Question 1

One difference between the assets included in M1 and those added to calculate M2 is that items in M1 are

Accepted Answer

A)  better stores of value than those added to compute M2. 
B)  more liquid than those added to compute M2. 
C)  less liquid than those added to compute M2. 
D)  larger than those added to compute M2. 
A)  better stores of value than those added to compute M2. 
B)  more liquid than those added to compute M2. 
C)  less liquid than those added to compute M2. 
D)  larger than those added to compute M2.

Question 2

The value of the deposit multiplier is 1 divided by the required reserve ratio.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following observations is not t?

Accepted Answer

A)  Money is divisible. 
B)  The value of money never remains the same. 
C)  Money has an intrinsic value. 
D)  Money is the most liquid form of asset. 
A)  Money is divisible. 
B)  The value of money never remains the same. 
C)  Money has an intrinsic value. 
D)  Money is the most liquid form of asset.

Question 4

Bank regulators are concerned about the safety of depositors because

Accepted Answer

A)  bank failures were common throughout most of U.S. history and have even occurred in recent decades. 
B)  in the absence of federal insurance, depositors would lose their money if a bank failed. 
C)  nervous depositors may rush to withdraw their accounts and produce a "run" that could threaten even a sound bank. 
D)  All of the above are correct. 
A)  bank failures were common throughout most of U.S. history and have even occurred in recent decades. 
B)  in the absence of federal insurance, depositors would lose their money if a bank failed. 
C)  nervous depositors may rush to withdraw their accounts and produce a "run" that could threaten even a sound bank. 
D)  All of the above are correct.

Question 5

If you have a checking account at Citibank,the account is a liability of the bank.

Accepted Answer

A) True 
 B)False

Question 6

The main advantage of money market deposit accounts over traditional checking accounts is the ease of check writing.

Accepted Answer

A) True 
 B)False

Question 7

When a bank makes loans with excess reserves,it

Accepted Answer

A)  creates money. 
B)  destroys money. 
C)  alters the composition of M1. 
D)  leaves the money supply unchanged. 
A)  creates money. 
B)  destroys money. 
C)  alters the composition of M1. 
D)  leaves the money supply unchanged.

Question 8

One conceptual problem in assigning assets to M1,M2,etc.is

Accepted Answer

A)  distinguishing money from "near monies." 
B)  the problem of measuring asset size. 
C)  the need to agree on a unit of account. 
D)  the different size of financial assets. 
A)  distinguishing money from "near monies." 
B)  the problem of measuring asset size. 
C)  the need to agree on a unit of account. 
D)  the different size of financial assets.

Question 9

Banking under a fractional reserve system is inherently risky,but

Accepted Answer

A)  safe if banks are allowed to make profits. 
B)  regulation removes all danger of failures. 
C)  is always safely done with modern management. 
D)  is made safer with cautious and prudent management. 
A)  safe if banks are allowed to make profits. 
B)  regulation removes all danger of failures. 
C)  is always safely done with modern management. 
D)  is made safer with cautious and prudent management.

Question 10

Money market mutual funds are accounts that are

Accepted Answer

A)  usually offered by banks. 
B)  do not pay interest income. 
C)  insured by the federal government. 
D)  usually offered by brokerage and insurance firms. 
A)  usually offered by banks. 
B)  do not pay interest income. 
C)  insured by the federal government. 
D)  usually offered by brokerage and insurance firms.

Question 11

Due to new methods of electronically transferring assets from savings accounts to checking accounts,many economists favor moving savings accounts from

Accepted Answer

A)  M1 into M2. 
B)  M2 into M3. 
C)  M3 into M2. 
D)  M2 into M1. 
A)  M1 into M2. 
B)  M2 into M3. 
C)  M3 into M2. 
D)  M2 into M1.

Question 12

Banking under a system of fractional reserves is a(n)

Accepted Answer

A)  inherently risky business that is unsafe regardless of bank management. 
B)  inherently risky business that is relatively safe under prudent management. 
C)  fairly safe business unless management is irresponsible. 
D)  fairly safe business with no unusual risks. 
A)  inherently risky business that is unsafe regardless of bank management. 
B)  inherently risky business that is relatively safe under prudent management. 
C)  fairly safe business unless management is irresponsible. 
D)  fairly safe business with no unusual risks.

