Exam 28: Money and the Banking System

The deposit-creation formula can be defined as

Under fractional banking, when a bank lends to a customer

Which of the following observations is not true?

During the financial crisis of 2007-2009, the U.S. government determined that

When excess reserves increase, the deposit multiplier is

The distinction between M1 and M2 is based on

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

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

The Federal Deposit Insurance Corporation insures

In order for barter trades to occur, there must be a

Excess reserves make a bank less vulnerable to runs, but bankers do not like to hold excess reserves because holding excess reserves

Agraria sends wheat to Cyberia in exchange for computers and technology goods. This is an example of

Many economists believe that the difference between savings accounts and checking accounts is disappearing.

Banks try to keep their level of excess reserves low because

Commodity money is

Paper money has been in use since the

The Ponderosa Bank receives a new deposit of $2,500. The reserves requirement is 20 percent. How much can this bank loan out as a result of this deposit?

One advantage of a money system compared to a barter system is that

In a fractional reserve banking system,

During a recession, profit-oriented banks would be prone to reduce the money supply by increasing their excess reserves and declining to lend to less creditworthy applicants.