Question 1

When prices for goods and services are quoted in money terms,this is an example of money being used as a store of value.

Accepted Answer

A) True 
 B)False

Question 2

The lion's share of purchases and transactions in the U.S.economy are made with coins and paper money.

Accepted Answer

A) True 
 B)False

Question 3

A bank run involves a large flow of money

Accepted Answer

A)  into bank depositors' accounts. 
B)  into checking and savings accounts. 
C)  out of depositors' accounts. 
D)  out of individuals' cash reserves into money market funds. 
A)  into bank depositors' accounts. 
B)  into checking and savings accounts. 
C)  out of depositors' accounts. 
D)  out of individuals' cash reserves into money market funds.

Question 4

Under the modern system of fractional reserve banking,banks

Accepted Answer

A)  keep cash reserves equal to only a fraction of their deposit liabilities. 
B)  loan out their excess reserves at interest,which is the key to their profitability. 
C)  are always potentially vulnerable to runs. 
D)  All of the above are correct. 
A)  keep cash reserves equal to only a fraction of their deposit liabilities. 
B)  loan out their excess reserves at interest,which is the key to their profitability. 
C)  are always potentially vulnerable to runs. 
D)  All of the above are correct.

Question 5

Bank runs are "contagious" in that they often spread to other banks.

Accepted Answer

A) True 
 B)False

Question 6

The money multiplier yielded by the deposit creation formula assumes that

Accepted Answer

A)  banks hold no excess reserves. 
B)  banks hold excess reserves. 
C)  recipients of loans take some of the proceeds in cash. 
D)  recipients of loans do not redeposit their funds in other banks. 
A)  banks hold no excess reserves. 
B)  banks hold excess reserves. 
C)  recipients of loans take some of the proceeds in cash. 
D)  recipients of loans do not redeposit their funds in other banks.

Question 7

The most common form of trading goods for goods is

Accepted Answer

A)  bilateral trade. 
B)  government commodity distribution. 
C)  status-based trades. 
D)  barter. 
E)  payments in kind. 
A)  bilateral trade. 
B)  government commodity distribution. 
C)  status-based trades. 
D)  barter. 
E)  payments in kind.

Question 8

Banking under a system of fractional reserves is a(n)

Accepted Answer

A)  inherently risky business that is unsafe regardless of bank management. 
B)  inherently risky business that is relatively safe under prudent management. 
C)  fairly safe business unless management is irresponsible. 
D)  fairly safe business with no unusual risks. 
A)  inherently risky business that is unsafe regardless of bank management. 
B)  inherently risky business that is relatively safe under prudent management. 
C)  fairly safe business unless management is irresponsible. 
D)  fairly safe business with no unusual risks.

Question 9

Agraria uses bushels of wheat to quote prices.In this case,bushels of wheat act as a

Accepted Answer

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

Question 10

When banking first began,it could be said that paper money was in reality

Accepted Answer

A)  worthless. 
B)  receipts. 
C)  government money. 
D)  fiat money. 
A)  worthless. 
B)  receipts. 
C)  government money. 
D)  fiat money.

Question 11

What is fiat money? Why is fiat money important in the United States today?

Accepted Answer

Fiat (from the Latin for "Let it be done

Question 12

Do bankers create money?

Accepted Answer

A)  No,they cannot do this as private businesses. 
B)  No,they are prevented by federal law. 
C)  Yes,through multiple deposit creation. 
D)  Yes,by opening checking accounts for customers. 
A)  No,they cannot do this as private businesses. 
B)  No,they are prevented by federal law. 
C)  Yes,through multiple deposit creation. 
D)  Yes,by opening checking accounts for customers.

Question 13

Many economists believe that the difference between savings accounts and checking accounts is disappearing.

Accepted Answer

A) True 
 B)False

Question 14

The net worth of a bank is defined as the difference between

Accepted Answer

A)  income and expenses. 
B)  assets and liabilities. 
C)  loans and deposits. 
D)  loans and reserves. 
A)  income and expenses. 
B)  assets and liabilities. 
C)  loans and deposits. 
D)  loans and reserves.

Question 15

What may limit the size of the money supply expansion to an amount less than indicated by the oversimplified deposit creation formula?

