Question 1

Milly Miser removes $250,000 from her mattress and opens a checking account.This single transaction immediately increases the money supply by

Accepted Answer

A)  $250,000. 
B)  $50,000. 
C)  $0. 
D)  −$250,000. 
A)  $250,000. 
B)  $50,000. 
C)  $0. 
D)  −$250,000.

Question 2

Many economists believe that savings accounts should be added to M1 because they

Accepted Answer

A)  are larger in size than conventional checking accounts. 
B)  pay larger interest than checking accounts. 
C)  can be transferred quickly into checkable accounts. 
D)  are also insured by the federal government. 
A)  are larger in size than conventional checking accounts. 
B)  pay larger interest than checking accounts. 
C)  can be transferred quickly into checkable accounts. 
D)  are also insured by the federal government.

Question 3

Are funds available on a credit card included in a definition of the money supply?

Accepted Answer

A)  Yes, because these funds can be used to pay for goods and services. 
B)  Yes, because these funds are included in M2. 
C)  No, because these funds are hard to measure total credit card spending. 
D)  No, because these funds are not a store of value. 
A)  Yes, because these funds can be used to pay for goods and services. 
B)  Yes, because these funds are included in M2. 
C)  No, because these funds are hard to measure total credit card spending. 
D)  No, because these funds are not a store of value.

Question 4

Money as defined by M1 includes

Accepted Answer

A)  coins. 
B)  paper money. 
C)  checking deposits. 
D)  travelers' checks. 
E)  All of the above are correct. 
A)  coins. 
B)  paper money. 
C)  checking deposits. 
D)  travelers' checks. 
E)  All of the above are correct.

Question 5

The government banking regulation that places an upper limit on the money supply is

Accepted Answer

A)  deposit insurance by the FDIC. 
B)  reserve requirements on bank deposits. 
C)  periodic bank examinations and audits. 
D)  limitations on the types of assets that a bank may own. 
A)  deposit insurance by the FDIC. 
B)  reserve requirements on bank deposits. 
C)  periodic bank examinations and audits. 
D)  limitations on the types of assets that a bank may own.

Question 6

A banker operating under a system of fractional reserves

Accepted Answer

A)  is exposed to potential bank runs. 
B)  must keep a prudent level of reserves. 
C)  must lend money carefully. 
D)  All of the above are correct. 
A)  is exposed to potential bank runs. 
B)  must keep a prudent level of reserves. 
C)  must lend money carefully. 
D)  All of the above are correct.

Question 7

Which of the following definitions of the money supply includes only the most liquid forms of money?

Accepted Answer

A)  M1 
B)  M2 
C)  savings deposits. 
D)  money market mutual deposits. 
A)  M1 
B)  M2 
C)  savings deposits. 
D)  money market mutual deposits.

Question 8

If bankers decide to keep a lower fraction of deposits on reserve,the money supply will

Accepted Answer

A)  decrease. 
B)  increase. 
C)  remain unchanged. 
D)  move more quickly through the economy. 
A)  decrease. 
B)  increase. 
C)  remain unchanged. 
D)  move more quickly through the economy.

Question 9

As a general rule,you would be unwise to keep a deposit at an FDIC-insured bank in an amount greater than

Accepted Answer

A)  20 percent of the bank's reserves. 
B)  $1,000,000. 
C)  $250,000. 
D)  an infinite amount; there is no limit. 
A)  20 percent of the bank's reserves. 
B)  $1,000,000. 
C)  $250,000. 
D)  an infinite amount; there is no limit.

Question 10

The deposit creation formula can be defined as

Accepted Answer

A)  one minus the required reserve ratio. 
B)  the same as the GDP income multiplier. 
C)  the reciprocal of the required reserve ratio. 
D)  one plus the required reserve ratio. 
A)  one minus the required reserve ratio. 
B)  the same as the GDP income multiplier. 
C)  the reciprocal of the required reserve ratio. 
D)  one plus the required reserve ratio.

Question 11

Define the following terms and explain their importance to the study of macroeconomics:
a.money
b.M1
c.near money
d.bank run

Accepted Answer

a.Money is the standard object used in t

Question 12

In addition to fiscal policy,the other main tool used to affect aggregate demand is

Accepted Answer

A)  trade policy. 
B)  industrial policy. 
C)  planning policy. 
D)  monetary policy. 
A)  trade policy. 
B)  industrial policy. 
C)  planning policy. 
D)  monetary policy.

Question 13

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 14

The one disadvantage of paper money is that it is easier to

Accepted Answer

A)  duplicate and counterfeit. 
B)  carry. 
C)  divide. 
D)  store and use at a later time. 
A)  duplicate and counterfeit. 
B)  carry. 
C)  divide. 
D)  store and use at a later time.

Question 15

Banks are required to keep a minimum level of reserves on hand.The intent of this regulation is

Accepted Answer

A)  monetary control rather than bank safety. 
B)  bank safety in case of bank runs. 
C)  maintenance of bank profits. 
D)  limiting the level of bank profits. 
A)  monetary control rather than bank safety. 
B)  bank safety in case of bank runs. 
C)  maintenance of bank profits. 
D)  limiting the level of bank profits.

Question 16

The banking industry is heavily regulated because

Accepted Answer

A)  banking is a monopoly industry. 
B)  most banks are owned by government agencies. 
C)  bankers do what is best for their stockholders, not necessarily what is best for the economy. 
D)  All of the above are correct. 
A)  banking is a monopoly industry. 
B)  most banks are owned by government agencies. 
C)  bankers do what is best for their stockholders, not necessarily what is best for the economy. 
D)  All of the above are correct.

Question 17

The "efficiency of the payments mechanism" refers to

Accepted Answer

A)  the ease and speed of exchanging money for goods and services. 
B)  how fast member banks replenish required reserves. 
C)  how fast banks pay interest on deposit accounts. 
D)  how fast countries pay off foreign debts. 
A)  the ease and speed of exchanging money for goods and services. 
B)  how fast member banks replenish required reserves. 
C)  how fast banks pay interest on deposit accounts. 
D)  how fast countries pay off foreign debts.

Question 18

The banking system receives a new cash deposit of $250,000.Total deposits eventually rise by $1 million.The value of the reserve ratio is

Accepted Answer

A) 25. 
B) 4. 
C) 0.50. 
D) 0.25. 
E) 0.20. 
A) 25. 
B) 4. 
C) 0.50. 
D) 0.25. 
E) 0.20.

Question 19

If the required reserve ratio,m,is 20 percent,then the oversimplified money multiplier is

Accepted Answer

A) 10. 
B) 5. 
C) 4. 
D) 2. 
A) 10. 
B) 5. 
C) 4. 
D) 2.

Milly Miser removes $250,000 from her mattress and opens a checking account.This single transaction immediately increases the money supply by

Many economists believe that savings accounts should be added to M1 because they

Are funds available on a credit card included in a definition of the money supply?

Money as defined by M1 includes

The government banking regulation that places an upper limit on the money supply is

A banker operating under a system of fractional reserves

Which of the following definitions of the money supply includes only the most liquid forms of money?

If bankers decide to keep a lower fraction of deposits on reserve,the money supply will

As a general rule,you would be unwise to keep a deposit at an FDIC-insured bank in an amount greater than

The deposit creation formula can be defined as

Define the following terms and explain their importance to the study of macroeconomics: a.money b.M1 c.near money d.bank run

In addition to fiscal policy,the other main tool used to affect aggregate demand is

Money's principal function is to serve as a

The one disadvantage of paper money is that it is easier to

Banks are required to keep a minimum level of reserves on hand.The intent of this regulation is

The banking industry is heavily regulated because

The "efficiency of the payments mechanism" refers to

The banking system receives a new cash deposit of $250,000.Total deposits eventually rise by $1 million.The value of the reserve ratio is

If the required reserve ratio,m,is 20 percent,then the oversimplified money multiplier is

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

Milly Miser removes $250,000 from her mattress and opens a checking account.This single transaction immediately increases the money supply by

Many economists believe that savings accounts should be added to M1 because they

Are funds available on a credit card included in a definition of the money supply?

Money as defined by M1 includes

The government banking regulation that places an upper limit on the money supply is

A banker operating under a system of fractional reserves

Which of the following definitions of the money supply includes only the most liquid forms of money?

If bankers decide to keep a lower fraction of deposits on reserve,the money supply will

As a general rule,you would be unwise to keep a deposit at an FDIC-insured bank in an amount greater than

The deposit creation formula can be defined as

Define the following terms and explain their importance to the study of macroeconomics: a.money b.M1 c.near money d.bank run

In addition to fiscal policy,the other main tool used to affect aggregate demand is

Money's principal function is to serve as a

The one disadvantage of paper money is that it is easier to

Banks are required to keep a minimum level of reserves on hand.The intent of this regulation is

The banking industry is heavily regulated because

The "efficiency of the payments mechanism" refers to

The banking system receives a new cash deposit of $250,000.Total deposits eventually rise by $1 million.The value of the reserve ratio is

If the required reserve ratio,m,is 20 percent,then the oversimplified money multiplier is

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