Question 1

Money as defined by M1 includes

Accepted Answer

A)  coins. 
B)  paper money. 
C)  checking deposits. 
D)  travelers' checks. 
E)  All of the above are correct. 
A)  coins. 
B)  paper money. 
C)  checking deposits. 
D)  travelers' checks. 
E)  All of the above are correct.

Question 2

Liquidity refers to the

Accepted Answer

A)  rapidity with which money flows through the economy. 
B)  ease with which an asset can be converted into cash. 
C)  ease with which banks move funds from checking to savings accounts. 
D)  All of the above are correct. 
A)  rapidity with which money flows through the economy. 
B)  ease with which an asset can be converted into cash. 
C)  ease with which banks move funds from checking to savings accounts. 
D)  All of the above are correct.

Question 3

The increase in bank supervision in the U.S.in the 1980s and early 1990s was due to an increase in bank

Accepted Answer

A)  profits. 
B)  ownership of common stocks. 
C)  failures. 
D)  deposits and loans. 
A)  profits. 
B)  ownership of common stocks. 
C)  failures. 
D)  deposits and loans.

Question 4

Banks will keep excess reserves when:​

Accepted Answer

A)  ​they do not foresee profitable opportunities to make loans 
B)  ​business conditions generally are depressed 
C)  ​they do not foresee opportunities to make secure loans 
D)  ​All of the above are correct. 
A)  ​they do not foresee profitable opportunities to make loans 
B)  ​business conditions generally are depressed 
C)  ​they do not foresee opportunities to make secure loans 
D)  ​All of the above are correct.

Question 5

Banks try to keep their level of excess reserves low because

Accepted Answer

A)  the Fed charges a penalty for holdings of excess reserves. 
B)  they are concerned that the money multiplier will become too large. 
C)  they wish to maximize profits. 
D)  bank regulators levy fines on the amount of excess reserves. 
A)  the Fed charges a penalty for holdings of excess reserves. 
B)  they are concerned that the money multiplier will become too large. 
C)  they wish to maximize profits. 
D)  bank regulators levy fines on the amount of excess reserves.

Question 6

Bankers must always trade off

Accepted Answer

A)  honesty and dishonesty. 
B)  stocks and loans. 
C)  prudence and profits. 
D)  gold and cash. 
E)  All of the above are correct. 
A)  honesty and dishonesty. 
B)  stocks and loans. 
C)  prudence and profits. 
D)  gold and cash. 
E)  All of the above are correct.

Question 7

Due to the private nature of bank ownership,there is often a difference between bankers' goals and macroeconomic objectives.

Accepted Answer

A) True 
 B)False

Question 8

Bank failures in the U.S.

Accepted Answer

A)  occurred frequently through the 1960s and declined since then. 
B)  occurred infrequently through the 1960s and have become more common since then. 
C)  occurred frequently through the 1930s,declined after that time,and became more common in 2008. 
D)  occurred infrequently through the 1930s,increased after that time,and became less common in 2008. 
A)  occurred frequently through the 1960s and declined since then. 
B)  occurred infrequently through the 1960s and have become more common since then. 
C)  occurred frequently through the 1930s,declined after that time,and became more common in 2008. 
D)  occurred infrequently through the 1930s,increased after that time,and became less common in 2008.

Question 9

During a period of economic depression,such as has existed for a long period in Japan,a profit-oriented bank will act in such a way that

Accepted Answer

A)  dampens the fluctuations. 
B)  makes the depression worse. 
C)  is neutral with respect to the fluctuations. 
D)  is counter-cyclical and stabilizing. 
A)  dampens the fluctuations. 
B)  makes the depression worse. 
C)  is neutral with respect to the fluctuations. 
D)  is counter-cyclical and stabilizing.

Question 10

Recently,the financial crisis led to a bank run in

Accepted Answer

A)  Brazil. 
B)  Germany and France. 
C)  Japan. 
D)  England. 
A)  Brazil. 
B)  Germany and France. 
C)  Japan. 
D)  England.

Question 11

Which of the following definitions of the money supply is the least liquid?

Accepted Answer

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

Question 12

Due to new methods of electronically transferring assets from savings accounts to checking accounts,many economists favor moving savings accounts from

Accepted Answer

A)  M1 into M2. 
B)  M2 into M3. 
C)  M3 into M2. 
D)  M2 into M1. 
A)  M1 into M2. 
B)  M2 into M3. 
C)  M3 into M2. 
D)  M2 into M1.

Question 13

The objective of bank management is to

Accepted Answer

A)  maximize stockholders' profits by making risky investments and giving loans to borrowers who will pay the highest interest rates. 
B)  refuse to make risky loans and make loans only to the safest borrowers. 
C)  invest in U.S.government securities and make loans only to established businesses. 
D)  strike the appropriate balance between the attraction of bank profits and the need for bank safety. 
A)  maximize stockholders' profits by making risky investments and giving loans to borrowers who will pay the highest interest rates. 
B)  refuse to make risky loans and make loans only to the safest borrowers. 
C)  invest in U.S.government securities and make loans only to established businesses. 
D)  strike the appropriate balance between the attraction of bank profits and the need for bank safety.

Question 14

Paper money has been in use since the

Accepted Answer

A)  Roman Empire. 
B)  eleventh century in China. 
C)  Civil War in the United States. 
D)  development of money-center banking in nineteenth-century London. 
A)  Roman Empire. 
B)  eleventh century in China. 
C)  Civil War in the United States. 
D)  development of money-center banking in nineteenth-century London.

Question 15

If you have a checking account at Citibank,the account is a liability of the bank.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is a drawback of FDIC insurance?

Accepted Answer

A)  It leads to excess industry profits. 
B)  It has failed to arrest the trend of bank failures. 
C)  It leads to the problem of moral hazard. 
D)  It undercuts private insurance companies. 
A)  It leads to excess industry profits. 
B)  It has failed to arrest the trend of bank failures. 
C)  It leads to the problem of moral hazard. 
D)  It undercuts private insurance companies.

Question 17

The banking industry is heavily regulated because

Accepted Answer

A)  banking is a monopoly industry. 
B)  most banks are owned by government agencies. 
C)  bankers do what is best for their stockholders,not necessarily what is best for the economy. 
D)  All of the above are correct. 
A)  banking is a monopoly industry. 
B)  most banks are owned by government agencies. 
C)  bankers do what is best for their stockholders,not necessarily what is best for the economy. 
D)  All of the above are correct.

Question 18

If Ms.Anniston transfers $1,000 from her checking account to her money market account,then

Accepted Answer

A)  M1 falls and M2 remains the same. 
B)  M1 falls and M2 rises. 
C)  both M1 and M2 rise. 
D)  M1 remains the same and M2 rises. 
A)  M1 falls and M2 remains the same. 
B)  M1 falls and M2 rises. 
C)  both M1 and M2 rise. 
D)  M1 remains the same and M2 rises.

Question 19

The value of the deposit multiplier is 1 divided by the required reserve ratio.

Accepted Answer

A) True 
 B)False

Question 20

The distinction between M1 and M2 is based on

Accepted Answer

A)  portability-the ease with which an asset can be moved. 
B)  divisibility-the ease with which an asset can be used to make smaller payments. 
C)  liquidity-the ease with which an asset can be converted into cash. 
D)  storability-how long an asset will retain its value. 
A)  portability-the ease with which an asset can be moved. 
B)  divisibility-the ease with which an asset can be used to make smaller payments. 
C)  liquidity-the ease with which an asset can be converted into cash. 
D)  storability-how long an asset will retain its value.

Money as defined by M1 includes

Liquidity refers to the

The increase in bank supervision in the U.S.in the 1980s and early 1990s was due to an increase in bank

Banks will keep excess reserves when:

Banks try to keep their level of excess reserves low because

Bankers must always trade off

Due to the private nature of bank ownership,there is often a difference between bankers' goals and macroeconomic objectives.

Bank failures in the U.S.

During a period of economic depression,such as has existed for a long period in Japan,a profit-oriented bank will act in such a way that

Recently,the financial crisis led to a bank run in

Which of the following definitions of the money supply is the least liquid?

Due to new methods of electronically transferring assets from savings accounts to checking accounts,many economists favor moving savings accounts from

The objective of bank management is to

Paper money has been in use since the

If you have a checking account at Citibank,the account is a liability of the bank.

Which of the following is a drawback of FDIC insurance?

The banking industry is heavily regulated because

If Ms.Anniston transfers $1,000 from her checking account to her money market account,then

The value of the deposit multiplier is 1 divided by the required reserve ratio.

The distinction between M1 and M2 is based on

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

Money as defined by M1 includes

Liquidity refers to the

The increase in bank supervision in the U.S.in the 1980s and early 1990s was due to an increase in bank

Banks will keep excess reserves when:​

Banks try to keep their level of excess reserves low because

Bankers must always trade off

Due to the private nature of bank ownership,there is often a difference between bankers' goals and macroeconomic objectives.

Bank failures in the U.S.

During a period of economic depression,such as has existed for a long period in Japan,a profit-oriented bank will act in such a way that

Recently,the financial crisis led to a bank run in

Which of the following definitions of the money supply is the least liquid?

Due to new methods of electronically transferring assets from savings accounts to checking accounts,many economists favor moving savings accounts from

The objective of bank management is to

Paper money has been in use since the

If you have a checking account at Citibank,the account is a liability of the bank.

Which of the following is a drawback of FDIC insurance?

The banking industry is heavily regulated because

If Ms.Anniston transfers $1,000 from her checking account to her money market account,then

The value of the deposit multiplier is 1 divided by the required reserve ratio.

The distinction between M1 and M2 is based on

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

Banks will keep excess reserves when: