Question 1

Commercial banks act as middlemen between savers and borrowers, therefore they are called _____.

Accepted Answer

A)  lenders of the last resort 
B)  financial intermediaries 
C)  banker's banks 
D)  thrift institutions 
E)  profitable institutions 
A)  lenders of the last resort 
B)  financial intermediaries 
C)  banker's banks 
D)  thrift institutions 
E)  profitable institutions

Question 2

Other things equal, when U.S. money moves to other countries to take advantage of better foreign investment opportunities, then:

Accepted Answer

A)  the U.S. money supply will increase. 
B)  the reserve requirement for U.S. banks will rise. 
C)  the U.S. money supply will decrease. 
D)  U.S. banks will have more excess reserves to loan out. 
E)  the effect of the U.S. deposit expansion multiplier will be increased. 
A)  the U.S. money supply will increase. 
B)  the reserve requirement for U.S. banks will rise. 
C)  the U.S. money supply will decrease. 
D)  U.S. banks will have more excess reserves to loan out. 
E)  the effect of the U.S. deposit expansion multiplier will be increased.

Question 3

Excess reserves are equal to:

Accepted Answer

A)  total reserves plus required reserves. 
B)  cash plus required reserves. 
C)  total reserves minus cash. 
D)  total reserves minus required reserves. 
E)  required reserves minus total reserves. 
A)  total reserves plus required reserves. 
B)  cash plus required reserves. 
C)  total reserves minus cash. 
D)  total reserves minus required reserves. 
E)  required reserves minus total reserves.

Question 4

Currency includes coins and paper money in circulation and stored in the federal reserve vaults.

Accepted Answer

A) True 
 B)False

Question 5

When depository institutions have negative excess reserves, it indicates that the banking system is not "loaned up."

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is true of other checkable deposits?

Accepted Answer

A)  These are checking account deposits at commercial banks and do not pay any interest. 
B)  They are accounts at financial institutions that pay interest and give the depositor check-writing privileges. 
C)  They comprise solely of demand deposits at mutual savings banks. 
D)  They are not included in the M1 money supply. 
E)  They are savings deposits that earn interest at savings and loan associations. 
A)  These are checking account deposits at commercial banks and do not pay any interest. 
B)  They are accounts at financial institutions that pay interest and give the depositor check-writing privileges. 
C)  They comprise solely of demand deposits at mutual savings banks. 
D)  They are not included in the M1 money supply. 
E)  They are savings deposits that earn interest at savings and loan associations.

Question 7

What is the immediate effect when Bank A lends $1,000 to a local business?

Accepted Answer

A)  The money supply increases by $1,000 
B)  The money supply decreases by $1,000 
C)  Bank A's liability increases by $1,000 
D)  Bank A's excess reserves increase by $1,000 
E)  Bank A's demand deposits decrease by $1,000 
A)  The money supply increases by $1,000 
B)  The money supply decreases by $1,000 
C)  Bank A's liability increases by $1,000 
D)  Bank A's excess reserves increase by $1,000 
E)  Bank A's demand deposits decrease by $1,000

Question 8

When you save $1,500 for a spring-break vacation in Cancun, you are using money as a standard of deferred payment.

Accepted Answer

A) True 
 B)False

Question 9

The Depository Institutions Deregulation and Monetary Control Act passed by the Congress in 1980 led to:

Accepted Answer

A)  the complete removal of thrift institutions. 
B)  increased competition among financial institutions. 
C)  the formation of large number of savings and loan associations. 
D)  privatization of all financial institutions in the U.S. 
E)  the complete removal of credit unions. 
A)  the complete removal of thrift institutions. 
B)  increased competition among financial institutions. 
C)  the formation of large number of savings and loan associations. 
D)  privatization of all financial institutions in the U.S. 
E)  the complete removal of credit unions.

Question 10

Which of the following statements applies to international banking facilities (IBFs)?

