Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

The occurrence of bank failures in the United States

Accepted Answer

A)  ended after 1933 and the creation of the FDIC. 
B)  increased dramatically during the Clinton administration. 
C)  reappeared in intensity in the late 1990s and early 2000s. 
D)  reappeared in the 1980s and early 1990s and again in 2006. 
A)  ended after 1933 and the creation of the FDIC. 
B)  increased dramatically during the Clinton administration. 
C)  reappeared in intensity in the late 1990s and early 2000s. 
D)  reappeared in the 1980s and early 1990s and again in 2006.

Question 3

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.

Question 4

The official definition of the money supply that includes coins, paper money, travelers' checks, conventional checking accounts, and other checkable deposits at banks and saving institutions is called ____.

Accepted Answer

A)  M1 
B)  M2 
C)  M3 
D)  L 
A)  M1 
B)  M2 
C)  M3 
D)  L

Question 5

The net worth of a bank is defined as the difference between

Accepted Answer

A)  income and expenses. 
B)  assets and liabilities. 
C)  loans and deposits. 
D)  loans and reserves. 
A)  income and expenses. 
B)  assets and liabilities. 
C)  loans and deposits. 
D)  loans and reserves.

Question 6

Any reserves held by a bank above the amount of minimum legal reserves are called

Accepted Answer

A)  total reserves. 
B)  required reserves. 
C)  fiat money. 
D)  excess reserves. 
A)  total reserves. 
B)  required reserves. 
C)  fiat money. 
D)  excess reserves.

Question 7

Banks cannot influence the money supply if they hold all deposits in reserve.

Accepted Answer

A) True 
 B)False

Question 8

Banks will keep excess reserves when

Accepted Answer

A)  they do not foresee profitable opportunities to make loans. 
B)  business conditions generally are depressed. 
C)  they do not foresee opportunities to make secure loans. 
D)  All of these responses are correct. 
A)  they do not foresee profitable opportunities to make loans. 
B)  business conditions generally are depressed. 
C)  they do not foresee opportunities to make secure loans. 
D)  All of these responses are correct.

Question 9

The early goldsmiths issued money in the form of

Accepted Answer

A)  coins made from gold in their safes. 
B)  receipts for the acceptance of gold deposits. 
C)  gold fragments left over from the production of jewelry. 
D)  fully backed gold certificates. 
A)  coins made from gold in their safes. 
B)  receipts for the acceptance of gold deposits. 
C)  gold fragments left over from the production of jewelry. 
D)  fully backed gold certificates.

Question 10

An important effect of fractional reserve banking is that bankers have

Accepted Answer

A)  little control over total reserves. 
B)  total control over the amount of lending in the economy. 
C)  no control over the amount of reserves in the banking system. 
D)  some discretion over the money supply. 
A)  little control over total reserves. 
B)  total control over the amount of lending in the economy. 
C)  no control over the amount of reserves in the banking system. 
D)  some discretion over the money supply.

Question 11

Most bank deposits in the United States are insured by the Federal Deposit Insurance Corporation (FDIC).

Accepted Answer

A) True 
 B)False

Question 12

Barter transactions involve a double coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is an example of fiat money?

Accepted Answer

A)  Gold 
B)  Paper dollars 
C)  Solid silver coins. 
D)  None of the above is correct. 
A)  Gold 
B)  Paper dollars 
C)  Solid silver coins. 
D)  None of the above is correct.

Question 14

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 15

The basic equation for a bank's balance sheet is ____.

Accepted Answer

A)  assets = liabilities − net worth 
B)  net worth = assets − liabilities 
C)  net worth = assets + liabilities 
D)  liabilities = net worth + assets 
A)  assets = liabilities − net worth 
B)  net worth = assets − liabilities 
C)  net worth = assets + liabilities 
D)  liabilities = net worth + assets

Question 16

Money's principal function is to serve as a

Accepted Answer

A)  standard for making loans. 
B)  standard for credit reporting. 
C)  medium of exchange. 
D)  method for storing wealth. 
A)  standard for making loans. 
B)  standard for credit reporting. 
C)  medium of exchange. 
D)  method for storing wealth.

Question 17

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 18

Which of the following is an example of money serving as a medium of exchange?

Accepted Answer

A)  Richard puts money into a piggy bank. 
B)  Ellen deposits cash into a money market account. 
C)  Sean puts a new $20 bill into his currency collection. 
D)  Marian buys a carbo-loaded drink before a marathon. 
A)  Richard puts money into a piggy bank. 
B)  Ellen deposits cash into a money market account. 
C)  Sean puts a new $20 bill into his currency collection. 
D)  Marian buys a carbo-loaded drink before a marathon.

Question 19

The money multiplier yielded by the deposit-creation formula assumes that

Accepted Answer

A)  banks hold no excess reserves. 
B)  banks hold excess reserves. 
C)  recipients of loans take some of the proceeds in cash. 
D)  recipients of loans do not redeposit their funds in other banks. 
A)  banks hold no excess reserves. 
B)  banks hold excess reserves. 
C)  recipients of loans take some of the proceeds in cash. 
D)  recipients of loans do not redeposit their funds in other banks.

Question 20

Liquid assets that are close substitutes for money are known as

Accepted Answer

A)  near moneys. 
B)  far moneys 
C)  deposits. 
D)  None of the above is correct. 
A)  near moneys. 
B)  far moneys 
C)  deposits. 
D)  None of the above is correct.

Exam 28: Money and the Banking System

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

The occurrence of bank failures in the United States

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

The official definition of the money supply that includes coins, paper money, travelers' checks, conventional checking accounts, and other checkable deposits at banks and saving institutions is called ____.

The net worth of a bank is defined as the difference between

Any reserves held by a bank above the amount of minimum legal reserves are called

Banks cannot influence the money supply if they hold all deposits in reserve.

Banks will keep excess reserves when

The early goldsmiths issued money in the form of

An important effect of fractional reserve banking is that bankers have

Most bank deposits in the United States are insured by the Federal Deposit Insurance Corporation (FDIC).

Barter transactions involve a double coincidence of wants.

Which of the following is an example of fiat money?

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

The basic equation for a bank's balance sheet is ____.

Money's principal function is to serve as a

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

Which of the following is an example of money serving as a medium of exchange?

The money multiplier yielded by the deposit-creation formula assumes that

Liquid assets that are close substitutes for money are known as

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

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 Us Economy

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