Question 1

List the various categories into which a bank's liabilities are divided.

Accepted Answer

A bank's liabilities are divided into th

Question 2

An optimizing economic agent will use the ________ rate when calculating the economic cost of a loan.

Accepted Answer

A)  tax 
B)  exchange 
C)  real interest 
D)  nominal interest 
A)  tax 
B)  exchange 
C)  real interest 
D)  nominal interest

Question 3

The following table shows a T-account for Bank A in a new economy.
  
-Refer to the table above.If the required reserve ratio is 5 percent,how much is Bank A currently holding in excess reserves?

Accepted Answer

A)  $0 
B)  $400 
C)  $800 
D)  $1,200 
A)  $0 
B)  $400 
C)  $800 
D)  $1,200

Question 4

The credit demand curve is the schedule that reports the relationship between the quantity of credit demanded and ________ in an economy,assuming all else equal.

Accepted Answer

A)  the average tax rate 
B)  the annual inflation rate 
C)  the real rate of interest 
D)  the nominal rate of interest 
A)  the average tax rate 
B)  the annual inflation rate 
C)  the real rate of interest 
D)  the nominal rate of interest

Question 5

Borrowed funds that are to be repaid in a year or more are referred to as ________.

Accepted Answer

A)  annual debt 
B)  long-term debt 
C)  loanable funds 
D)  stockholders' equity 
A)  annual debt 
B)  long-term debt 
C)  loanable funds 
D)  stockholders' equity

Question 6

Assuming all else equal,if a firm decides to pay more dividends and lowers the amount of retained earnings it holds,it will cause ________.

Accepted Answer

A)  the current credit supply curve of the firm to shift to the left 
B)  the current credit supply curve of the firm to shift to the right 
C)  an upward movement along the current credit supply curve of the firm 
D)  a downward movement along the current credit supply curve of the firm 
A)  the current credit supply curve of the firm to shift to the left 
B)  the current credit supply curve of the firm to shift to the right 
C)  an upward movement along the current credit supply curve of the firm 
D)  a downward movement along the current credit supply curve of the firm

Question 7

The following table lists some economic agents and their intentions. At present the interest rate is 5 percent.
  
-Refer to the table above.What further information would help construct the supply curve in the credit market in this case?

Accepted Answer

A)  The interest rate will increase to 6 percent. 
B)  As the interest rate decreases to 3 percent, Pie's Pizza and Sophie decide to take out loans of $110,000 and $12,000, respectively. 
C)  As the interest rate increases to 6 percent, Pie's Pizza and Sophie decide to take out loans of $110,000 and $12,000 respectively. 
D)  As the interest rate increases to 6 percent, Mike and Sara decide to save $55,000 and $130,000, respectively. 
A)  The interest rate will increase to 6 percent. 
B)  As the interest rate decreases to 3 percent, Pie's Pizza and Sophie decide to take out loans of $110,000 and $12,000, respectively. 
C)  As the interest rate increases to 6 percent, Pie's Pizza and Sophie decide to take out loans of $110,000 and $12,000 respectively. 
D)  As the interest rate increases to 6 percent, Mike and Sara decide to save $55,000 and $130,000, respectively.

Question 8

Assuming all else equal,the credit supply curve shows the relationship between the quantity of credit supplied and the ________.

Accepted Answer

A)  inflation rate 
B)  real wage rate 
C)  income tax rate 
D)  real interest rate 
A)  inflation rate 
B)  real wage rate 
C)  income tax rate 
D)  real interest rate

Question 9

Scenario: Amateur Bank is just starting out and has had the following transactions:
• Amateur Bank takes out a $3,000 loan from Pro Bank.
• Amateur bank has $2,500 invested in building and operations.
• Suzie deposits $1,200.
• Joe deposits $750.
• Robbie takes out a loan for $900.
• Jackie takes out a business loan for $625.
• Amateur Bank invests $1,000 in GoPro.
-Refer to the scenario above.How much does Amateur Bank have in excess reserves?

Accepted Answer

A)  $105 
B)  $230 
C)  $300 
D)  $425 
A)  $105 
B)  $230 
C)  $300 
D)  $425

Question 10

The following table shows a T-account for Bank A in a new economy.
  
-Refer to the table above.What is the missing value for the amount of reserves that the bank has?

Accepted Answer

A)  $1,850 
B)  $2,850 
C)  $14,050 
D)  $24,150 
A)  $1,850 
B)  $2,850 
C)  $14,050 
D)  $24,150

Question 11

The following table shows the balance sheet for Poor Baby Bank.
  
-Refer to the table above.If the required reserve ratio increases to 25 percent,what could Poor Baby Bank do to satisfy the reserve requirements?

Accepted Answer

A)  Nothing. It has enough reserves. 
B)  Increase its reserves by $3 by liquidating some of its long-term investments. 
C)  Increase its reserves by $4.50 by borrowing more from other banks. 
D)  Increase its deposits by $5. 
A)  Nothing. It has enough reserves. 
B)  Increase its reserves by $3 by liquidating some of its long-term investments. 
C)  Increase its reserves by $4.50 by borrowing more from other banks. 
D)  Increase its deposits by $5.

