Question 1

Absent regulation of the money supply,the money supply would likely reflect the business cycle.

Accepted Answer

A) True 
 B)False

Question 2

One difference between the assets included in M1 and those added to calculate M2 is that items in M1 are

Accepted Answer

A)  better stores of value than those added to compute M2. 
B)  more liquid than those added to compute M2. 
C)  less liquid than those added to compute M2. 
D)  larger than those added to compute M2. 
A)  better stores of value than those added to compute M2. 
B)  more liquid than those added to compute M2. 
C)  less liquid than those added to compute M2. 
D)  larger than those added to compute M2.

Question 3

An IOU held by a bank,and signed by a customer is a liability.

Accepted Answer

A) True 
 B)False

Question 4

The fractional reserve system of banking evolved because

Accepted Answer

A)  goldsmiths did not have safes large enough to hold all their gold deposits. 
B)  there was always a dire need for additional money. 
C)  goldsmiths knew that on any given day,only a few depositors would come to claim their deposits. 
D)  goldsmiths knew that they would not be prosecuted for lending out money they did not have. 
A)  goldsmiths did not have safes large enough to hold all their gold deposits. 
B)  there was always a dire need for additional money. 
C)  goldsmiths knew that on any given day,only a few depositors would come to claim their deposits. 
D)  goldsmiths knew that they would not be prosecuted for lending out money they did not have.

Question 5

Any reserves held by a bank above the amount of minimum legal reserves are called

Accepted Answer

A)  total reserves. 
B)  required reserves. 
C)  fiat money. 
D)  excess reserves. 
A)  total reserves. 
B)  required reserves. 
C)  fiat money. 
D)  excess reserves.

Question 6

Bank regulators are concerned about the safety of depositors because

Accepted Answer

A)  bank failures were common throughout most of U.S.history and have even occurred in recent decades. 
B)  in the absence of federal insurance,depositors would lose their money if a bank failed. 
C)  nervous depositors may rush to withdraw their accounts and produce a "run" that could threaten even a sound bank. 
D)  All of the above are correct. 
A)  bank failures were common throughout most of U.S.history and have even occurred in recent decades. 
B)  in the absence of federal insurance,depositors would lose their money if a bank failed. 
C)  nervous depositors may rush to withdraw their accounts and produce a "run" that could threaten even a sound bank. 
D)  All of the above are correct.

Question 7

The money creation process generated by an injection of reserves stops when

Accepted Answer

A)  people deposit their loans into other banks. 
B)  reserve requirements are raised. 
C)  the increase in required reserves equals the size of the injection. 
D)  bankers begin to fear runs and stop making loans. 
A)  people deposit their loans into other banks. 
B)  reserve requirements are raised. 
C)  the increase in required reserves equals the size of the injection. 
D)  bankers begin to fear runs and stop making loans.

Question 8

The early goldsmiths issued money in the form of

Accepted Answer

A)  coins made from gold in their safes. 
B)  receipts for the acceptance of gold deposits. 
C)  gold fragments left over from the production of jewelry. 
D)  fully backed gold certificates. 
A)  coins made from gold in their safes. 
B)  receipts for the acceptance of gold deposits. 
C)  gold fragments left over from the production of jewelry. 
D)  fully backed gold certificates.

Question 9

Banks that are managed in a very safe and conservative manner can be expected to earn

Accepted Answer

A)  high,steady profits. 
B)  high but volatile profits. 
C)  low and consistent profits. 
D)  low profits with occasional major losses. 
A)  high,steady profits. 
B)  high but volatile profits. 
C)  low and consistent profits. 
D)  low profits with occasional major losses.

Question 10

Liquidity refers to the ability of an asset to hold its value in periods of inflation.

Accepted Answer

A) True 
 B)False

Question 11

As of December 2010,the largest single component of M1 consists of

Accepted Answer

A)  checkable deposits at banks. 
B)  money market mutual funds. 
C)  savings deposits. 
D)  currency. 
A)  checkable deposits at banks. 
B)  money market mutual funds. 
C)  savings deposits. 
D)  currency.

Question 12

A bank run involves a large inflow of money into commercial banks.

