Question 1

Agraria uses bushels of wheat to quote prices.In this case, bushels of wheat act as a

Accepted Answer

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

Question 2

On which of the following assets are you most likely to earn interest income?

Accepted Answer

A) Cash and currency 
B) Checkable deposits 
C) Money market deposit accounts 
D) Gold and other precious metals 
E) All of these responses are correct. 
A) Cash and currency 
B) Checkable deposits 
C) Money market deposit accounts 
D) Gold and other precious metals 
E) All of these responses are correct. C

Question 3

An asset of a bank is

Accepted Answer

A) the value of money that is on deposit. 
B) the amount a depositor may legally borrow. 
C) something of value that the bank owes to a depositor. 
D) something of value that a bank owns. 
A) the value of money that is on deposit. 
B) the amount a depositor may legally borrow. 
C) something of value that the bank owes to a depositor. 
D) something of value that a bank owns. D

Question 4

One aspect of bank accounting is that many liabilities of banks are

Accepted Answer

A) assets of other persons and businesses in the economy. 
B) also liabilities of other persons and businesses in the economy. 
C) not matched by liabilities of most other banks. 
D) not actually owed to any other person or business in the economy. 
A) assets of other persons and businesses in the economy. 
B) also liabilities of other persons and businesses in the economy. 
C) not matched by liabilities of most other banks. 
D) not actually owed to any other person or business in the economy.

Question 5

If people begin to hold more cash, the money-multiplier process will

Accepted Answer

A) increase in intensity. 
B) remain the same. 
C) decrease in actual size. 
D) cause larger amounts of excess reserves. 
A) increase in intensity. 
B) remain the same. 
C) decrease in actual size. 
D) cause larger amounts of excess reserves.

Question 6

The primary feature of money is that it serves as

Accepted Answer

A) barter value. 
B) a medium of exchange. 
C) intrinsic value. 
D) commodity value. 
A) barter value. 
B) a medium of exchange. 
C) intrinsic value. 
D) commodity value.

Question 7

Which of the following observations is not true?

Accepted Answer

A) Money is divisible. 
B) The value of money never remains the same. 
C) Money has an intrinsic value. 
D) Money is the most liquid form of asset. 
A) Money is divisible. 
B) The value of money never remains the same. 
C) Money has an intrinsic value. 
D) Money is the most liquid form of asset.

Question 8

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 9

The required reserve ratio is 10 percent, but banks actually keep 20 percent on reserve.The actual money multiplier will be

Accepted Answer

A) 10 
B) 9 
C) 5 
D) 2 
E) 1 
A) 10 
B) 9 
C) 5 
D) 2 
E) 1

Question 10

Bankers have a reputation for conservatism in politics, dress, and business affairs.Is there an economic rationale for this conservatism? Explain.

Accepted Answer

There is an economic rationale for this

Question 11

A "near money" is an asset that can be

Accepted Answer

A) indistinguishable from commodity money. 
B) spent easily. 
C) a close substitute for money. 
D) only issued by a bank. 
A) indistinguishable from commodity money. 
B) spent easily. 
C) a close substitute for money. 
D) only issued by a bank.

Question 12

If R is the reserve ratio, then the money multiplier is given by 1 / (1+R).

Accepted Answer

A) True 
 B)False

Question 13

Required reserves of banks are a fixed percentage of their

Accepted Answer

A) loans. 
B) assets. 
C) deposits. 
D) All of these responses are correct. 
A) loans. 
B) assets. 
C) deposits. 
D) All of these responses are correct.

Question 14

The moral hazard problem refers to

Accepted Answer

A) difficulty banks have in satisfying the government's reserve requirement. 
B) depositors making a run on the bank, even though the bank is insured. 
C) banks taking on more risk in their lending because they know their depositors are insured. 
D) banks issuing bank notes that compete with the government's currency. 
A) difficulty banks have in satisfying the government's reserve requirement. 
B) depositors making a run on the bank, even though the bank is insured. 
C) banks taking on more risk in their lending because they know their depositors are insured. 
D) banks issuing bank notes that compete with the government's currency.

Question 15

Paper money in the United States is

Accepted Answer

A) backed by gold in Fort Knox. 
B) partially backed by gold and silver. 
C) entirely fiat money. 
D) fully convertible into gold at fixed prices. 
A) backed by gold in Fort Knox. 
B) partially backed by gold and silver. 
C) entirely fiat money. 
D) fully convertible into gold at fixed prices.

Question 16

Milly Miser removes $250,000 from her mattress and opens a checking account.This single transaction immediately increases the money supply by

Accepted Answer

A) $250,000. 
B) $50,000. 
C) $0. 
D) −$250,000. 
A) $250,000. 
B) $50,000. 
C) $0. 
D) −$250,000.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Do bankers create money?

Accepted Answer

A) No, they cannot do this as private businesses. 
B) No, they are prevented by federal law. 
C) Yes, they create money through multiple deposit creation. 
D) Yes, they create money by opening checking accounts for customers. 
A) No, they cannot do this as private businesses. 
B) No, they are prevented by federal law. 
C) Yes, they create money through multiple deposit creation. 
D) Yes, they create money by opening checking accounts for customers.

Question 19

Which of the following types of money has intrinsic value?

Accepted Answer

A) Commodity money 
B) Fiat money 
C) Both commodity and fiat money 
D) None of the above is correct. 
A) Commodity money 
B) Fiat money 
C) Both commodity and fiat money 
D) None of the above is correct.

Question 20

Liquidity is the ease with which an asset can be converted into the economy's medium of exchange.

Accepted Answer

A) True 
 B)False

Exam 28: Money and the Banking System

Agraria uses bushels of wheat to quote prices.In this case, bushels of wheat act as a

On which of the following assets are you most likely to earn interest income?

An asset of a bank is

One aspect of bank accounting is that many liabilities of banks are

If people begin to hold more cash, the money-multiplier process will

The primary feature of money is that it serves as

Which of the following observations is not true?

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

The required reserve ratio is 10 percent, but banks actually keep 20 percent on reserve.The actual money multiplier will be

Bankers have a reputation for conservatism in politics, dress, and business affairs.Is there an economic rationale for this conservatism? Explain.

A "near money" is an asset that can be

If R is the reserve ratio, then the money multiplier is given by 1 / (1+R).

Required reserves of banks are a fixed percentage of their

The moral hazard problem refers to

Paper money in the United States is

Milly Miser removes $250,000 from her mattress and opens a checking account.This single transaction immediately increases the money supply by

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

Do bankers create money?

Which of the following types of money has intrinsic value?

Liquidity is the ease with which an asset can be converted into the economy's medium of exchange.

What Is Economics

The Economony: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

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

Contemporary Issues in the Useconomy

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