Question 1

A composite currency whose value is the average of the value of the U.S. dollar, the Japanese yen, the euro, and the British pound is known as:

Accepted Answer

A)  special drawing right. 
B)  social direct response. 
C)  single directive response. 
D)  scarce diligence resource. 
E)  scarce delivery resource. 
A)  special drawing right. 
B)  social direct response. 
C)  single directive response. 
D)  scarce diligence resource. 
E)  scarce delivery resource.

Question 2

Suppose the reserve requirement is 10 percent and a person deposits $1,500 in a local bank. That single local bank can now create a maximum of:

Accepted Answer

A)  $150 in additional money by lending $150. 
B)  $15,000 in additional money by lending $15,000. 
C)  $1,500 in additional money by lending $1,500. 
D)  $1,350 in additional money by lending $1,350. 
E)  $135 in additional money by lending $135. 
A)  $150 in additional money by lending $150. 
B)  $15,000 in additional money by lending $15,000. 
C)  $1,500 in additional money by lending $1,500. 
D)  $1,350 in additional money by lending $1,350. 
E)  $135 in additional money by lending $135.

Question 3

Assume that an American investor decides to buy one-year Swiss bonds that are denominated in Swiss francs and pay 2 percent annual interest. For this purpose, $10,000 is exchanged into Swiss francs at an exchange rate of $1 = 2Fr to buy the bonds. How many dollars will the investor have after one year if the exchange rate is then $1 = 1.5Fr?

Accepted Answer

A)  $10,000 
B)  $10,200 
C)  $15,300 
D)  $13,600 
E)  $7,650 
A)  $10,000 
B)  $10,200 
C)  $15,300 
D)  $13,600 
E)  $7,650

Question 4

The main advantage of the Eurocurrency market is that investment funds cannot be subject to foreign government controls.

Accepted Answer

A) True 
 B)False

Question 5

Under the system of fractional reserve banking, the reserve requirement is the ratio of excess reserves to total reserves.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is true of International Banking Facilities (IBFs) in the U.S.?

Accepted Answer

A)  IBFs were legalized by the Federal Reserve Board in 1970. 
B)  IBFs are bookkeeping systems set up in existing bank offices of the U.S. to record international banking transactions 
C)  IBFs are "shell" bank branches of U.S. banks in the Caribbean. 
D)  Loans extended by the IBFs are subject to reserve requirements and interest rate regulations. 
E)  IBFs are allowed to extend loans to the residents and businesses of the United States and not to the nonresidents. 
A)  IBFs were legalized by the Federal Reserve Board in 1970. 
B)  IBFs are bookkeeping systems set up in existing bank offices of the U.S. to record international banking transactions 
C)  IBFs are "shell" bank branches of U.S. banks in the Caribbean. 
D)  Loans extended by the IBFs are subject to reserve requirements and interest rate regulations. 
E)  IBFs are allowed to extend loans to the residents and businesses of the United States and not to the nonresidents.

Question 7

Because a bank pays a lower interest rate on deposits than it charges on loans, it cannot fail.

Accepted Answer

A) True 
 B)False

Question 8

Identify the correct definition of liquidity.

Accepted Answer

A)  The availability of credit in the form of money. 
B)  The ability of money to be a store of value. 
C)  The difference between real and nominal money values. 
D)  The ability of an asset to be easily converted into money. 
E)  The ability of a precious metal to be converted into spendable bank notes. 
A)  The availability of credit in the form of money. 
B)  The ability of money to be a store of value. 
C)  The difference between real and nominal money values. 
D)  The ability of an asset to be easily converted into money. 
E)  The ability of a precious metal to be converted into spendable bank notes.

Question 9

The money-creating ability of the banking system may be lowered by:

Accepted Answer

A)  a decrease in the cash balances that people wish to hold. 
B)  a fall in the overall rate of inflation. 
C)  an increase in the excess reserves. 
D)  an increase in total deposits. 
E)  an increase in the reserve requirement. 
A)  a decrease in the cash balances that people wish to hold. 
B)  a fall in the overall rate of inflation. 
C)  an increase in the excess reserves. 
D)  an increase in total deposits. 
E)  an increase in the reserve requirement.

Question 10

Which of the following is not true about a special drawing right (SDR)?

Accepted Answer

A)  The SDR is a composite currency. 
B)  The value of the SDR is an average of the values of the currencies of the major industrial countries. 
C)  The SDR was created in 1980 by the World Bank. 
D)  The SDR is an international reserve asset. 
E)  The SDR is used to settle international debts. 
A)  The SDR is a composite currency. 
B)  The value of the SDR is an average of the values of the currencies of the major industrial countries. 
C)  The SDR was created in 1980 by the World Bank. 
D)  The SDR is an international reserve asset. 
E)  The SDR is used to settle international debts.

Question 11

If the deposit expansion multiplier is 20, what is the reserve requirement in the banking system?

Accepted Answer

A)  20 percent 
B)  50 percent 
C)  2 percent 
D)  5 percent 
E)  10 percent 
A)  20 percent 
B)  50 percent 
C)  2 percent 
D)  5 percent 
E)  10 percent

Question 12

The primary international reserves in most countries is:

Accepted Answer

A)  silver. 
B)  gold. 
C)  the euro. 
D)  the U.S. dollar. 
E)  the Japanese yen. 
A)  silver. 
B)  gold. 
C)  the euro. 
D)  the U.S. dollar. 
E)  the Japanese yen.

Question 13

An increase in the amount of currency held by the public will raise the value of the deposit expansion multiplier.