Accepted Answer

A)  IBFs are subject to U.S. interest rate regulations. 
B)  IBFs are located all over the world. 
C)  IBFs do not require FDIC deposit insurance. 
D)  IBFs offer a higher interest rate spread than normal U.S. banks. 
E)  IBFs allow European residents to participate in the American stock exchanges. 
A)  IBFs are subject to U.S. interest rate regulations. 
B)  IBFs are located all over the world. 
C)  IBFs do not require FDIC deposit insurance. 
D)  IBFs offer a higher interest rate spread than normal U.S. banks. 
E)  IBFs allow European residents to participate in the American stock exchanges.

Question 11

Stocks and bonds are considered to be highly illiquid assets while real estate is considered to be a liquid asset.

Accepted Answer

A) True 
 B)False

Question 12

For a depository institution, reserves are:

Accepted Answer

A)  assets on the balance sheet. 
B)  loans to individuals and businesses. 
C)  borrowings from the central bank. 
D)  liabilities it owes to customers. 
E)  checkable deposits. 
A)  assets on the balance sheet. 
B)  loans to individuals and businesses. 
C)  borrowings from the central bank. 
D)  liabilities it owes to customers. 
E)  checkable deposits.

Question 13

Which of the following properties should be satisfied by a commodity to be considered as money?

Accepted Answer

A)  Scarce and rare 
B)  Perishable 
C)  Indivisible 
D)  Unpredictable in value 
E)  Homogenous in nature 
A)  Scarce and rare 
B)  Perishable 
C)  Indivisible 
D)  Unpredictable in value 
E)  Homogenous in nature

Question 14

Which of the following is true of international reserve currencies?

Accepted Answer

A)  They are used for international exchange of goods and services. 
B)  They are used to settle international debt. 
C)  They are used for international bookkeeping. 
D)  They are held for government investment abroad. 
E)  They are created for international stock market trading. 
A)  They are used for international exchange of goods and services. 
B)  They are used to settle international debt. 
C)  They are used for international bookkeeping. 
D)  They are held for government investment abroad. 
E)  They are created for international stock market trading.

Question 15

Which of the following would be counted as part of M1?

Accepted Answer

A)  Money market deposit accounts 
B)  Savings deposits 
C)  Mutual funds 
D)  Traveler's checks 
E)  Time deposits 
A)  Money market deposit accounts 
B)  Savings deposits 
C)  Mutual funds 
D)  Traveler's checks 
E)  Time deposits

Question 16

Table 12.2
 $\begin{array}{c}
\text {  Balance Sheet  }\
\quad\quad\quad\text { Assets } \quad\quad\quad\quad\quad\quad\quad\quad \text { Liabilities }\
\begin{array}{|c|c|c|c|}
\hline\text { Cash } & \$ 5,000 & \begin{array}{c}
\text { Demand } \
\text { Deposits }
\end{array} & \$ 20,000 \
\hline \text { Loans } & 15,000 & & \
\hline \text { Total Assets } & \$ 20,000 & \text { Total Liabilities } & \$ 20,000 \
\hline
\end{array}\end{array}$

-Refer to Table 12.2. Assume a reserve requirement of 10 percent. The maximum amount of new loans the bank could extend is _____.

Accepted Answer

A)  $500 
B)  $1,000 
C)  $2,000 
D)  $3,000 
E)  $4,000 
A)  $500 
B)  $1,000 
C)  $2,000 
D)  $3,000 
E)  $4,000

Question 17

The table given below records the amount of new deposits, the value of required reserves, and total amount loaned out by Banks 1, 2, and 3.
Table 12.3
 $\begin{array}{l}
\begin{array}{|c|c|c|c|}
\hline \text { Bank } & \text { New Deposit } & \begin{array}{c}
\text { Required } \
\text { Reserves }
\end{array} & \text { Loans } \
\hline \text { Bank 1 } & \$ 10,000 & \$ 1,000 & \$ 9,000 \
\hline \text { Bank 2 } & \$ 9,000 & \$ 900 & \$ 8,100 \
\hline \text { Bank 3 } & \$ 8,100 & \$ 810 & \$ 7,290 \
\hline
\end{array}\
\text { *Assume all excess reserves are loaned out. }
\end{array}$
-Refer to Table 12.3. What is the total increase in the money supply created in the banking system as a result of the initial deposit of $10,000 in Bank 1?

