by angry Americans.

Question 12

The Federal Reserve System consists of _______ Federal Reserve Banks.

Accepted Answer

A)  8 
B)  14 
C)  10 
D)  12 
A)  8 
B)  14 
C)  10 
D)  12

Question 13

Recall Application 1, "City-Issued Money in the Great Depression," to answer the following questions:
-According to the application, all scrip money ended as a result of the start World War II.

Accepted Answer

A) True 
 B)False

Question 14

The gold standard is an example of which type of a monetary system?

Accepted Answer

A)  fiat money system 
B)  barter system 
C)  commodity money system 
D)  All of the above are correct. 
A)  fiat money system 
B)  barter system 
C)  commodity money system 
D)  All of the above are correct.

Question 15

Credit cards are part of the money supply.

Accepted Answer

A) True 
 B)False

Question 16

Discuss the monetary multiplier. Assume that the banking system's total excess reserves total $20 million and that the required reserve ratio is 25%. Calculate the money multiplier and the total potential expansion of the nation's money supply.

Accepted Answer

The money multiplier represents the mult

Question 17

When you pay $12 for the pizza that you ordered for dinner, you are using money as a (an):

Accepted Answer

A)  store of value. 
B)  medium of exchange. 
C)  investment good. 
D)  unit of account. 
A)  store of value. 
B)  medium of exchange. 
C)  investment good. 
D)  unit of account.

Question 18

Recall Application 3, "The Financial System Under Stress: September 11, 2001," to answer the following questions:
-The potentially catastrophic financial impact of the September 11, 2001, terrorist attacks against the United States was due to:

Accepted Answer

A)  the large volume of direct borrowing from the Fed. 
B)  the forced closing of the New York Stock Exchange. 
C)  the temporary freezing of the "Federal Reserve float." 
D)  the risk of massive default, resulting from the forced closing of financial institutions. 
A)  the large volume of direct borrowing from the Fed. 
B)  the forced closing of the New York Stock Exchange. 
C)  the temporary freezing of the "Federal Reserve float." 
D)  the risk of massive default, resulting from the forced closing of financial institutions.

Question 19

The Bank of Texas has $1 million in deposits and $200,000 in reserves. If excess reserves are equal to $150,000, the required reserve ratio is:

Accepted Answer

A)  10%. 
B)  15%. 
C)  5%. 
D)  8%. 
A)  10%. 
B)  15%. 
C)  5%. 
D)  8%.

Question 20

The fraction of its reposits that banks keep in the form of reserves as required by law is/are called:

Accepted Answer

A)  federal funds. 
B)  excess reserves. 
C)  required reserves. 
D)  owner's equity. 
A)  federal funds. 
B)  excess reserves. 
C)  required reserves. 
D)  owner's equity.

Suppose the required reserve ratio is 20%. A $5 million deposit allows commercial banks to create a maximum total of _______ in deposits.

Which of the following assets is easiest to make transactions with?

Which of the following is considered a liability to a bank?

The Federal Open Market Committee consists of the:

The problem that can arise in a barter system where one person may not have what the other person desires is called:

What is the difference between the medium of exchange and unit of account functions of money?

-Refer to Table 13.2. The required reserve ratio is 20%. If the First Charter Bank is meeting its reserve requirement and has no excess reserves, its loans equal:

How many individuals are included in the Federal Open Market Committee (FOMC)?

Dena won $1,000 at a bingo game. She deposits her $1,000 winnings into a money market fund so that she can use the money next year to pay for her tuition. This is an example of money serving as a (an):

Owners' equity is:

Recall Application 1, "City-Issued Money in the Great Depression," to answer the following questions: -According to the application, why were the cities forced to issue their own currency during the Great Depression?

The Federal Reserve System consists of _______ Federal Reserve Banks.

Recall Application 1, "City-Issued Money in the Great Depression," to answer the following questions: -According to the application, all scrip money ended as a result of the start World War II.

The gold standard is an example of which type of a monetary system?

Credit cards are part of the money supply.

Discuss the monetary multiplier. Assume that the banking system's total excess reserves total $20 million and that the required reserve ratio is 25%. Calculate the money multiplier and the total potential expansion of the nation's money supply.

When you pay $12 for the pizza that you ordered for dinner, you are using money as a (an):

Recall Application 3, "The Financial System Under Stress: September 11, 2001," to answer the following questions: -The potentially catastrophic financial impact of the September 11, 2001, terrorist attacks against the United States was due to:

The Bank of Texas has $1 million in deposits and $200,000 in reserves. If excess reserves are equal to $150,000, the required reserve ratio is:

The fraction of its reposits that banks keep in the form of reserves as required by law is/are called:

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nations Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

Exam 13: Money and the Banking System

Suppose the required reserve ratio is 20%. A $5 million deposit allows commercial banks to create a maximum total of _______ in deposits.

Which of the following assets is easiest to make transactions with?

Which of the following is considered a liability to a bank?

The Federal Open Market Committee consists of the:

The problem that can arise in a barter system where one person may not have what the other person desires is called:

What is the difference between the medium of exchange and unit of account functions of money?

-Refer to Table 13.2. The required reserve ratio is 20%. If the First Charter Bank is meeting its reserve requirement and has no excess reserves, its loans equal:

How many individuals are included in the Federal Open Market Committee (FOMC)?

Dena won $1,000 at a bingo game. She deposits her $1,000 winnings into a money market fund so that she can use the money next year to pay for her tuition. This is an example of money serving as a (an):

Owners' equity is:

Recall Application 1, "City-Issued Money in the Great Depression," to answer the following questions: -According to the application, why were the cities forced to issue their own currency during the Great Depression?

The Federal Reserve System consists of _______ Federal Reserve Banks.

Recall Application 1, "City-Issued Money in the Great Depression," to answer the following questions: -According to the application, all scrip money ended as a result of the start World War II.

The gold standard is an example of which type of a monetary system?

Credit cards are part of the money supply.

Discuss the monetary multiplier. Assume that the banking system's total excess reserves total $20 million and that the required reserve ratio is 25%. Calculate the money multiplier and the total potential expansion of the nation's money supply.

When you pay $12 for the pizza that you ordered for dinner, you are using money as a (an):

Recall Application 3, "The Financial System Under Stress: September 11, 2001," to answer the following questions: -The potentially catastrophic financial impact of the September 11, 2001, terrorist attacks against the United States was due to:

The Bank of Texas has $1 million in deposits and $200,000 in reserves. If excess reserves are equal to $150,000, the required reserve ratio is:

The fraction of its reposits that banks keep in the form of reserves as required by law is/are called:

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nations Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters