Question 1

An increase in the reserve ratio would tend to

Accepted Answer

A)  increase excess reserves and raise the money multiplier. 
B)  decrease excess reserves and decrease the money multiplier. 
C)  increase excess reserves and decrease the money multiplier. 
D)  decrease excess reserves and raise the money multiplier. 
A)  increase excess reserves and raise the money multiplier. 
B)  decrease excess reserves and decrease the money multiplier. 
C)  increase excess reserves and decrease the money multiplier. 
D)  decrease excess reserves and raise the money multiplier.

Question 2

Barter transactions involve a double coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 3

The money multiplier process is based on the principle of fractional reserve banking.

Accepted Answer

A) True 
 B)False

Question 4

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 5

When people trade goods for money,money is being used as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 6

Inflation increases the use of money as a store of value.

Accepted Answer

A) True 
 B)False

Question 7

Barter transactions typically take place between two individuals with the same goods to supply.

Accepted Answer

A) True 
 B)False

Question 8

The value of the deposit multiplier is increased if individuals hold all their money in cash.

Accepted Answer

A) True 
 B)False

Question 9

As of December 31,2010,the assets listed on the balance sheet of Bank A were: $1.5 million in cash reserves,and $6 million in outstanding loans to its customers.Its liabilities totaled $6.5 million in checking deposits.What was the bank's net worth on that date?

Accepted Answer

A)  $1 million 
B)  $4.5 million 
C)  $5 million. 
D)  $14 million. 
E)  Zero 
A)  $1 million 
B)  $4.5 million 
C)  $5 million. 
D)  $14 million. 
E)  Zero

Question 10

The objective of bank management is to

Accepted Answer

A)  maximize stockholders' profits by making risky investments and giving loans to borrowers who will pay the highest interest rates. 
B)  refuse to make risky loans and make loans only to the safest borrowers. 
C)  invest in U.S. government securities and make loans only to established businesses. 
D)  strike the appropriate balance between the attraction of bank profits and the need for bank safety. 
A)  maximize stockholders' profits by making risky investments and giving loans to borrowers who will pay the highest interest rates. 
B)  refuse to make risky loans and make loans only to the safest borrowers. 
C)  invest in U.S. government securities and make loans only to established businesses. 
D)  strike the appropriate balance between the attraction of bank profits and the need for bank safety.

Question 11

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 12

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 13

It is necessary for the Federal Reserve to regulate the money supply because

Accepted Answer

A)  banks tend to act in a counter-cyclical manner with regard to the money supply. 
B)  banks are not profit-oriented, and tend to be unresponsive to the needs of business. 
C)  left to itself, the banking system will create a gyrating money supply that will be destabilizing. 
D)  left to itself, the banking system will not be able to increase or decrease the money supply. 
A)  banks tend to act in a counter-cyclical manner with regard to the money supply. 
B)  banks are not profit-oriented, and tend to be unresponsive to the needs of business. 
C)  left to itself, the banking system will create a gyrating money supply that will be destabilizing. 
D)  left to itself, the banking system will not be able to increase or decrease the money supply.

Question 14

Fractional reserve banking has three crucial features: bank profitability,bank discretion over the money supply,and bank exposure to runs.

Accepted Answer

A) True 
 B)False

Question 15

The initial development of paper money began when people used ____ as payment for goods and services.

Accepted Answer

A)  credit cards 
B)  commodity money 
C)  goldsmith receipts 
D)  gold bullion 
E)  gold coins 
A)  credit cards 
B)  commodity money 
C)  goldsmith receipts 
D)  gold bullion 
E)  gold coins

Question 16

Which of the following is the term used to describe a failing bank selling off a substantial amount of assets in a short time period in order to remain solvent?

Accepted Answer

A)  fire sale 
B)  short sale 
C)  long sale 
D)  liquidity sale 
A)  fire sale 
B)  short sale 
C)  long sale 
D)  liquidity sale

Question 17

Fiat money has value because it

Accepted Answer

A)  is backed by gold. 
B)  can be used to buy goods and services. 
C)  can be exchanged for precious metals at a fixed price. 
D)  can be divided into smaller units. 
E)  All of the above are correct. 
A)  is backed by gold. 
B)  can be used to buy goods and services. 
C)  can be exchanged for precious metals at a fixed price. 
D)  can be divided into smaller units. 
E)  All of the above are correct.

Question 18

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

Accepted Answer

A)  barter never works. 
B)  money creates the need for banks. 
C)  money is more efficient. 
D)  everyone has money. 
A)  barter never works. 
B)  money creates the need for banks. 
C)  money is more efficient. 
D)  everyone has money.

Question 19

Money that is backed solely by a government decree is referred to as fiat money.

Accepted Answer

A) True 
 B)False

Question 20

One inconvenience of commodity money is the need for

Accepted Answer

A)  money to be divisible. 
B)  uniform quality. 
C)  portability. 
D)  All of the above are correct. 
A)  money to be divisible. 
B)  uniform quality. 
C)  portability. 
D)  All of the above are correct.

An increase in the reserve ratio would tend to

Barter transactions involve a double coincidence of wants.

The money multiplier process is based on the principle of fractional reserve banking.

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

When people trade goods for money,money is being used as a medium of exchange.

Inflation increases the use of money as a store of value.

Barter transactions typically take place between two individuals with the same goods to supply.

The value of the deposit multiplier is increased if individuals hold all their money in cash.

As of December 31,2010,the assets listed on the balance sheet of Bank A were: $1.5 million in cash reserves,and $6 million in outstanding loans to its customers.Its liabilities totaled $6.5 million in checking deposits.What was the bank's net worth on that date?

The objective of bank management is to

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

The early goldsmiths issued money in the form of

It is necessary for the Federal Reserve to regulate the money supply because

Fractional reserve banking has three crucial features: bank profitability,bank discretion over the money supply,and bank exposure to runs.

The initial development of paper money began when people used ____ as payment for goods and services.

Which of the following is the term used to describe a failing bank selling off a substantial amount of assets in a short time period in order to remain solvent?

Fiat money has value because it

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

Money that is backed solely by a government decree is referred to as fiat money.

One inconvenience of commodity money is the need for

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

An increase in the reserve ratio would tend to

Barter transactions involve a double coincidence of wants.

The money multiplier process is based on the principle of fractional reserve banking.

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

When people trade goods for money,money is being used as a medium of exchange.

Inflation increases the use of money as a store of value.

Barter transactions typically take place between two individuals with the same goods to supply.

The value of the deposit multiplier is increased if individuals hold all their money in cash.

As of December 31,2010,the assets listed on the balance sheet of Bank A were: $1.5 million in cash reserves,and $6 million in outstanding loans to its customers.Its liabilities totaled $6.5 million in checking deposits.What was the bank's net worth on that date?

The objective of bank management is to

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

The early goldsmiths issued money in the form of

It is necessary for the Federal Reserve to regulate the money supply because

Fractional reserve banking has three crucial features: bank profitability,bank discretion over the money supply,and bank exposure to runs.

The initial development of paper money began when people used ____ as payment for goods and services.

Which of the following is the term used to describe a failing bank selling off a substantial amount of assets in a short time period in order to remain solvent?

Fiat money has value because it

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

Money that is backed solely by a government decree is referred to as fiat money.

One inconvenience of commodity money is the need for

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