Question 1

Fractional reserve banking originated

Accepted Answer

A) when the United States Congress passed a law regarding the required reserve ratio. 
B) when goldsmiths realized they could issue warehouse receipts beyond gold on deposits. 
C) with the establishment of the Federal Reserve System. 
D) in the United States with the Clayton Act. 
A) when the United States Congress passed a law regarding the required reserve ratio. 
B) when goldsmiths realized they could issue warehouse receipts beyond gold on deposits. 
C) with the establishment of the Federal Reserve System. 
D) in the United States with the Clayton Act.

Question 2

Which of the following is not included in M1?

Accepted Answer

A) retail money market mutual funds 
B) checkable deposits 
C) traveler's checks 
D) all of the above 
A) retail money market mutual funds 
B) checkable deposits 
C) traveler's checks 
D) all of the above

Question 3

Tenth National Bank holds $285 million in checkable deposits and $35 million in reserves. With a required reserve ratio of 11 percent, how much in excess reserves is Tenth National holding?

Accepted Answer

A) $250 million 
B) $3.65 million 
C) $35.2 million 
D) 3.85 million 
A) $250 million 
B) $3.65 million 
C) $35.2 million 
D) 3.85 million

Question 4

Money is an invention of government.

Accepted Answer

A) True 
 B)False

Question 5

Bank A holds $1 million in required reserves and the required reserve ratio is 9 percent. It follows that Bank A holds checkable deposit liabilities that total approximately

Accepted Answer

A) $111 million. 
B) $11.11 million. 
C) $90 million. 
D) $900 million. 
A) $111 million. 
B) $11.11 million. 
C) $90 million. 
D) $900 million.

Question 6

In a barter economy, people are _________ to specialize in the production of one good or service, compared to in a money economy.

Accepted Answer

A) more likely 
B) less likely 
C) equally likely 
D) almost always going 
A) more likely 
B) less likely 
C) equally likely 
D) almost always going

Question 7

If M1 is $1,200 billion, currency held outside banks is $400 billion, and traveler's checks is $10 billion, then small-denomination time deposits equal

Accepted Answer

A) $790 billion. 
B) $390 billion. 
C) $800 billion. 
D) $1,190 billion. 
E) There is not information to answer the question. 
A) $790 billion. 
B) $390 billion. 
C) $800 billion. 
D) $1,190 billion. 
E) There is not information to answer the question.

Question 8

In a barter economy,

Accepted Answer

A) money is a medium of exchange. 
B) coins are used to facilitate trade. 
C) money is a store of value. 
D) goods and services are traded directly for each other. 
E) the money supply consists entirely of coins and currency. 
A) money is a medium of exchange. 
B) coins are used to facilitate trade. 
C) money is a store of value. 
D) goods and services are traded directly for each other. 
E) the money supply consists entirely of coins and currency.

Question 9

A moral hazard problem occurs before a loan is made, and the adverse selection problem occurs after a loan is made.

Accepted Answer

A) True 
 B)False

Question 10

Consider the following data: currency (held outside banks) = $354 billion, checkable deposits = $250 billion, traveler's checks = $4 billion, small-denomination time deposits = $200 billion, savings deposits = $100 billion, retail money market mutual funds = $160 billion. M1 equals __________ billion and M2 equals __________ billion.

Accepted Answer

A) $608; $1,068 
B) $708; $1,038 
C) $708; $948 
D) $694; $1,038 
E) none of the above 
A) $608; $1,068 
B) $708; $1,038 
C) $708; $948 
D) $694; $1,038 
E) none of the above

Question 11

A bank's business is to turn its liabilities into assets.

Accepted Answer

A) True 
 B)False

Question 12

The M2 money supply

Accepted Answer

A) includes M1. 
B) is commonly referred to as the broad definition of the money supply. 
C) includes savings deposits. 
D) is larger than M1. 
E) all of the above 
A) includes M1. 
B) is commonly referred to as the broad definition of the money supply. 
C) includes savings deposits. 
D) is larger than M1. 
E) all of the above

Question 13

According to the textbook, L. Frank Baum, the author of The Wonderful Wizard of Oz, blamed ____________________ for the economic depression of 1893 and the related hardships faced by farmers and workers.

Accepted Answer

A) the gold standard 
B) the silver standard 
C) a massive tornado 
D) high taxes 
A) the gold standard 
B) the silver standard 
C) a massive tornado 
D) high taxes

Question 14

When economists say that banks must hold a percentage of their total deposits in reserve form, what does this mean?

Accepted Answer

A) It means that banks must hold a fraction of their customers' deposits either as bank deposits at the Federal Reserve, or as vault cash, or both. 
B) It means that banks reserve the right to turn away customers a certain percentage of the time. 
C) It means that the fraction of vault cash a bank has cannot be greater than the fraction of bank deposits (it has) at the Federal Reserve. 
D) Essentially, it means that total reserves are greater than required reserves. 
E) none of the above 
A) It means that banks must hold a fraction of their customers' deposits either as bank deposits at the Federal Reserve, or as vault cash, or both. 
B) It means that banks reserve the right to turn away customers a certain percentage of the time. 
C) It means that the fraction of vault cash a bank has cannot be greater than the fraction of bank deposits (it has) at the Federal Reserve. 
D) Essentially, it means that total reserves are greater than required reserves. 
E) none of the above

Question 15

If checkable deposits rise, it follows that the

Accepted Answer

A) required reserve ratio will fall. 
B) dollar amount of reserves will rise. 
C) dollar amount of vault cash will rise. 
D) required reserve ratio will rise. 
E) none of the above 
A) required reserve ratio will fall. 
B) dollar amount of reserves will rise. 
C) dollar amount of vault cash will rise. 
D) required reserve ratio will rise. 
E) none of the above

Question 16

A unit of account is

Accepted Answer

A) anything that is generally accepted in exchange for goods and services. 
B) a common measurement in which relative values are expressed. 
C) an item's ability to hold value over time. 
D) the exchange of goods and services for other goods and services. 
E) both a and d 
A) anything that is generally accepted in exchange for goods and services. 
B) a common measurement in which relative values are expressed. 
C) an item's ability to hold value over time. 
D) the exchange of goods and services for other goods and services. 
E) both a and d

Question 17

The term federal reserve notes refers to coins minted by the U.S. Treasury.

Accepted Answer

A) True 
 B)False

Question 18

If checkable deposits in Bank A total $390 million and the required reserve ratio is 10 percent, then required reserves at Bank A equal

Accepted Answer

A) $3.9 million. 
B) $0.39 million. 
C) $93 million. 
D) $39 million. 
E) There is not enough information provided to answer the question. 
A) $3.9 million. 
B) $0.39 million. 
C) $93 million. 
D) $39 million. 
E) There is not enough information provided to answer the question.

Question 19

The unit of account function of money refers to the

Accepted Answer

A) fact that money and income are the same thing. 
B) common denominator of measurement provided by money. 
C) characteristic that all money is intrinsically valuable. 
D) all of the above 
A) fact that money and income are the same thing. 
B) common denominator of measurement provided by money. 
C) characteristic that all money is intrinsically valuable. 
D) all of the above

Question 20

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Exhibit 12-4
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-Refer to Exhibit 12-4. How much bank capital does Bank XYZ have (i.e. what dollar amount belongs in blank (A))?

Accepted Answer

A) $150 
B) $625 
C) $245 
D) $355 
E) There is not enough information provided to answer this question. 
A) $150 
B) $625 
C) $245 
D) $355 
E) There is not enough information provided to answer this question.

Exam 12: Money Banking and the Financial System

Fractional reserve banking originated

Which of the following is not included in M1?

Tenth National Bank holds $285 million in checkable deposits and $35 million in reserves. With a required reserve ratio of 11 percent, how much in excess reserves is Tenth National holding?

Money is an invention of government.

Bank A holds $1 million in required reserves and the required reserve ratio is 9 percent. It follows that Bank A holds checkable deposit liabilities that total approximately

In a barter economy, people are _________ to specialize in the production of one good or service, compared to in a money economy.

If M1 is $1,200 billion, currency held outside banks is $400 billion, and traveler's checks is $10 billion, then small-denomination time deposits equal

In a barter economy,

A moral hazard problem occurs before a loan is made, and the adverse selection problem occurs after a loan is made.

A bank's business is to turn its liabilities into assets.

The M2 money supply

According to the textbook, L. Frank Baum, the author of The Wonderful Wizard of Oz, blamed ____________________ for the economic depression of 1893 and the related hardships faced by farmers and workers.

When economists say that banks must hold a percentage of their total deposits in reserve form, what does this mean?

If checkable deposits rise, it follows that the

A unit of account is

The term federal reserve notes refers to coins minted by the U.S. Treasury.

If checkable deposits in Bank A total $390 million and the required reserve ratio is 10 percent, then required reserves at Bank A equal

The unit of account function of money refers to the

​ Exhibit 12-4 ​ ​ ​ ​ ​ -Refer to Exhibit 12-4. How much bank capital does Bank XYZ have (i.e. what dollar amount belongs in blank (A))?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand Theory

Prices Free Controlled and Relative

Supply Demand and Price Applications

Macroeconomic Measurements Part I Prices and Unemployment

Macroeconomic Measurements Part II Gdp and Real Gdp

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability a Critique of the Self Regulating Economy

Fiscal Policy and the Federal Budget

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth Resources Technology Ideas and Institutions

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice and Behavioral Economics

Production and Costs

Perfect Competition

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Government and Product Markets Antitrust and Regulation

Factor Markets With Emphasis on the Labor Market

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The Distribution of Income and Poverty

Interest Rent and Profit

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Building Theories to Explain Everyday Life From Observations to Questions to Theories to Predictions

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The Economic Case for and Against Government Five Topics Considered

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Exhibit 12-4 -Refer to Exhibit 12-4. How much bank capital does Bank XYZ have (i.e. what dollar amount belongs in blank (A))?