Question 13

Gold and silver have historically been the most common form of commodity money.

Accepted Answer

A) True 
 B)False

Question 14

In comparison to commodity money,paper money

Accepted Answer

A)  is not portable. 
B)  has no intrinsic value. 
C)  is not divisible. 
D)  cannot be stored. 
E)  All of the above are correct. 
A)  is not portable. 
B)  has no intrinsic value. 
C)  is not divisible. 
D)  cannot be stored. 
E)  All of the above are correct.

Question 15

Fractional reserve banking began as a search for

Accepted Answer

A)  a different metallic monetary system. 
B)  additional sources of gold. 
C)  different types of borrowers. 
D)  additional profits. 
A)  a different metallic monetary system. 
B)  additional sources of gold. 
C)  different types of borrowers. 
D)  additional profits.

Question 16

A liability to a bank is

Accepted Answer

A)  something that the bank owns. 
B)  something that the bank owes. 
C)  something a customer owes the bank. 
D)  the value of bank buildings and hardware. 
A)  something that the bank owns. 
B)  something that the bank owes. 
C)  something a customer owes the bank. 
D)  the value of bank buildings and hardware.

Question 17

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 18

When you pay for some purchase with a check,cash must be transferred to another account to pay for the check.

Accepted Answer

A) True 
 B)False

Question 19

The money creation process generated by an injection of reserves stops when

Accepted Answer

A)  people deposit their loans into other banks. 
B)  reserve requirements are raised. 
C)  the increase in required reserves equals the size of the injection. 
D)  bankers begin to fear runs and stop making loans. 
A)  people deposit their loans into other banks. 
B)  reserve requirements are raised. 
C)  the increase in required reserves equals the size of the injection. 
D)  bankers begin to fear runs and stop making loans.

Question 20

Unlike recent events in England,the United States has no recent history of bank failures.

Accepted Answer

A) True 
 B)False

One difference between the assets included in M1 and those added to calculate M2 is that items in M1 are

The value of the deposit multiplier is 1 divided by the required reserve ratio.

Which of the following observations is not t?

Bank regulators are concerned about the safety of depositors because

If you have a checking account at Citibank,the account is a liability of the bank.

The main advantage of money market deposit accounts over traditional checking accounts is the ease of check writing.

When a bank makes loans with excess reserves,it

One conceptual problem in assigning assets to M1,M2,etc.is

Banking under a fractional reserve system is inherently risky,but

Money market mutual funds are accounts that are

Due to new methods of electronically transferring assets from savings accounts to checking accounts,many economists favor moving savings accounts from

Banking under a system of fractional reserves is a(n)

Gold and silver have historically been the most common form of commodity money.

In comparison to commodity money,paper money

Fractional reserve banking began as a search for

A liability to a bank is

The occurrence of bank failures in the United States

When you pay for some purchase with a check,cash must be transferred to another account to pay for the check.

The money creation process generated by an injection of reserves stops when

Unlike recent events in England,the United States has no recent history of bank failures.

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

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Exam 12: Money and the Banking System

One difference between the assets included in M1 and those added to calculate M2 is that items in M1 are

The value of the deposit multiplier is 1 divided by the required reserve ratio.

Which of the following observations is not t?

Bank regulators are concerned about the safety of depositors because

If you have a checking account at Citibank,the account is a liability of the bank.

The main advantage of money market deposit accounts over traditional checking accounts is the ease of check writing.

When a bank makes loans with excess reserves,it

One conceptual problem in assigning assets to M1,M2,etc.is

Banking under a fractional reserve system is inherently risky,but

Money market mutual funds are accounts that are

Due to new methods of electronically transferring assets from savings accounts to checking accounts,many economists favor moving savings accounts from

Banking under a system of fractional reserves is a(n)

Gold and silver have historically been the most common form of commodity money.

In comparison to commodity money,paper money

Fractional reserve banking began as a search for

A liability to a bank is

The occurrence of bank failures in the United States

When you pay for some purchase with a check,cash must be transferred to another account to pay for the check.

The money creation process generated by an injection of reserves stops when

Unlike recent events in England,the United States has no recent history of bank failures.

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

Filters