Question 1

A contraction of the money supply would have no effect on a recession.

Accepted Answer

A) True 
 B)False

Question 2

The government banking regulation that places an upper limit on the money supply is

Accepted Answer

A)  deposit insurance by the FDIC. 
B)  reserve requirements on bank deposits. 
C)  periodic bank examinations and audits. 
D)  limitations on the types of assets that a bank may own. 
A)  deposit insurance by the FDIC. 
B)  reserve requirements on bank deposits. 
C)  periodic bank examinations and audits. 
D)  limitations on the types of assets that a bank may own.

Question 3

An increase in the reserve ratio would tend to

Accepted Answer

A)  increase excess reserves and raise the money multiplier. 
B)  decrease excess reserves and decrease the money multiplier. 
C)  increase excess reserves and decrease the money multiplier. 
D)  decrease excess reserves and raise the money multiplier. 
A)  increase excess reserves and raise the money multiplier. 
B)  decrease excess reserves and decrease the money multiplier. 
C)  increase excess reserves and decrease the money multiplier. 
D)  decrease excess reserves and raise the money multiplier.

Question 4

It is necessary for the Federal Reserve to regulate the money supply because

Accepted Answer

A)  banks tend to act in a counter-cyclical manner with regard to the money supply. 
B)  banks are not profit-oriented,and tend to be unresponsive to the needs of business. 
C)  left to itself,the banking system will create a gyrating money supply that will be destabilizing. 
D)  left to itself,the banking system will not be able to increase or decrease the money supply. 
A)  banks tend to act in a counter-cyclical manner with regard to the money supply. 
B)  banks are not profit-oriented,and tend to be unresponsive to the needs of business. 
C)  left to itself,the banking system will create a gyrating money supply that will be destabilizing. 
D)  left to itself,the banking system will not be able to increase or decrease the money supply.

Question 5

Nowadays,most observers believe that monetary policy

Accepted Answer

A)  is less important than fiscal policy. 
B)  is more important than fiscal policy. 
C)  and fiscal policy are equally important. 
D)  and fiscal policy are both unimportant. 
A)  is less important than fiscal policy. 
B)  is more important than fiscal policy. 
C)  and fiscal policy are equally important. 
D)  and fiscal policy are both unimportant.

Question 6

It is imperative that banks maintain a reputation for safety in order that

Accepted Answer

A)  regulators can reduce their efforts. 
B)  bank runs can be reduced or prevented. 
C)  customers will not be afraid to ask for loans. 
D)  stockholders can earn a high rate of return. 
A)  regulators can reduce their efforts. 
B)  bank runs can be reduced or prevented. 
C)  customers will not be afraid to ask for loans. 
D)  stockholders can earn a high rate of return.

Question 7

Which of the following observations is not true?

Accepted Answer

A)  Money is divisible. 
B)  The value of money never remains the same. 
C)  Money has an intrinsic value. 
D)  Money is the most liquid form of asset. 
A)  Money is divisible. 
B)  The value of money never remains the same. 
C)  Money has an intrinsic value. 
D)  Money is the most liquid form of asset.

Question 8

The official definition of the money supply that includes coins,paper money,travelers' checks,conventional checking accounts,and other checkable deposits at banks and savings institutions is called ____.

Accepted Answer

A)  M1 
B)  M2 
C)  M3 
D)  L 
A)  M1 
B)  M2 
C)  M3 
D)  L

Question 9

The U.S.government will probably return soon to a system of paper money backed by gold.

Accepted Answer

A) True 
 B)False

Question 10

When a banker accepts a deposit of $1,000 in cash and puts $200 aside as required reserves and then makes a loan of $800 to a new borrower,this set of transactions

Accepted Answer

A)  decreases the money supply by $1,000. 
B)  decreases the money supply by $200. 
C)  does not change the money supply. 
D)  increases the money supply by $200. 
E)  increases the money supply by $800. 
A)  decreases the money supply by $1,000. 
B)  decreases the money supply by $200. 
C)  does not change the money supply. 
D)  increases the money supply by $200. 
E)  increases the money supply by $800.

Question 11

Fractional reserve banking began as a search for

Accepted Answer

A)  a different metallic monetary system. 
B)  additional sources of gold. 
C)  different types of borrowers. 
D)  additional profits. 
A)  a different metallic monetary system. 
B)  additional sources of gold. 
C)  different types of borrowers. 
D)  additional profits.

Question 12

One problem for economic stability is that in a period of inflation

Accepted Answer

A)  banks will be tempted to increase lending in order to increase profits. 
B)  banks will be tempted to decrease lending in order to increase profits. 
C)  profit-oriented banks will tend to hold excess reserves and decrease the money supply. 
D)  deposits will decrease and banks will have to reduce lending. 
A)  banks will be tempted to increase lending in order to increase profits. 
B)  banks will be tempted to decrease lending in order to increase profits. 
C)  profit-oriented banks will tend to hold excess reserves and decrease the money supply. 
D)  deposits will decrease and banks will have to reduce lending.

Question 13

"Near monies" are

Accepted Answer

A)  stocks,bonds,and real estate. 
B)  U.S.notes and Federal Reserve notes. 
C)  included in the M1 definition of the money supply. 
D)  liquid assets that are close substitutes for money. 
E)  All of the above are correct. 
A)  stocks,bonds,and real estate. 
B)  U.S.notes and Federal Reserve notes. 
C)  included in the M1 definition of the money supply. 
D)  liquid assets that are close substitutes for money. 
E)  All of the above are correct.

Question 14

Although checking deposits are considered money,they are actually

Accepted Answer

A)  fictitious numbers in persons' checkbooks. 
B)  backed by commodities like gold. 
C)  not very useful for making payments. 
D)  bookkeeping entries in bank balance sheets. 
A)  fictitious numbers in persons' checkbooks. 
B)  backed by commodities like gold. 
C)  not very useful for making payments. 
D)  bookkeeping entries in bank balance sheets.

Question 15

Gold and silver have historically been the most common form of commodity money.

Accepted Answer

A) True 
 B)False

Question 16

A banker operating under a system of fractional reserves

Accepted Answer

A)  is exposed to potential bank runs. 
B)  must keep a prudent level of reserves. 
C)  must lend money carefully. 
D)  All of the above are correct. 
A)  is exposed to potential bank runs. 
B)  must keep a prudent level of reserves. 
C)  must lend money carefully. 
D)  All of the above are correct.

Question 17

The banking system of the United States is a fractional reserve system.What dangers does this pose for the safety of the banking system?

Accepted Answer

Fractional reserve banking means that ea

Question 18

E-cash cards are considered a major portion of the modern money supply.

Accepted Answer

A) True 
 B)False

Question 19

A single bank is limited in its ability to create money because

Accepted Answer

A)  loan recipients usually take the proceeds of the loan in cash. 
B)  the FDIC will not permit it to create money unless the loans are guaranteed by the federal government. 
C)  the money loaned will probably be deposited in another bank. 
D)  federal legislation prohibits banks from creating money except to finance international trade. 
A)  loan recipients usually take the proceeds of the loan in cash. 
B)  the FDIC will not permit it to create money unless the loans are guaranteed by the federal government. 
C)  the money loaned will probably be deposited in another bank. 
D)  federal legislation prohibits banks from creating money except to finance international trade.

Question 20

The FDIC

Accepted Answer

A)  insures most bank deposits for up to $250,000. 
B)  eliminates the need for bank depositors to run to their bank when they hear bad news about the bank. 
C)  has been credited with reducing the number of bank failures since 1933. 
D)  All of the above are correct. 
A)  insures most bank deposits for up to $250,000. 
B)  eliminates the need for bank depositors to run to their bank when they hear bad news about the bank. 
C)  has been credited with reducing the number of bank failures since 1933. 
D)  All of the above are correct.

A contraction of the money supply would have no effect on a recession.

The government banking regulation that places an upper limit on the money supply is

An increase in the reserve ratio would tend to

It is necessary for the Federal Reserve to regulate the money supply because

Nowadays,most observers believe that monetary policy

It is imperative that banks maintain a reputation for safety in order that

Which of the following observations is not true?

The official definition of the money supply that includes coins,paper money,travelers' checks,conventional checking accounts,and other checkable deposits at banks and savings institutions is called ____.

The U.S.government will probably return soon to a system of paper money backed by gold.

When a banker accepts a deposit of $1,000 in cash and puts $200 aside as required reserves and then makes a loan of $800 to a new borrower,this set of transactions

Fractional reserve banking began as a search for

One problem for economic stability is that in a period of inflation

"Near monies" are

Although checking deposits are considered money,they are actually

Gold and silver have historically been the most common form of commodity money.

A banker operating under a system of fractional reserves

The banking system of the United States is a fractional reserve system.What dangers does this pose for the safety of the banking system?

E-cash cards are considered a major portion of the modern money supply.

A single bank is limited in its ability to create money because

The FDIC

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters

Exam 12: Money and The Banking System

A contraction of the money supply would have no effect on a recession.

The government banking regulation that places an upper limit on the money supply is

An increase in the reserve ratio would tend to

It is necessary for the Federal Reserve to regulate the money supply because

Nowadays,most observers believe that monetary policy

It is imperative that banks maintain a reputation for safety in order that

Which of the following observations is not true?

The official definition of the money supply that includes coins,paper money,travelers' checks,conventional checking accounts,and other checkable deposits at banks and savings institutions is called ____.

The U.S.government will probably return soon to a system of paper money backed by gold.

When a banker accepts a deposit of $1,000 in cash and puts $200 aside as required reserves and then makes a loan of $800 to a new borrower,this set of transactions

Fractional reserve banking began as a search for

One problem for economic stability is that in a period of inflation

"Near monies" are

Although checking deposits are considered money,they are actually

Gold and silver have historically been the most common form of commodity money.

A banker operating under a system of fractional reserves

The banking system of the United States is a fractional reserve system.What dangers does this pose for the safety of the banking system?

E-cash cards are considered a major portion of the modern money supply.

A single bank is limited in its ability to create money because

The FDIC

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters