Question 1

Which of the following represents a double coincidence of wants?

Accepted Answer

A) Smith has what Jones has and neither wants what the other has. 
B) Smith has what Jones wants but Jones doesn't have what Smith wants. 
C) Smith has what Jones wants and Jones has what Smith wants. 
D) Smith wants what Jones has, Jones wants what Brown has, and Brown wants what Smith has. 
E) none of the above 
A) Smith has what Jones has and neither wants what the other has. 
B) Smith has what Jones wants but Jones doesn't have what Smith wants. 
C) Smith has what Jones wants and Jones has what Smith wants. 
D) Smith wants what Jones has, Jones wants what Brown has, and Brown wants what Smith has. 
E) none of the above

Question 2

Bank ABC's reserve account at the Federal Reserve contains $44.5 million, its vault cash is $1.1 million, and its checkable deposits equal $400 million. If the required reserve ratio (r) is 10 percent, it follows that Bank ABC's required reserves equal __________ million, and its excess reserves equal __________ million.

Accepted Answer

A) $4.45; $1.1 
B) $40; $5.6 
C) $0.11; $5.6 
D) $40; $4.5 
A) $4.45; $1.1 
B) $40; $5.6 
C) $0.11; $5.6 
D) $40; $4.5

Question 3

A house is $100,000, a computer is $2,000, and a car is $20,000. In this context, money is principally functioning as a

Accepted Answer

A) unit of account. 
B) store of value. 
C) medium of exchange. 
D) none of the above 
A) unit of account. 
B) store of value. 
C) medium of exchange. 
D) none of the above

Question 4

Explain why it is not necessary for paper money to be backed by some commodity (e.g. gold) before it can have value.

Accepted Answer

The U.S. money supply is no longer backe

Question 5

Money is defined by economists as

Accepted Answer

A) the market value of an asset. 
B) the funds one receives during a specified period of time. 
C) any good that is widely accepted in exchange and for the repayment of debts. 
D) both b and c 
E) all of the above 
A) the market value of an asset. 
B) the funds one receives during a specified period of time. 
C) any good that is widely accepted in exchange and for the repayment of debts. 
D) both b and c 
E) all of the above

Question 6

Prior to 2008, the Fed ____________ interest on any reserves, so banks ______________ financial incentive to create loans with their excess reserves.

Accepted Answer

A) paid, had no 
B) did not pay, had no 
C) paid, had a 
D) did not pay; had a 
A) paid, had no 
B) did not pay, had no 
C) paid, had a 
D) did not pay; had a

Question 7

Bank ABC has checkable deposits of $415 million and total reserves of $50 million. The required reserve ratio is 9 percent. The bank has excess reserves of

Accepted Answer

A) $365,000,000. 
B) $45,500,000. 
C) $12,650,000. 
D) $14,550,000. 
E) There is not enough information provided to answer this question. 
A) $365,000,000. 
B) $45,500,000. 
C) $12,650,000. 
D) $14,550,000. 
E) There is not enough information provided to answer this question.

Question 8

Money is defined as any good that _________________ and ___________________.

Accepted Answer

A) can be used for the repayment of debt; can be used as a store of value 
B) is widely accepted for purposes of exchange; the repayment of debt 
C) can serve as collateral when applying for a loan; can be used to start a business 
D) is widely accepted for purposes of exchange; can be used when making credit decisions 
A) can be used for the repayment of debt; can be used as a store of value 
B) is widely accepted for purposes of exchange; the repayment of debt 
C) can serve as collateral when applying for a loan; can be used to start a business 
D) is widely accepted for purposes of exchange; can be used when making credit decisions

Question 9

The requirement of a "double coincidence of wants" is the chief __________ of the __________ exchange system.

Accepted Answer

A) advantage; barter 
B) advantage; monetary 
C) disadvantage; barter 
D) disadvantage; monetary 
A) advantage; barter 
B) advantage; monetary 
C) disadvantage; barter 
D) disadvantage; monetary

Question 10

If reserves equal $59 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 $30 million. 
D) bank deposits at the Federal Reserve equal $30 million. 
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 $30 million. 
D) bank deposits at the Federal Reserve equal $30 million. 
E) There is not enough information to answer the question.

Exam 12: Money Banking and the Financial System

Which of the following represents a double coincidence of wants?

A house is $100,000, a computer is $2,000, and a car is $20,000. In this context, money is principally functioning as a

Explain why it is not necessary for paper money to be backed by some commodity (e.g. gold) before it can have value.

Money is defined by economists as

Prior to 2008, the Fed ____________ interest on any reserves, so banks ______________ financial incentive to create loans with their excess reserves.

Bank ABC has checkable deposits of $415 million and total reserves of $50 million. The required reserve ratio is 9 percent. The bank has excess reserves of

Money is defined as any good that _________________ and ___________________.

The requirement of a "double coincidence of wants" is the chief __________ of the __________ exchange system.

If reserves equal $59 million and vault cash equals $29 million, it follows that

What Economics Is About

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Prior to 2008, the Fed interest on any reserves, so banks __ financial incentive to create loans with their excess reserves.

Money is defined as any good that _ and ___.

The requirement of a "double coincidence of wants" is the chief of the exchange system.