Accepted Answer

A) True 
 B)False

Question 13

The "efficiency of the payments mechanism" refers to

Accepted Answer

A)  the ease and speed of exchanging money for goods and services. 
B)  how fast member banks replenish required reserves. 
C)  how fast banks pay interest on deposit accounts. 
D)  how fast countries pay off foreign debts. 
A)  the ease and speed of exchanging money for goods and services. 
B)  how fast member banks replenish required reserves. 
C)  how fast banks pay interest on deposit accounts. 
D)  how fast countries pay off foreign debts.

Question 14

A run on a bank may occur if

Accepted Answer

A)  depositors withdraw some funds to invest in the stock market. 
B)  required reserves are increased. 
C)  interest rates are raised. 
D)  depositors lose confidence in the bank and attempt to withdraw all their funds. 
E)  All of the above are correct. 
A)  depositors withdraw some funds to invest in the stock market. 
B)  required reserves are increased. 
C)  interest rates are raised. 
D)  depositors lose confidence in the bank and attempt to withdraw all their funds. 
E)  All of the above are correct.

Question 15

Fractional reserve banking has three crucial features: bank profitability,bank discretion over the money supply,and bank exposure to runs.

Accepted Answer

A) True 
 B)False

Question 16

A banker motivated by profit maximization may make decisions that destabilize the banking system.

Accepted Answer

A) True 
 B)False

Question 17

The new $20 bills were designed with features to make counterfeiting more difficult.

Accepted Answer

A) True 
 B)False

Question 18

Barter is a system of

Accepted Answer

A)  trade without the use of money. 
B)  trading one good for another. 
C)  the double coincidence of wants. 
D)  All of the above are correct. 
A)  trade without the use of money. 
B)  trading one good for another. 
C)  the double coincidence of wants. 
D)  All of the above are correct.

Question 19

Which of the following would be an asset to a bank?

Accepted Answer

A)  cash in the vault 
B)  a loan to a university student 
C)  a government security 
D)  All of the above are correct. 
A)  cash in the vault 
B)  a loan to a university student 
C)  a government security 
D)  All of the above are correct.

Question 20

One advantage of a money system compared to a barter system is that

Accepted Answer

A)  barter never works. 
B)  money creates the need for banks. 
C)  money is more efficient. 
D)  everyone has money. 
A)  barter never works. 
B)  money creates the need for banks. 
C)  money is more efficient. 
D)  everyone has money.

Absent regulation of the money supply,the money supply would likely reflect the business cycle.

One difference between the assets included in M1 and those added to calculate M2 is that items in M1 are

An IOU held by a bank,and signed by a customer is a liability.

The fractional reserve system of banking evolved because

Any reserves held by a bank above the amount of minimum legal reserves are called

Bank regulators are concerned about the safety of depositors because

The money creation process generated by an injection of reserves stops when

The early goldsmiths issued money in the form of

Banks that are managed in a very safe and conservative manner can be expected to earn

Liquidity refers to the ability of an asset to hold its value in periods of inflation.

As of December 2010,the largest single component of M1 consists of

A bank run involves a large inflow of money into commercial banks.

The "efficiency of the payments mechanism" refers to

A run on a bank may occur if

Fractional reserve banking has three crucial features: bank profitability,bank discretion over the money supply,and bank exposure to runs.

A banker motivated by profit maximization may make decisions that destabilize the banking system.

The new $20 bills were designed with features to make counterfeiting more difficult.

Barter is a system of

Which of the following would be an asset to a bank?

One advantage of a money system compared to a barter system is that

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

Absent regulation of the money supply,the money supply would likely reflect the business cycle.

One difference between the assets included in M1 and those added to calculate M2 is that items in M1 are

An IOU held by a bank,and signed by a customer is a liability.

The fractional reserve system of banking evolved because

Any reserves held by a bank above the amount of minimum legal reserves are called

Bank regulators are concerned about the safety of depositors because

The money creation process generated by an injection of reserves stops when

The early goldsmiths issued money in the form of

Banks that are managed in a very safe and conservative manner can be expected to earn

Liquidity refers to the ability of an asset to hold its value in periods of inflation.

As of December 2010,the largest single component of M1 consists of

A bank run involves a large inflow of money into commercial banks.

The "efficiency of the payments mechanism" refers to

A run on a bank may occur if

Fractional reserve banking has three crucial features: bank profitability,bank discretion over the money supply,and bank exposure to runs.

A banker motivated by profit maximization may make decisions that destabilize the banking system.

The new $20 bills were designed with features to make counterfeiting more difficult.

Barter is a system of

Which of the following would be an asset to a bank?

One advantage of a money system compared to a barter system is that

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