Question 1

If the required reserve ratio,m,is 20 percent,then the oversimplified money multiplier is

Accepted Answer

A)  10. 
B)  5. 
C)  4. 
D)  2. 
A)  10. 
B)  5. 
C)  4. 
D)  2.

Question 2

Fractional reserve banking takes its name from the fact that banks

Accepted Answer

A)  hold only a fraction of their reserves at the bank itself. 
B)  keep only a fraction of their total deposits on reserve. 
C)  lend only a fraction of their total reserves to customers. 
D)  reserve only a fraction of their activity for lending. 
A)  hold only a fraction of their reserves at the bank itself. 
B)  keep only a fraction of their total deposits on reserve. 
C)  lend only a fraction of their total reserves to customers. 
D)  reserve only a fraction of their activity for lending.

Question 3

What is a barter system? What are the drawbacks of this system?

Accepted Answer

Barter is a type of trade in which goods

Question 4

Which of the following would be a liability to a bank?

Accepted Answer

A)  cash in the vault 
B)  a loan to a new business 
C)  a checking account of a professor 
D)  All of the above are correct. 
A)  cash in the vault 
B)  a loan to a new business 
C)  a checking account of a professor 
D)  All of the above are correct.

Question 5

The primary purpose of bank regulation is to

Accepted Answer

A)  assure that banks do not get into financial trouble. 
B)  assure that banks lend to needy persons and businesses. 
C)  assure that banks maintain a minimum level of profits. 
D)  guarantee bank profitability and prevent stockholder losses. 
A)  assure that banks do not get into financial trouble. 
B)  assure that banks lend to needy persons and businesses. 
C)  assure that banks maintain a minimum level of profits. 
D)  guarantee bank profitability and prevent stockholder losses.

Question 6

One reason why gold and silver have served as money is that they

Accepted Answer

A)  are easy to produce. 
B)  are easy to duplicate. 
C)  are durable. 
D)  All of the above are correct. 
A)  are easy to produce. 
B)  are easy to duplicate. 
C)  are durable. 
D)  All of the above are correct.

Question 7

The major contribution of goldsmiths to the development of modern banking was

Accepted Answer

A)  local banking. 
B)  market banking. 
C)  fractional reserve banking. 
D)  gold standard banking. 
A)  local banking. 
B)  market banking. 
C)  fractional reserve banking. 
D)  gold standard banking.

Question 8

Money's principal function is to serve as a

Accepted Answer

A)  standard for making loans. 
B)  standard for credit reporting. 
C)  medium of exchange. 
D)  method for storing wealth. 
A)  standard for making loans. 
B)  standard for credit reporting. 
C)  medium of exchange. 
D)  method for storing wealth.

Question 9

On the Micronesian island of Yap,it is easier to make purchases with stone wheel currency than it is to make purchases with paper currency including the U.S.dollar.

Accepted Answer

A) True 
 B)False

Question 10

If fears of a terrorist attack are widespread and people lose faith in money,the economy could revert to a system of

Accepted Answer

A)  cash and checks. 
B)  double-entry bookkeeping. 
C)  barter. 
D)  financial intermediaries. 
A)  cash and checks. 
B)  double-entry bookkeeping. 
C)  barter. 
D)  financial intermediaries.

Question 11

The principal innovation that increases the safety of bank deposits is

Accepted Answer

A)  computerized accounting systems. 
B)  credit cards. 
C)  automatic teller machines. 
D)  deposit insurance. 
A)  computerized accounting systems. 
B)  credit cards. 
C)  automatic teller machines. 
D)  deposit insurance.

Question 12

The balance sheet of a solvent bank will show

Accepted Answer

A)  assets = liabilities − net worth. 
B)  assets = liabilities + net worth. 
C)  net worth = assets + liabilities. 
D)  liabilities = assets + net worth. 
A)  assets = liabilities − net worth. 
B)  assets = liabilities + net worth. 
C)  net worth = assets + liabilities. 
D)  liabilities = assets + net worth.

Question 13

Bankers have a reputation for conservatism in politics,dress,and business affairs.Is there an economic rationale for this conservatism? Explain.

Accepted Answer

There is an economic rationale for this

Question 14

Which of the following is included in M1?