Question 12

The following figure plots real interest rate against quantity of credit.
  
-Refer to the figure above.Without a credit market such as that pictured,________.

Accepted Answer

A)  it would be less risky to save 
B)  resources would be allocated more efficiently 
C)  resources would be allocated less efficiently 
D)  it would be more risky to save 
A)  it would be less risky to save 
B)  resources would be allocated more efficiently 
C)  resources would be allocated less efficiently 
D)  it would be more risky to save

Question 13

Throughout the past century,what can be said about financial crises in the United States?

Accepted Answer

A)  Each financial crisis resulted from a housing bubble. 
B)  Each financial crisis resulted in the failure of a number of banks. 
C)  Each financial crisis resulted in the failure of some of the largest banks. 
D)  Only the most recent financial crisis resulted in bank failures. 
A)  Each financial crisis resulted from a housing bubble. 
B)  Each financial crisis resulted in the failure of a number of banks. 
C)  Each financial crisis resulted in the failure of some of the largest banks. 
D)  Only the most recent financial crisis resulted in bank failures.

Question 14

The following table shows Free Donut Bank's balance sheet. Free Donut Bank has a required reserve ratio of 20 percent and has $75 in excess reserves.
  
-Refer to the table above.What is the amount of Free Donut Bank's cash equivalents?

Accepted Answer

A)  $110 
B)  $175 
C)  $245 
D)  $310 
A)  $110 
B)  $175 
C)  $245 
D)  $310

Question 15

The following table shows a T-account for Bank A in a new economy.
  
-Refer to the table above.If the reserve ratio remains the same and deposits increase by 16 percent,how much can the bank increase its loans by?

Accepted Answer

A)  5 percent 
B)  12 percent 
C)  24 percent 
D)  None of the above 
A)  5 percent 
B)  12 percent 
C)  24 percent 
D)  None of the above

Question 16

Which of the following statements is true?

Accepted Answer

A)  An increase in the real interest rate might discourage savings. 
B)  An increase in the real interest rate always encourages higher savings. 
C)  In an economy with a positive inflation rate, the real wage rate is always greater than the nominal wage rate. 
D)  An increase in the nominal wage rate leads to a decrease in the real wage rate if the price level is stable. 
A)  An increase in the real interest rate might discourage savings. 
B)  An increase in the real interest rate always encourages higher savings. 
C)  In an economy with a positive inflation rate, the real wage rate is always greater than the nominal wage rate. 
D)  An increase in the nominal wage rate leads to a decrease in the real wage rate if the price level is stable.

Question 17

Suppose Bank A holds $50,000 in deposits with other banks.On its balance sheet,this amount will be accounted as Bank A's ________.

Accepted Answer

A)  reserves 
B)  cash equivalents 
C)  long-term investments 
D)  short-term borrowing 
A)  reserves 
B)  cash equivalents 
C)  long-term investments 
D)  short-term borrowing

Question 18

The following table shows Free Donut Bank's balance sheet. Free Donut Bank has a required reserve ratio of 20 percent and has $75 in excess reserves.
  
-Refer to the table above.What are Free Donut Bank's total assets?

Accepted Answer

A)  $1,260 
B)  $1,335 
C)  $1,375 
D)  $1,435 
A)  $1,260 
B)  $1,335 
C)  $1,375 
D)  $1,435

Question 19

The following table lists some economic agents and their intentions. At present the interest rate is 5 percent.
  
-Refer to the table above.If the table represents an entire loanable funds market,then ________.

Accepted Answer

A)  the interest rate is zero 
B)  it does not reach market clearing equilibrium 
C)  the equilibrium will be at a total amount of credit of $130,000 
D)  the equilibrium will be at a total amount of credit below $150,000 
A)  the interest rate is zero 
B)  it does not reach market clearing equilibrium 
C)  the equilibrium will be at a total amount of credit of $130,000 
D)  the equilibrium will be at a total amount of credit below $150,000

Question 20

Which of the following statements is true?

Accepted Answer

A)  Money that is lent out is considered to be a liability. 
B)  People who lend money are known as debtors. 
C)  People who borrow money are known as creditors. 
D)  Non-bank institutions are also a part of the credit market. 
A)  Money that is lent out is considered to be a liability. 
B)  People who lend money are known as debtors. 
C)  People who borrow money are known as creditors. 
D)  Non-bank institutions are also a part of the credit market.

List the various categories into which a bank's liabilities are divided.

An optimizing economic agent will use the ________ rate when calculating the economic cost of a loan.

The following table shows a T-account for Bank A in a new economy. -Refer to the table above.If the required reserve ratio is 5 percent,how much is Bank A currently holding in excess reserves?

The credit demand curve is the schedule that reports the relationship between the quantity of credit demanded and ________ in an economy,assuming all else equal.