Accepted Answer

The oversimplified deposit creation form

Question 16

One aspect of bank accounting is that many liabilities of banks are

Accepted Answer

A)  assets of other persons and businesses in the economy. 
B)  also liabilities of other persons and businesses in the economy. 
C)  not matched by liabilities of most other banks. 
D)  not actually owed to any other person or business in the economy. 
A)  assets of other persons and businesses in the economy. 
B)  also liabilities of other persons and businesses in the economy. 
C)  not matched by liabilities of most other banks. 
D)  not actually owed to any other person or business in the economy.

Question 17

Government regulations to insure the safety of bank deposits and to control the money supply include

Accepted Answer

A)  limitations on the types and quantities of assets in which banks may invest. 
B)  elimination of the need for required reserves. 
C)  setting interest rate ceilings on savings and money market deposit accounts. 
D)  All of the above are correct. 
A)  limitations on the types and quantities of assets in which banks may invest. 
B)  elimination of the need for required reserves. 
C)  setting interest rate ceilings on savings and money market deposit accounts. 
D)  All of the above are correct.

Question 18

The money creation formula is oversimplified because it assumes that

Accepted Answer

A)  every recipient of a bank loan will redeposit the proceeds in another bank. 
B)  loan recipients will not take any of the proceeds in cash. 
C)  every bank lends out all excess reserves. 
D)  All of the above are correct. 
A)  every recipient of a bank loan will redeposit the proceeds in another bank. 
B)  loan recipients will not take any of the proceeds in cash. 
C)  every bank lends out all excess reserves. 
D)  All of the above are correct.

Question 19

Systemic risks are most likely to exist with regard to

Accepted Answer

A)  small governments. 
B)  large governments. 
C)  small financial institutions. 
D)  large financial institutions. 
A)  small governments. 
B)  large governments. 
C)  small financial institutions. 
D)  large financial institutions.

Question 20

Which of the following is included in M1?

Accepted Answer

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

When prices for goods and services are quoted in money terms,this is an example of money being used as a store of value.

The lion's share of purchases and transactions in the U.S.economy are made with coins and paper money.

A bank run involves a large flow of money

Under the modern system of fractional reserve banking,banks

Bank runs are "contagious" in that they often spread to other banks.

The money multiplier yielded by the deposit creation formula assumes that

The most common form of trading goods for goods is

Banking under a system of fractional reserves is a(n)

Agraria uses bushels of wheat to quote prices.In this case,bushels of wheat act as a

When banking first began,it could be said that paper money was in reality

What is fiat money? Why is fiat money important in the United States today?

Do bankers create money?

Many economists believe that the difference between savings accounts and checking accounts is disappearing.

The net worth of a bank is defined as the difference between

What may limit the size of the money supply expansion to an amount less than indicated by the oversimplified deposit creation formula?

One aspect of bank accounting is that many liabilities of banks are

Government regulations to insure the safety of bank deposits and to control the money supply include

The money creation formula is oversimplified because it assumes that

Systemic risks are most likely to exist with regard to

Which of the following is included in M1?

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

When prices for goods and services are quoted in money terms,this is an example of money being used as a store of value.

The lion's share of purchases and transactions in the U.S.economy are made with coins and paper money.

A bank run involves a large flow of money

Under the modern system of fractional reserve banking,banks

Bank runs are "contagious" in that they often spread to other banks.

The money multiplier yielded by the deposit creation formula assumes that

The most common form of trading goods for goods is

Banking under a system of fractional reserves is a(n)

Agraria uses bushels of wheat to quote prices.In this case,bushels of wheat act as a

When banking first began,it could be said that paper money was in reality

What is fiat money? Why is fiat money important in the United States today?

Do bankers create money?

Many economists believe that the difference between savings accounts and checking accounts is disappearing.

The net worth of a bank is defined as the difference between

What may limit the size of the money supply expansion to an amount less than indicated by the oversimplified deposit creation formula?

One aspect of bank accounting is that many liabilities of banks are

Government regulations to insure the safety of bank deposits and to control the money supply include

The money creation formula is oversimplified because it assumes that

Systemic risks are most likely to exist with regard to

Which of the following is included in M1?

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