Question 1

According to the textbook, the good that emerged as money in World War II POW camps was

Accepted Answer

A) tinned beef. 
B) toilet paper. 
C) cigarettes. 
D) cheese. 
A) tinned beef. 
B) toilet paper. 
C) cigarettes. 
D) cheese.

Question 2

Exhibit 12-1
   ​
​
-Refer to Exhibit 12-1. How much bank capital does Bank ABC have (i.e.what dollar value goes in blank (A))?

Accepted Answer

A) $0. 
B) $50 
C) $20 
D) $10 
E) $5 
A) $0. 
B) $50 
C) $20 
D) $10 
E) $5

Question 3

The risk of specializing (in the production of one good or service) is

Accepted Answer

A) lower in a barter economy than in a money economy. 
B) lower in a money economy than in a barter economy. 
C) the same in both a money and barter economy. 
D) greater the less likely you and the person you want to trade with have a double coincidence of wants. 
E) b and d 
A) lower in a barter economy than in a money economy. 
B) lower in a money economy than in a barter economy. 
C) the same in both a money and barter economy. 
D) greater the less likely you and the person you want to trade with have a double coincidence of wants. 
E) b and d

Question 4

Transaction costs are best defined as the

Accepted Answer

A) various costs of different goods and services. 
B) cost of one good in terms of another; that is, the price of apples in terms of oranges. 
C) costs involved in borrowing money from someone, that is, the interest that must be paid for the use of someone else's money. 
D) costs associated with the time and effort necessary to make an exchange. 
A) various costs of different goods and services. 
B) cost of one good in terms of another; that is, the price of apples in terms of oranges. 
C) costs involved in borrowing money from someone, that is, the interest that must be paid for the use of someone else's money. 
D) costs associated with the time and effort necessary to make an exchange.

Question 5

A bank has $10,000 in excess reserves and the required reserve ratio is 20 percent. This means the bank could have __________ in checkable deposit liabilities and __________ in total reserves.

Accepted Answer

A) $80,000, $10,000 
B) $100,000, $20,000 
C) $50,000, $25,000 
D) $100,000, $30,000 
A) $80,000, $10,000 
B) $100,000, $20,000 
C) $50,000, $25,000 
D) $100,000, $30,000

Question 6

The sum of currency held outside banks, traveler's checks, and checkable deposits is

Accepted Answer

A) credit cards 
B) M1. 
C) M2. 
D) total reserves. 
A) credit cards 
B) M1. 
C) M2. 
D) total reserves.

Question 7

The amount of required reserves a bank holds depends on the

Accepted Answer

A) required reserve ratio. 
B) demand-deposit ratio. 
C) excess-reserve ratio. 
D) currency ratio. 
A) required reserve ratio. 
B) demand-deposit ratio. 
C) excess-reserve ratio. 
D) currency ratio.

Question 8

Changing from a barter economy to a money economy can reduce transaction costs.

Accepted Answer

A) True 
 B)False

Question 9

Inflation does the greatest harm to money's function as a

Accepted Answer

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

Question 10

M1 is comprised of currency held outside banks + traveler's checks + __________.

Accepted Answer

A) credit cards 
B) savings deposits 
C) gold 
D) checkable deposits 
E) money market mutual funds 
A) credit cards 
B) savings deposits 
C) gold 
D) checkable deposits 
E) money market mutual funds

Question 11

In direct finance, funds are loaned and borrowed through a financial intermediary.

Accepted Answer

A) True 
 B)False

Question 12

Asymmetric information exists when

Accepted Answer

A) both parties to an exchange have all relevant facts about that exchange. 
B) a good that is either nonrivalrous or nonexcludable is being sold on a market. 
C) the two parties to an exchange differ in what they know about the good being exchanged. 
D) neither party to an exchange is knowledgeable about the quality of the good being exchanged. 
A) both parties to an exchange have all relevant facts about that exchange. 
B) a good that is either nonrivalrous or nonexcludable is being sold on a market. 
C) the two parties to an exchange differ in what they know about the good being exchanged. 
D) neither party to an exchange is knowledgeable about the quality of the good being exchanged.

Question 13

If a bank's reserves equal $422 million and vault cash equals $47 million, it follows that

Accepted Answer

A) the bank's deposits at the Federal Reserve equal $422 million. 
B) currency in the hands of the public equals $375 million. 
C) excess reserves equal $42.2 million. 
D) the bank's deposits at the Federal Reserve equal $42.2 million. 
E) the bank's deposits at the Federal Reserve equal $375 million. 
A) the bank's deposits at the Federal Reserve equal $422 million. 
B) currency in the hands of the public equals $375 million. 
C) excess reserves equal $42.2 million. 
D) the bank's deposits at the Federal Reserve equal $42.2 million. 
E) the bank's deposits at the Federal Reserve equal $375 million.

Question 14

To a bank, checkable deposits are classified as a liability.

Accepted Answer

A) True 
 B)False

Question 15

Banks in the United States operate under a fractional reserve system, which means they must maintain only a fraction of their deposits in the form of

Accepted Answer

A) debt. 
B) loans. 
C) an insurance policy. 
D) reserves. 
A) debt. 
B) loans. 
C) an insurance policy. 
D) reserves.

Question 16

The balance in a banking customer's checkable deposit account is the amount the bank owes the customer.

Accepted Answer

A) True 
 B)False

Question 17

According to the textbook, many people believe that the character Dorothy, in the book The Wonderful Wizard of Oz, represents

Accepted Answer

A) presidential candidate Barry Goldwater. 
B) President Abraham Lincoln. 
C) President William McKinley. 
D) presidential candidate William Jennings Bryan. 
A) presidential candidate Barry Goldwater. 
B) President Abraham Lincoln. 
C) President William McKinley. 
D) presidential candidate William Jennings Bryan.

Question 18

Which set of prices would you expect to see (posted, quoted) in a barter economy?

Accepted Answer

A) 1 horse = 10 pieces of gold; 1 kettle = 1 piece of gold 
B) 1 horse = 10 kettles; 1 kettle = 1/10 horse 
C) 1 horse = $200; 1 kettle = $20 
D) 1 horse = 10 kettles; 1 kettle = 10 apples; 1 apple = 1 orange 
E) b and d 
A) 1 horse = 10 pieces of gold; 1 kettle = 1 piece of gold 
B) 1 horse = 10 kettles; 1 kettle = 1/10 horse 
C) 1 horse = $200; 1 kettle = $20 
D) 1 horse = 10 kettles; 1 kettle = 10 apples; 1 apple = 1 orange 
E) b and d

Question 19

Ninth National Bank holds $200 million in checkable deposits and $18,000,000 in total reserves. With a required reserve ratio of 8 percent, how much in excess reserves is Ninth National holding?

Accepted Answer

A) $1,440,000 
B) $218,000,000 
C) $17,440,000 
D) $16,000,000 
E) $2,000,000 
A) $1,440,000 
B) $218,000,000 
C) $17,440,000 
D) $16,000,000 
E) $2,000,000

Question 20

Which of the following statements is false?

Accepted Answer

A) Money is the only good that can (or does) serve as a store of value. 
B) In a barter economy, there is no good that serves as a unit of account. 
C) There are higher transaction costs of making exchanges in a barter economy than in a money economy. 
D) Money functions as a medium of exchange, unit of account, and store of value. 
A) Money is the only good that can (or does) serve as a store of value. 
B) In a barter economy, there is no good that serves as a unit of account. 
C) There are higher transaction costs of making exchanges in a barter economy than in a money economy. 
D) Money functions as a medium of exchange, unit of account, and store of value.

Exam 12: Money Banking and the Financial System

According to the textbook, the good that emerged as money in World War II POW camps was

Exhibit 12-1 ​ ​ -Refer to Exhibit 12-1. How much bank capital does Bank ABC have (i.e.what dollar value goes in blank (A))?

The risk of specializing (in the production of one good or service) is

Transaction costs are best defined as the

A bank has $10,000 in excess reserves and the required reserve ratio is 20 percent. This means the bank could have __________ in checkable deposit liabilities and __________ in total reserves.

The sum of currency held outside banks, traveler's checks, and checkable deposits is

The amount of required reserves a bank holds depends on the

Changing from a barter economy to a money economy can reduce transaction costs.

Inflation does the greatest harm to money's function as a

M1 is comprised of currency held outside banks + traveler's checks + __________.

In direct finance, funds are loaned and borrowed through a financial intermediary.

Asymmetric information exists when

If a bank's reserves equal $422 million and vault cash equals $47 million, it follows that

To a bank, checkable deposits are classified as a liability.

Banks in the United States operate under a fractional reserve system, which means they must maintain only a fraction of their deposits in the form of

The balance in a banking customer's checkable deposit account is the amount the bank owes the customer.

According to the textbook, many people believe that the character Dorothy, in the book The Wonderful Wizard of Oz, represents

Which set of prices would you expect to see (posted, quoted) in a barter economy?

Ninth National Bank holds $200 million in checkable deposits and $18,000,000 in total reserves. With a required reserve ratio of 8 percent, how much in excess reserves is Ninth National holding?

Which of the following statements is false?

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

Monopoly

Monopolistic Competition Oligopoly and Game Theory

Government and Product Markets Antitrust and Regulation

Factor Markets With Emphasis on the Labor Market

Wages Unions and Labor

The Distribution of Income and Poverty

Interest Rent and Profit

Market Failure Externalities Public Goods and Asymmetric Information

Public Choice and Special Interest Group Politics

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

International Trade

International Finance

The Economic Case for and Against Government Five Topics Considered

Stocks Bonds Futures and Options

Filters

Exhibit 12-1 -Refer to Exhibit 12-1. How much bank capital does Bank ABC have (i.e.what dollar value goes in blank (A))?

A bank has $10,000 in excess reserves and the required reserve ratio is 20 percent. This means the bank could have in checkable deposit liabilities and in total reserves.