Accepted Answer

A)  $10,000 
B)  $27,100 
C)  $100,000 
D)  $90,000 
E)  $20,000 
A)  $10,000 
B)  $27,100 
C)  $100,000 
D)  $90,000 
E)  $20,000

Question 18

Scarcity and durability characterize the property of money as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 19

The U.S. banks have been facing greater competition from the Eurocurrency market because of the establishment of international banking facilities.

Accepted Answer

A) True 
 B)False

Question 20

If the reserve requirement is 33.3 percent, what is the approximate value of deposit expansion multiplier?

Accepted Answer

A)  3.33 
B)  3 
C)  0.33 
D)  0.667 
E)  1.5 
A)  3.33 
B)  3 
C)  0.33 
D)  0.667 
E)  1.5

Commercial banks act as middlemen between savers and borrowers, therefore they are called _____.

Other things equal, when U.S. money moves to other countries to take advantage of better foreign investment opportunities, then:

Excess reserves are equal to:

Currency includes coins and paper money in circulation and stored in the federal reserve vaults.

When depository institutions have negative excess reserves, it indicates that the banking system is not "loaned up."

Which of the following is true of other checkable deposits?

What is the immediate effect when Bank A lends $1,000 to a local business?

When you save $1,500 for a spring-break vacation in Cancun, you are using money as a standard of deferred payment.

The Depository Institutions Deregulation and Monetary Control Act passed by the Congress in 1980 led to:

Which of the following statements applies to international banking facilities (IBFs)?

Stocks and bonds are considered to be highly illiquid assets while real estate is considered to be a liquid asset.

For a depository institution, reserves are:

Which of the following properties should be satisfied by a commodity to be considered as money?

Which of the following is true of international reserve currencies?

Which of the following would be counted as part of M1?

Table 12.2 Balance Sheet Assets Liabilities Cash \ 5,000 Demand Deposits \ 20,000 Loans 15,000 Total Assets \ 20,000 Total Liabilities \ 20,000 -Refer to Table 12.2. Assume a reserve requirement of 10 percent. The maximum amount of new loans the bank could extend is _____.

Scarcity and durability characterize the property of money as a medium of exchange.

The U.S. banks have been facing greater competition from the Eurocurrency market because of the establishment of international banking facilities.

If the reserve requirement is 33.3 percent, what is the approximate value of deposit expansion multiplier?

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

Commercial banks act as middlemen between savers and borrowers, therefore they are called _____.

Other things equal, when U.S. money moves to other countries to take advantage of better foreign investment opportunities, then:

Excess reserves are equal to:

Currency includes coins and paper money in circulation and stored in the federal reserve vaults.

When depository institutions have negative excess reserves, it indicates that the banking system is not "loaned up."

Which of the following is true of other checkable deposits?

What is the immediate effect when Bank A lends $1,000 to a local business?

When you save $1,500 for a spring-break vacation in Cancun, you are using money as a standard of deferred payment.

The Depository Institutions Deregulation and Monetary Control Act passed by the Congress in 1980 led to:

Which of the following statements applies to international banking facilities (IBFs)?

Stocks and bonds are considered to be highly illiquid assets while real estate is considered to be a liquid asset.

For a depository institution, reserves are:

Which of the following properties should be satisfied by a commodity to be considered as money?

Which of the following is true of international reserve currencies?

Which of the following would be counted as part of M1?

Table 12.2 Balance Sheet Assets Liabilities Cash \ 5,000 Demand Deposits \ 20,000 Loans 15,000 Total Assets \ 20,000 Total Liabilities \ 20,000 -Refer to Table 12.2. Assume a reserve requirement of 10 percent. The maximum amount of new loans the bank could extend is _____.

Scarcity and durability characterize the property of money as a medium of exchange.

The U.S. banks have been facing greater competition from the Eurocurrency market because of the establishment of international banking facilities.

If the reserve requirement is 33.3 percent, what is the approximate value of deposit expansion multiplier?

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