Question 1

When a bank makes a loan to one of its customers, to the bank the loan is classified as

Accepted Answer

A) an asset. 
B) a liability. 
C) neither an asset nor a liability. 
D) an asset in some cases and a liability in other cases, depending on the type of loan. 
A) an asset. 
B) a liability. 
C) neither an asset nor a liability. 
D) an asset in some cases and a liability in other cases, depending on the type of loan.

Question 2

To an economist, money is a synonym for which of the following?

Accepted Answer

A) income 
B) credit 
C) wealth 
D) salary 
E) none of the above 
A) income 
B) credit 
C) wealth 
D) salary 
E) none of the above

Question 3

Excess reserves are the amount by which total reserves exceed required reserves.

Accepted Answer

A) True 
 B)False

Question 4

When a country imposes capital controls, it is controlling the

Accepted Answer

A) amount of money flowing in or out of the country. 
B) amount of reserves that banks must hold. 
C) portion of bank deposits that must be held at its central bank. 
D) portion of bank deposits that must be used for loans to the government. 
A) amount of money flowing in or out of the country. 
B) amount of reserves that banks must hold. 
C) portion of bank deposits that must be held at its central bank. 
D) portion of bank deposits that must be used for loans to the government.

Question 5

If a bank's deposits at the Federal Reserve equal $35 million and its total reserves equal $40 million, what does the bank's vault cash equal?

Accepted Answer

A) $5 million 
B) $75 million 
C) $37.5 million 
D) $30 million 
A) $5 million 
B) $75 million 
C) $37.5 million 
D) $30 million

Question 6

To an economist, credit cards ___________ money. When a credit card is used to make a purchase, _____________ is incurred, which ________ the case when money is used to make a purchase.

Accepted Answer

A) are; an asset; is not 
B) are not; an asset; is also 
C) are; a liability; is also 
D) are not; a liability; is not 
A) are; an asset; is not 
B) are not; an asset; is also 
C) are; a liability; is also 
D) are not; a liability; is not

Question 7

Reserves held beyond the required amount are called __________ reserves.

Accepted Answer

A) redundant 
B) precautionary 
C) excess 
D) surplus 
A) redundant 
B) precautionary 
C) excess 
D) surplus

Question 8

Which of the following statements is false?

Accepted Answer

A) Asymmetric information can exist both before and after a transaction. 
B) Moral hazard occurs when one party to a transaction changes his or her behavior in a way that is hidden from and costly to the other party. 
C) Adverse selection has the potential to eliminate some markets. 
D) none of the above 
A) Asymmetric information can exist both before and after a transaction. 
B) Moral hazard occurs when one party to a transaction changes his or her behavior in a way that is hidden from and costly to the other party. 
C) Adverse selection has the potential to eliminate some markets. 
D) none of the above

Question 9

Total reserves are

Accepted Answer

A) equal to required reserves plus excess reserves. 
B) equal to vault cash plus bank deposits at the Federal Reserve. 
C) an asset to banks. 
D) both b and c 
E) all of the above 
A) equal to required reserves plus excess reserves. 
B) equal to vault cash plus bank deposits at the Federal Reserve. 
C) an asset to banks. 
D) both b and c 
E) all of the above

Question 10

To an economist, the terms "money" and "wealth" are synonyms.

Accepted Answer

A) True 
 B)False

Question 11

Exhibit 12-1
   ​
​
-Refer to Exhibit 12-1. The required reserve ratio is

Accepted Answer

A) 0.10. 
B) 0.15. 
C) 0.20. 
D) 0.25. 
E) 0.30. 
A) 0.10. 
B) 0.15. 
C) 0.20. 
D) 0.25. 
E) 0.30.

Question 12

Total bank reserves equal

Accepted Answer

A) checkable deposits + vault cash + traveler's checks. 
B) vault cash + currency in the hands of the nonbanking public. 
C) bank deposits at the Federal Reserve. 
D) bank deposits at the Federal Reserve + vault cash. 
A) checkable deposits + vault cash + traveler's checks. 
B) vault cash + currency in the hands of the nonbanking public. 
C) bank deposits at the Federal Reserve. 
D) bank deposits at the Federal Reserve + vault cash.

Question 13

A bank has $50,000 in excess reserves and the required reserve ratio is 10 percent. This means the bank could have __________ in checkable deposit liabilities and __________ in (total) reserves.

Accepted Answer

A) $500,000; $90,000 
B) $100,000; $20,000 
C) $50,000; $25,000 
D) $250,000; $75,000 
A) $500,000; $90,000 
B) $100,000; $20,000 
C) $50,000; $25,000 
D) $250,000; $75,000

Question 14

If reserves equal $29 million and vault cash equals $29 million, it follows that

Accepted Answer

A) bank deposits at the Federal Reserve equal $29 million. 
B) currency in the hands of the public equals $29 million. 
C) excess reserves equal $10 million. 
D) bank deposits at the Federal Reserve equal $0. 
E) There is not enough information to answer the question. 
A) bank deposits at the Federal Reserve equal $29 million. 
B) currency in the hands of the public equals $29 million. 
C) excess reserves equal $10 million. 
D) bank deposits at the Federal Reserve equal $0. 
E) There is not enough information to answer the question.

Question 15

There was an economic depression in the U.S in 1893 that some people blamed on the gold standard.

Accepted Answer

A) True 
 B)False

Question 16

Discuss some of the economic symbolism thought by many to be contained in L. Frank Baum's book The Wonderful Wizard of Oz.

Accepted Answer

Many people believe that Baum's well-kno

Question 17

The Federal Reserve began paying interest on reserves in 2008.

Accepted Answer

A) True 
 B)False

Question 18

According to the textbook, in the book version of The Wonderful Wizard of Oz, Dorothy's slippers are

Accepted Answer

A) gold. 
B) silver. 
C) ruby. 
D) paper. 
A) gold. 
B) silver. 
C) ruby. 
D) paper.

Question 19

Which of the following statements is true?

Accepted Answer

A) A savings deposit is not counted in the most basic, or narrow, definition of the money supply. 
B) M1 is sometimes referred to as transactions money. 
C) Money reduces the transaction costs of making exchanges. 
D) b and c 
E) a, b, and c 
A) A savings deposit is not counted in the most basic, or narrow, definition of the money supply. 
B) M1 is sometimes referred to as transactions money. 
C) Money reduces the transaction costs of making exchanges. 
D) b and c 
E) a, b, and c

Question 20

Bank A has checkable deposits of $900,000 and total reserves of $112,000. If the required reserve ratio is 8 percent, the bank has excess reserves of

Accepted Answer

A) $40,000. 
B) $72,000. 
C) $13,440. 
D) $4,000. 
A) $40,000. 
B) $72,000. 
C) $13,440. 
D) $4,000.

Exam 12: Money Banking and the Financial System

When a bank makes a loan to one of its customers, to the bank the loan is classified as

To an economist, money is a synonym for which of the following?

Excess reserves are the amount by which total reserves exceed required reserves.

When a country imposes capital controls, it is controlling the

If a bank's deposits at the Federal Reserve equal $35 million and its total reserves equal $40 million, what does the bank's vault cash equal?

To an economist, credit cards ___________ money. When a credit card is used to make a purchase, _____________ is incurred, which ________ the case when money is used to make a purchase.

Reserves held beyond the required amount are called __________ reserves.

Which of the following statements is false?

Total reserves are

To an economist, the terms "money" and "wealth" are synonyms.

Exhibit 12-1 ​ ​ -Refer to Exhibit 12-1. The required reserve ratio is

Total bank reserves equal

A bank has $50,000 in excess reserves and the required reserve ratio is 10 percent. This means the bank could have __________ in checkable deposit liabilities and __________ in (total) reserves.

If reserves equal $29 million and vault cash equals $29 million, it follows that

There was an economic depression in the U.S in 1893 that some people blamed on the gold standard.

Discuss some of the economic symbolism thought by many to be contained in L. Frank Baum's book The Wonderful Wizard of Oz.

The Federal Reserve began paying interest on reserves in 2008.

According to the textbook, in the book version of The Wonderful Wizard of Oz, Dorothy's slippers are

Which of the following statements is true?

Bank A has checkable deposits of $900,000 and total reserves of $112,000. If the required reserve ratio is 8 percent, the bank has excess reserves of

What Economics Is About

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To an economist, credit cards _____ money. When a credit card is used to make a purchase, _ is incurred, which __ the case when money is used to make a purchase.

Exhibit 12-1 -Refer to Exhibit 12-1. The required reserve ratio is

A bank has $50,000 in excess reserves and the required reserve ratio is 10 percent. This means the bank could have in checkable deposit liabilities and in (total) reserves.