Accepted Answer

A)  savings accounts 
B)  money market deposit accounts 
C)  money market mutual funds 
D)  travelers' checks 
E)  None of the above are included. 
A)  savings accounts 
B)  money market deposit accounts 
C)  money market mutual funds 
D)  travelers' checks 
E)  None of the above are included.

Question 15

Banks try to keep their excess reserves at a maximum in order to maximize profits.

Accepted Answer

A) True 
 B)False

Question 16

If depositors become worried about the safety of their deposit accounts,they may trigger a

Accepted Answer

A)  deposit surplus. 
B)  bank run. 
C)  fiscal policy crisis. 
D)  required reserve increase. 
A)  deposit surplus. 
B)  bank run. 
C)  fiscal policy crisis. 
D)  required reserve increase.

Question 17

The primary benefit of a monetary system of exchange compared to a barter system is the increased

Accepted Answer

A)  ability to record transactions. 
B)  time necessary to find trading partners. 
C)  time devoted to shopping. 
D)  efficiency in arranging transactions. 
A)  ability to record transactions. 
B)  time necessary to find trading partners. 
C)  time devoted to shopping. 
D)  efficiency in arranging transactions.

Question 18

The amount of money held in checking accounts is significantly greater than money in the form of currency.

Accepted Answer

A) True 
 B)False

Question 19

The Ponderosa Bank receives a new deposit of $2,500.The reserves requirement is 20 percent.How much can this bank loan out as a result of this deposit?

Accepted Answer

A)  $25,000 
B)  $12,500 
C)  $3,125 
D)  $2,000 
E)  $500 
A)  $25,000 
B)  $12,500 
C)  $3,125 
D)  $2,000 
E)  $500

Question 20

The money multiplier process is based on the principle of fractional reserve banking.

Accepted Answer

A) True 
 B)False

If the required reserve ratio,m,is 20 percent,then the oversimplified money multiplier is

Fractional reserve banking takes its name from the fact that banks

What is a barter system? What are the drawbacks of this system?

Which of the following would be a liability to a bank?

The primary purpose of bank regulation is to

One reason why gold and silver have served as money is that they

The major contribution of goldsmiths to the development of modern banking was

Money's principal function is to serve as a

On the Micronesian island of Yap,it is easier to make purchases with stone wheel currency than it is to make purchases with paper currency including the U.S.dollar.

If fears of a terrorist attack are widespread and people lose faith in money,the economy could revert to a system of

The principal innovation that increases the safety of bank deposits is

The balance sheet of a solvent bank will show

Bankers have a reputation for conservatism in politics,dress,and business affairs.Is there an economic rationale for this conservatism? Explain.

Which of the following is included in M1?

Banks try to keep their excess reserves at a maximum in order to maximize profits.

If depositors become worried about the safety of their deposit accounts,they may trigger a

The primary benefit of a monetary system of exchange compared to a barter system is the increased

The amount of money held in checking accounts is significantly greater than money in the form of currency.

The Ponderosa Bank receives a new deposit of $2,500.The reserves requirement is 20 percent.How much can this bank loan out as a result of this deposit?

The money multiplier process is based on the principle of fractional reserve banking.

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

If the required reserve ratio,m,is 20 percent,then the oversimplified money multiplier is

Fractional reserve banking takes its name from the fact that banks

What is a barter system? What are the drawbacks of this system?

Which of the following would be a liability to a bank?

The primary purpose of bank regulation is to

One reason why gold and silver have served as money is that they

The major contribution of goldsmiths to the development of modern banking was

Money's principal function is to serve as a

On the Micronesian island of Yap,it is easier to make purchases with stone wheel currency than it is to make purchases with paper currency including the U.S.dollar.

If fears of a terrorist attack are widespread and people lose faith in money,the economy could revert to a system of

The principal innovation that increases the safety of bank deposits is

The balance sheet of a solvent bank will show

Bankers have a reputation for conservatism in politics,dress,and business affairs.Is there an economic rationale for this conservatism? Explain.

Which of the following is included in M1?

Banks try to keep their excess reserves at a maximum in order to maximize profits.

If depositors become worried about the safety of their deposit accounts,they may trigger a

The primary benefit of a monetary system of exchange compared to a barter system is the increased

The amount of money held in checking accounts is significantly greater than money in the form of currency.

The Ponderosa Bank receives a new deposit of $2,500.The reserves requirement is 20 percent.How much can this bank loan out as a result of this deposit?

The money multiplier process is based on the principle of fractional reserve banking.

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