Borrowed funds that are to be repaid in a year or more are referred to as ________.

Assuming all else equal,if a firm decides to pay more dividends and lowers the amount of retained earnings it holds,it will cause ________.

The following table lists some economic agents and their intentions. At present the interest rate is 5 percent. -Refer to the table above.What further information would help construct the supply curve in the credit market in this case?

Assuming all else equal,the credit supply curve shows the relationship between the quantity of credit supplied and the ________.

The following table shows a T-account for Bank A in a new economy. -Refer to the table above.What is the missing value for the amount of reserves that the bank has?

The following table shows the balance sheet for Poor Baby Bank. -Refer to the table above.If the required reserve ratio increases to 25 percent,what could Poor Baby Bank do to satisfy the reserve requirements?

The following figure plots real interest rate against quantity of credit. -Refer to the figure above.Without a credit market such as that pictured,________.

Throughout the past century,what can be said about financial crises in the United States?

The following table shows Free Donut Bank's balance sheet. Free Donut Bank has a required reserve ratio of 20 percent and has $75 in excess reserves. -Refer to the table above.What is the amount of Free Donut Bank's cash equivalents?

The following table shows a T-account for Bank A in a new economy. -Refer to the table above.If the reserve ratio remains the same and deposits increase by 16 percent,how much can the bank increase its loans by?

Which of the following statements is true?

Suppose Bank A holds $50,000 in deposits with other banks.On its balance sheet,this amount will be accounted as Bank A's ________.

The following table shows Free Donut Bank's balance sheet. Free Donut Bank has a required reserve ratio of 20 percent and has $75 in excess reserves. -Refer to the table above.What are Free Donut Bank's total assets?

The following table lists some economic agents and their intentions. At present the interest rate is 5 percent. -Refer to the table above.If the table represents an entire loanable funds market,then ________.

Which of the following statements is true?

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, Supply, and Equilibrium

The Wealth of Nations: Defining and Measuring Macroeconomic Aggregates

Aggregate Incomes

Economic Growth

Why Isn't the Whole World Developed?

Employment and Unemployment

The Monetary System

Short-Run Fluctuations

Countercyclical Macroeconomic Policy

Macroeconomics and International Trade

Open Economy Macroeconomics

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Exam 10: Credit Markets

List the various categories into which a bank's liabilities are divided.

An optimizing economic agent will use the ________ rate when calculating the economic cost of a loan.

The following table shows a T-account for Bank A in a new economy. -Refer to the table above.If the required reserve ratio is 5 percent,how much is Bank A currently holding in excess reserves?

The credit demand curve is the schedule that reports the relationship between the quantity of credit demanded and ________ in an economy,assuming all else equal.

Borrowed funds that are to be repaid in a year or more are referred to as ________.

Assuming all else equal,if a firm decides to pay more dividends and lowers the amount of retained earnings it holds,it will cause ________.

The following table lists some economic agents and their intentions. At present the interest rate is 5 percent. -Refer to the table above.What further information would help construct the supply curve in the credit market in this case?

Assuming all else equal,the credit supply curve shows the relationship between the quantity of credit supplied and the ________.

The following table shows a T-account for Bank A in a new economy. -Refer to the table above.What is the missing value for the amount of reserves that the bank has?

The following table shows the balance sheet for Poor Baby Bank. -Refer to the table above.If the required reserve ratio increases to 25 percent,what could Poor Baby Bank do to satisfy the reserve requirements?

The following figure plots real interest rate against quantity of credit. -Refer to the figure above.Without a credit market such as that pictured,________.

Throughout the past century,what can be said about financial crises in the United States?

The following table shows Free Donut Bank's balance sheet. Free Donut Bank has a required reserve ratio of 20 percent and has $75 in excess reserves. -Refer to the table above.What is the amount of Free Donut Bank's cash equivalents?

The following table shows a T-account for Bank A in a new economy. -Refer to the table above.If the reserve ratio remains the same and deposits increase by 16 percent,how much can the bank increase its loans by?

Which of the following statements is true?

Suppose Bank A holds $50,000 in deposits with other banks.On its balance sheet,this amount will be accounted as Bank A's ________.

The following table shows Free Donut Bank's balance sheet. Free Donut Bank has a required reserve ratio of 20 percent and has $75 in excess reserves. -Refer to the table above.What are Free Donut Bank's total assets?

The following table lists some economic agents and their intentions. At present the interest rate is 5 percent. -Refer to the table above.If the table represents an entire loanable funds market,then ________.

Which of the following statements is true?

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, Supply, and Equilibrium

The Wealth of Nations: Defining and Measuring Macroeconomic Aggregates

Aggregate Incomes

Economic Growth

Why Isn't the Whole World Developed?

Employment and Unemployment

The Monetary System

Short-Run Fluctuations

Countercyclical Macroeconomic Policy

Macroeconomics and International Trade

Open Economy Macroeconomics

Filters