Question 1

A major problem with a commodity money is that,to be useful,money must be

Accepted Answer

A)  divisible. 
B)  storable. 
C)  portable. 
D)  All of the above are correct. 
A)  divisible. 
B)  storable. 
C)  portable. 
D)  All of the above are correct.

Question 2

If bankers decide to keep a lower fraction of deposits on reserve,the money supply will

Accepted Answer

A)  decrease. 
B)  increase. 
C)  remain unchanged. 
D)  move more quickly through the economy. 
A)  decrease. 
B)  increase. 
C)  remain unchanged. 
D)  move more quickly through the economy.

Question 3

A "near money" is an asset that can be

Accepted Answer

A)  indistinguishable from commodity money. 
B)  spent easily. 
C)  a close substitute for money. 
D)  only issued by a bank. 
A)  indistinguishable from commodity money. 
B)  spent easily. 
C)  a close substitute for money. 
D)  only issued by a bank.

Question 4

The only major disadvantage of paper money is that it is hard to divide into smaller denominations.

Accepted Answer

A) True 
 B)False

Question 5

Money is an imperfect store of value when

Accepted Answer

A)  the rate of inflation is high. 
B)  the unemployment rate is high. 
C)  gold prices are falling. 
D)  businesses are failing due to bankruptcy. 
A)  the rate of inflation is high. 
B)  the unemployment rate is high. 
C)  gold prices are falling. 
D)  businesses are failing due to bankruptcy.

Question 6

Banking under a fractional reserve system is inherently risky,but

Accepted Answer

A)  safe if banks are allowed to make profits. 
B)  regulation removes all danger of failures. 
C)  is always safely done with modern management. 
D)  is made safer with cautious and prudent management. 
A)  safe if banks are allowed to make profits. 
B)  regulation removes all danger of failures. 
C)  is always safely done with modern management. 
D)  is made safer with cautious and prudent management.

Question 7

The basic equation for a bank's balance sheet is ____.

Accepted Answer

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

Question 8

Systemic risks would be most prevalent at larger banks like Bank of America and Citibank.

Accepted Answer

A) True 
 B)False

Question 9

The M2 definition of the money supply is based on the concept that

Accepted Answer

A)  M1 is a small number,and should be increased in size. 
B)  many types of deposits can be used as both payments and stores of value. 
C)  checking deposits are used for payments,and therefore,not part of M1. 
D)  cash is not used for the majority of payments. 
A)  M1 is a small number,and should be increased in size. 
B)  many types of deposits can be used as both payments and stores of value. 
C)  checking deposits are used for payments,and therefore,not part of M1. 
D)  cash is not used for the majority of payments.

Question 10

Most banks in the United States are owned by the government and operate as nonprofit institutions.

Accepted Answer

A) True 
 B)False

Question 11

____ is an object in use as a medium of exchange,but which also has a substantial value in alternative uses.

Accepted Answer

A)  IOU 
B)  A commodity money 
C)  Fiat money 
D)  Deposit certificate 
A)  IOU 
B)  A commodity money 
C)  Fiat money 
D)  Deposit certificate

Question 12

The deposit creation formula can be defined as

Accepted Answer

A)  one minus the required reserve ratio. 
B)  the same as the GDP income multiplier. 
C)  the reciprocal of the required reserve ratio. 
D)  one plus the required reserve ratio. 
A)  one minus the required reserve ratio. 
B)  the same as the GDP income multiplier. 
C)  the reciprocal of the required reserve ratio. 
D)  one plus the required reserve ratio.

Question 13

The maximum increase in the money supply possible from a deposit of $D into the banking system where R is the reserve requirement is

Accepted Answer

A)  (1/R)(D − R). 
B)  R × D. 
C)  (1/R)(1 − R)D. 
D)  (1/R)D. 
A)  (1/R)(D − R). 
B)  R × D. 
C)  (1/R)(1 − R)D. 
D)  (1/R)D.

Question 14

The net worth of a bank

Accepted Answer

A)  determines the level of bank loans possible. 
B)  is determined by subtracting liabilities from assets. 
C)  is determined by subtracting assets from liabilities. 
D)  can never be a negative value. 
A)  determines the level of bank loans possible. 
B)  is determined by subtracting liabilities from assets. 
C)  is determined by subtracting assets from liabilities. 
D)  can never be a negative value.