Accepted Answer

A) True 
 B)False

Question 14

The cash reserves held by banks that are illegal are called excess reserves.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is true of offshore banking?

Accepted Answer

A)  The offshore banks are mainly concentrated in the European Union and the transactions are generally denominated in euro. 
B)  The offshore banks operate with costly restrictions and pay higher taxes than the domestic banks. 
C)  The offshore banks usually charge higher rates of interest on consumption loans than the domestic banks. 
D)  Offshore banks in the U.S. are able to offer a higher rate on dollar deposits and a lower rate on dollar loans than their domestic competitors. 
E)  Offshore banking transactions are considerably less risky than domestic transactions as they are closely monitored by the government of the nations in which they operate. 
A)  The offshore banks are mainly concentrated in the European Union and the transactions are generally denominated in euro. 
B)  The offshore banks operate with costly restrictions and pay higher taxes than the domestic banks. 
C)  The offshore banks usually charge higher rates of interest on consumption loans than the domestic banks. 
D)  Offshore banks in the U.S. are able to offer a higher rate on dollar deposits and a lower rate on dollar loans than their domestic competitors. 
E)  Offshore banking transactions are considerably less risky than domestic transactions as they are closely monitored by the government of the nations in which they operate.

Question 16

Prior to 1980, thrift institutions in the United States were allowed to offer checking accounts.

Accepted Answer

A) True 
 B)False

Question 17

Assume that the reserve requirement is 10 percent. A $1,000 cash deposit into a savings account will immediately increase the bank's required reserves by _____.

Accepted Answer

A)  $10,000. 
B)  $500. 
C)  $100. 
D)  $1,500. 
E)  $10. 
A)  $10,000. 
B)  $500. 
C)  $100. 
D)  $1,500. 
E)  $10.

Question 18

The U.S. dollar is a composite currency.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following facilities give bank customers access to services over a much wider geographic area than any single bank's branches can cover?

Accepted Answer

A)  Traveler's checks 
B)  Saving account checks 
C)  ATM networks 
D)  Demand drafts 
E)  Certificates of deposit 
A)  Traveler's checks 
B)  Saving account checks 
C)  ATM networks 
D)  Demand drafts 
E)  Certificates of deposit

Question 20

An asset is said to be illiquid when:

Accepted Answer

A)  it lacks purchasing power. 
B)  it cannot act as a store of value. 
C)  it is an illegal tender. 
D)  it cannot be readily exchanged for goods. 
E)  it cannot be used to settle debts. 
A)  it lacks purchasing power. 
B)  it cannot act as a store of value. 
C)  it is an illegal tender. 
D)  it cannot be readily exchanged for goods. 
E)  it cannot be used to settle debts.

A composite currency whose value is the average of the value of the U.S. dollar, the Japanese yen, the euro, and the British pound is known as:

Suppose the reserve requirement is 10 percent and a person deposits $1,500 in a local bank. That single local bank can now create a maximum of:

The main advantage of the Eurocurrency market is that investment funds cannot be subject to foreign government controls.

Under the system of fractional reserve banking, the reserve requirement is the ratio of excess reserves to total reserves.

Which of the following is true of International Banking Facilities (IBFs) in the U.S.?

Because a bank pays a lower interest rate on deposits than it charges on loans, it cannot fail.

Identify the correct definition of liquidity.

The money-creating ability of the banking system may be lowered by:

Which of the following is not true about a special drawing right (SDR)?

If the deposit expansion multiplier is 20, what is the reserve requirement in the banking system?

The primary international reserves in most countries is:

An increase in the amount of currency held by the public will raise the value of the deposit expansion multiplier.

The cash reserves held by banks that are illegal are called excess reserves.

Which of the following is true of offshore banking?

Prior to 1980, thrift institutions in the United States were allowed to offer checking accounts.

Assume that the reserve requirement is 10 percent. A $1,000 cash deposit into a savings account will immediately increase the bank's required reserves by _____.

The U.S. dollar is a composite currency.

Which of the following facilities give bank customers access to services over a much wider geographic area than any single bank's branches can cover?

An asset is said to be illiquid when:

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

National Income Accounting

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

Exam 12: Money and Banking

A composite currency whose value is the average of the value of the U.S. dollar, the Japanese yen, the euro, and the British pound is known as:

Suppose the reserve requirement is 10 percent and a person deposits $1,500 in a local bank. That single local bank can now create a maximum of:

The main advantage of the Eurocurrency market is that investment funds cannot be subject to foreign government controls.

Under the system of fractional reserve banking, the reserve requirement is the ratio of excess reserves to total reserves.

Which of the following is true of International Banking Facilities (IBFs) in the U.S.?

Because a bank pays a lower interest rate on deposits than it charges on loans, it cannot fail.

Identify the correct definition of liquidity.

The money-creating ability of the banking system may be lowered by:

Which of the following is not true about a special drawing right (SDR)?

If the deposit expansion multiplier is 20, what is the reserve requirement in the banking system?

The primary international reserves in most countries is:

An increase in the amount of currency held by the public will raise the value of the deposit expansion multiplier.

The cash reserves held by banks that are illegal are called excess reserves.

Which of the following is true of offshore banking?

Prior to 1980, thrift institutions in the United States were allowed to offer checking accounts.

Assume that the reserve requirement is 10 percent. A $1,000 cash deposit into a savings account will immediately increase the bank's required reserves by _____.

The U.S. dollar is a composite currency.

Which of the following facilities give bank customers access to services over a much wider geographic area than any single bank's branches can cover?

An asset is said to be illiquid when:

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

National Income Accounting

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters