Question 1

The amount of money held in checking accounts is significantly greater than money in the form of currency.

Accepted Answer

A) True 
 B)False

Question 2

Systemic risks would be most prevalent at larger banks like Bank of America and Citibank.

Accepted Answer

A) True 
 B)False

Question 3

"Near monies" are

Accepted Answer

A) stocks, bonds, and real estate. 
B) U.S.notes and Federal Reserve notes. 
C) included in the M1 definition of the money supply. 
D) liquid assets that are close substitutes for money. 
E) All of these responses are correct. 
A) stocks, bonds, and real estate. 
B) U.S.notes and Federal Reserve notes. 
C) included in the M1 definition of the money supply. 
D) liquid assets that are close substitutes for money. 
E) All of these responses are correct.

Question 4

If banks decide to hold excess reserves, the multiple expansion of bank deposits will be limited.

Accepted Answer

A) True 
 B)False

Question 5

Credit cards are part of the M2 money supply and are valued at the maximum credit limit of the cardholder.

Accepted Answer

A) True 
 B)False

Question 6

Barter is a system of exchange in which people directly trade one good for another, without using money as an intermediate step.

Accepted Answer

A) True 
 B)False

Question 7

Paper money has been in use since the

Accepted Answer

A) Roman Empire. 
B) eleventh century in China. 
C) Civil War in the United States. 
D) development of money-center banking in nineteenth-century London. 
A) Roman Empire. 
B) eleventh century in China. 
C) Civil War in the United States. 
D) development of money-center banking in nineteenth-century London.

Question 8

Bankers' decisions on how much to hold in reserves influence the supply of money.

Accepted Answer

A) True 
 B)False

Question 9

If Ms.Anniston transfers $1,000 from her checking account to her money market account, then

Accepted Answer

A) M1 falls and M2 remains the same. 
B) M1 falls and M2 rises. 
C) both M1 and M2 rise. 
D) M1 remains the same and M2 rises. 
A) M1 falls and M2 remains the same. 
B) M1 falls and M2 rises. 
C) both M1 and M2 rise. 
D) M1 remains the same and M2 rises.

Question 10

Savings deposits are included in

Accepted Answer

A) M1 but not M2. 
B) M2 but not M1. 
C) M1 and M2. 
D) None of the above is correct. 
A) M1 but not M2. 
B) M2 but not M1. 
C) M1 and M2. 
D) None of the above is correct.

Question 11

____ is an object in use as a medium of exchange, but which also has a substantial value in alternative uses.

Accepted Answer

A) IOU 
B) Commodity money 
C) Fiat money 
D) Deposit certificate 
A) IOU 
B) Commodity money 
C) Fiat money 
D) Deposit certificate

Question 12

Money multiplier is the amount of money the banking system generates with each dollar of reserves.

Accepted Answer

A) True 
 B)False

Question 13

The objective of bank management is to

Accepted Answer

A) maximize stockholders' profits by making risky investments and giving loans to borrowers who will pay the highest interest rates. 
B) refuse to make risky loans and make loans only to the safest borrowers. 
C) invest in the U.S.government securities and make loans only to established businesses. 
D) strike the appropriate balance between the attraction of bank profits and the need for bank safety. 
A) maximize stockholders' profits by making risky investments and giving loans to borrowers who will pay the highest interest rates. 
B) refuse to make risky loans and make loans only to the safest borrowers. 
C) invest in the U.S.government securities and make loans only to established businesses. 
D) strike the appropriate balance between the attraction of bank profits and the need for bank safety.

Question 14

A run on a bank occurs when many depositors withdraw cash from their accounts all at once.

Accepted Answer

A) True 
 B)False

Question 15

M1 consists of currency, demand deposits, traveler's checks, and other checkable deposits.

Accepted Answer

A) True 
 B)False

Question 16

In the modern U.S.economy, most transactions are made with

Accepted Answer

A) cash. 
B) gold and silver. 
C) credit cards. 
D) checking deposits. 
A) cash. 
B) gold and silver. 
C) credit cards. 
D) checking deposits.

Question 17

In addition to fiscal policy, the other main tool used to affect aggregate demand is

Accepted Answer

A) trade policy. 
B) industrial policy. 
C) planning policy. 
D) monetary policy. 
A) trade policy. 
B) industrial policy. 
C) planning policy. 
D) monetary policy.

Question 18

Fractional reserve banking is a banking system in which banks hold only a fraction of deposits as reserves.

Accepted Answer

A) True 
 B)False

Question 19

Contraction of the money supply can aggravate a recession.

Accepted Answer

A) True 
 B)False

Question 20

The banking system receives a new cash deposit of $250,000.Total deposits eventually rise by $1 million.The value of the reserve ratio is

Accepted Answer

A) 25 
B) 4 
C) 0.50. 
D) 0.25. 
E) 0.20. 
A) 25 
B) 4 
C) 0.50. 
D) 0.25. 
E) 0.20.

Exam 28: Money and the Banking System

The amount of money held in checking accounts is significantly greater than money in the form of currency.

Systemic risks would be most prevalent at larger banks like Bank of America and Citibank.

"Near monies" are

If banks decide to hold excess reserves, the multiple expansion of bank deposits will be limited.

Credit cards are part of the M2 money supply and are valued at the maximum credit limit of the cardholder.

Barter is a system of exchange in which people directly trade one good for another, without using money as an intermediate step.

Paper money has been in use since the

Bankers' decisions on how much to hold in reserves influence the supply of money.

If Ms.Anniston transfers $1,000 from her checking account to her money market account, then

Savings deposits are included in

____ is an object in use as a medium of exchange, but which also has a substantial value in alternative uses.

Money multiplier is the amount of money the banking system generates with each dollar of reserves.

The objective of bank management is to

A run on a bank occurs when many depositors withdraw cash from their accounts all at once.

M1 consists of currency, demand deposits, traveler's checks, and other checkable deposits.

In the modern U.S.economy, most transactions are made with

In addition to fiscal policy, the other main tool used to affect aggregate demand is

Fractional reserve banking is a banking system in which banks hold only a fraction of deposits as reserves.

Contraction of the money supply can aggravate a recession.

The banking system receives a new cash deposit of $250,000.Total deposits eventually rise by $1 million.The value of the reserve ratio is

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

Filters

Credit cards are part of the M₂ money supply and are valued at the maximum credit limit of the cardholder.

M₁ consists of currency, demand deposits, traveler's checks, and other checkable deposits.