Question 15

Money market mutual funds are accounts that are

Accepted Answer

A)  usually offered by banks. 
B)  do not pay interest income. 
C)  insured by the federal government. 
D)  usually offered by brokerage and insurance firms. 
A)  usually offered by banks. 
B)  do not pay interest income. 
C)  insured by the federal government. 
D)  usually offered by brokerage and insurance firms.

Question 16

Banks are required to keep a minimum level of reserves on hand.The intent of this regulation is

Accepted Answer

A)  monetary control rather than bank safety. 
B)  bank safety in case of bank runs. 
C)  maintenance of bank profits. 
D)  limiting the level of bank profits. 
A)  monetary control rather than bank safety. 
B)  bank safety in case of bank runs. 
C)  maintenance of bank profits. 
D)  limiting the level of bank profits.

Question 17

The Federal Deposit Insurance Corporation insures

Accepted Answer

A)  savings accounts against unlawful transfer into checking accounts. 
B)  bank deposits against the failure of an individual bank. 
C)  that the bank will maintain sufficient required reserves. 
D)  bank buildings and property against fire and theft. 
A)  savings accounts against unlawful transfer into checking accounts. 
B)  bank deposits against the failure of an individual bank. 
C)  that the bank will maintain sufficient required reserves. 
D)  bank buildings and property against fire and theft.

Question 18

Which of the following is a bank liability?

Accepted Answer

A)  cash in the vault 
B)  loans made to customers 
C)  money market deposit accounts 
D)  bank computers 
E)  All of the above are correct. 
A)  cash in the vault 
B)  loans made to customers 
C)  money market deposit accounts 
D)  bank computers 
E)  All of the above are correct.

Question 19

When a bank makes loans with excess reserves,it

Accepted Answer

A)  creates money. 
B)  destroys money. 
C)  alters the composition of M1. 
D)  leaves the money supply unchanged. 
A)  creates money. 
B)  destroys money. 
C)  alters the composition of M1. 
D)  leaves the money supply unchanged.

Question 20

To a bank,an asset is an obligation that it owes to someone else.

Accepted Answer

A) True 
 B)False

A major problem with a commodity money is that,to be useful,money must be

If bankers decide to keep a lower fraction of deposits on reserve,the money supply will

A "near money" is an asset that can be

The only major disadvantage of paper money is that it is hard to divide into smaller denominations.

Money is an imperfect store of value when

Banking under a fractional reserve system is inherently risky,but

The basic equation for a bank's balance sheet is ____.

Systemic risks would be most prevalent at larger banks like Bank of America and Citibank.

The M2 definition of the money supply is based on the concept that

Most banks in the United States are owned by the government and operate as nonprofit institutions.

____ is an object in use as a medium of exchange,but which also has a substantial value in alternative uses.

The deposit creation formula can be defined as

The maximum increase in the money supply possible from a deposit of $D into the banking system where R is the reserve requirement is

The net worth of a bank

Money market mutual funds are accounts that are

Banks are required to keep a minimum level of reserves on hand.The intent of this regulation is

The Federal Deposit Insurance Corporation insures

Which of the following is a bank liability?

When a bank makes loans with excess reserves,it

To a bank,an asset is an obligation that it owes to someone else.

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

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Exam 12: Money and The Banking System

A major problem with a commodity money is that,to be useful,money must be

If bankers decide to keep a lower fraction of deposits on reserve,the money supply will

A "near money" is an asset that can be

The only major disadvantage of paper money is that it is hard to divide into smaller denominations.

Money is an imperfect store of value when

Banking under a fractional reserve system is inherently risky,but

The basic equation for a bank's balance sheet is ____.

Systemic risks would be most prevalent at larger banks like Bank of America and Citibank.

The M2 definition of the money supply is based on the concept that

Most banks in the United States are owned by the government and operate as nonprofit institutions.

____ is an object in use as a medium of exchange,but which also has a substantial value in alternative uses.

The deposit creation formula can be defined as

The maximum increase in the money supply possible from a deposit of $D into the banking system where R is the reserve requirement is

The net worth of a bank

Money market mutual funds are accounts that are

Banks are required to keep a minimum level of reserves on hand.The intent of this regulation is

The Federal Deposit Insurance Corporation insures

Which of the following is a bank liability?

When a bank makes loans with excess reserves,it

To a bank,an asset is an obligation that it owes to someone else.

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