Question 1

Price levels rarely remain the same.This implies that

Accepted Answer

A)  money is an excellent medium of exchange. 
B)  money is divisible. 
C)  money is a good medium for measuring value. 
D)  money is an imperfect medium for storing value. 
A)  money is an excellent medium of exchange. 
B)  money is divisible. 
C)  money is a good medium for measuring value. 
D)  money is an imperfect medium for storing value.

Question 2

Bank failures in the U.S.

Accepted Answer

A)  occurred frequently through the 1960s and declined since then. 
B)  occurred infrequently through the 1960s and have become more common since then. 
C)  occurred frequently through the 1930s, declined after that time, and became more common in 2008. 
D)  occurred infrequently through the 1930s, increased after that time, and became less common in 2008. 
A)  occurred frequently through the 1960s and declined since then. 
B)  occurred infrequently through the 1960s and have become more common since then. 
C)  occurred frequently through the 1930s, declined after that time, and became more common in 2008. 
D)  occurred infrequently through the 1930s, increased after that time, and became less common in 2008.

Question 3

A principal disadvantage of conventional checking accounts compared to money market mutual funds is that checking accounts

Accepted Answer

A)  are less liquid. 
B)  often do not pay interest. 
C)  cannot be used as a store of value. 
D)  are not insured by deposit insurance. 
A)  are less liquid. 
B)  often do not pay interest. 
C)  cannot be used as a store of value. 
D)  are not insured by deposit insurance.

Question 4

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 5

The banking system of the United States is a fractional reserve system.What dangers does this pose for the safety of the banking system?

Accepted Answer

Fractional reserve banking means that ea

Question 6

Agraria uses bushels of wheat to quote prices.In this case,bushels of wheat act as a

Accepted Answer

A)  medium of exchange. 
B)  store of value. 
C)  commodity value. 
D)  unit of account. 
A)  medium of exchange. 
B)  store of value. 
C)  commodity value. 
D)  unit of account.

Question 7

The new $20 bills are being introduced by the U.S.Treasury primarily to diminish

Accepted Answer

A)  inflation. 
B)  poverty. 
C)  counterfeiting. 
D)  bank failures. 
A)  inflation. 
B)  poverty. 
C)  counterfeiting. 
D)  bank failures.

Question 8

Banks try to keep their excess reserves at a maximum in order to maximize profits.

Accepted Answer

A) True 
 B)False

Question 9

Most checkable deposits are insured up to $250,000 by

Accepted Answer

A)  state banking commissions. 
B)  the Federal Reserve Board. 
C)  U.S. Department of the Treasury. 
D)  the Federal Deposit Insurance Corporation. 
A)  state banking commissions. 
B)  the Federal Reserve Board. 
C)  U.S. Department of the Treasury. 
D)  the Federal Deposit Insurance Corporation.

Question 10

Which of the following is a drawback of FDIC insurance?

Accepted Answer

A)  It leads to excess industry profits. 
B)  It has failed to arrest the trend of bank failures. 
C)  It leads to the problem of moral hazard. 
D)  It undercuts private insurance companies. 
A)  It leads to excess industry profits. 
B)  It has failed to arrest the trend of bank failures. 
C)  It leads to the problem of moral hazard. 
D)  It undercuts private insurance companies.

Question 11

What is a barter system? What are the drawbacks of this system?

Accepted Answer

Barter is a type of trade in which goods

Question 12

What is fiat money? Why is fiat money important in the United States today?

Accepted Answer

Fiat (from the Latin for "Let it be done

Question 13

With the invention of banking,one important aspect of money was that

Accepted Answer

A)  banks have some discretion over the money supply. 
B)  banks have complete control over the money supply. 
C)  governments lost all control over the money supply. 
D)  individuals have no discretion over the money supply. 
A)  banks have some discretion over the money supply. 
B)  banks have complete control over the money supply. 
C)  governments lost all control over the money supply. 
D)  individuals have no discretion over the money supply.

Question 14

The narrowest definition of the money supply (M1)includes

Accepted Answer

A)  cash and travelers' checks. 
B)  cash, travelers' checks, and savings account balances. 
C)  cash, checking account balances, and travelers' checks. 
D)  cash, bank deposits, and money market accounts. 
A)  cash and travelers' checks. 
B)  cash, travelers' checks, and savings account balances. 
C)  cash, checking account balances, and travelers' checks. 
D)  cash, bank deposits, and money market accounts.

Question 15

The largest portion of the M1 money supply consists of

Accepted Answer

A)  coins in circulation. 
B)  paper currency in circulation. 
C)  savings deposits at credit unions. 
D)  checkable deposits. 
A)  coins in circulation. 
B)  paper currency in circulation. 
C)  savings deposits at credit unions. 
D)  checkable deposits.

Question 16

Identify the basis on which you measure the liquidity of an asset.

Accepted Answer

A)  Its value. 
B)  Its future earning potential. 
C)  Its convertibility into cash. 
D)  Its ability to act as a perfect store of value. 
A)  Its value. 
B)  Its future earning potential. 
C)  Its convertibility into cash. 
D)  Its ability to act as a perfect store of value.

Question 17

One aspect of bank accounting is that many liabilities of banks are

Accepted Answer

A)  assets of other persons and businesses in the economy. 
B)  also liabilities of other persons and businesses in the economy. 
C)  not matched by liabilities of most other banks. 
D)  not actually owed to any other person or business in the economy. 
A)  assets of other persons and businesses in the economy. 
B)  also liabilities of other persons and businesses in the economy. 
C)  not matched by liabilities of most other banks. 
D)  not actually owed to any other person or business in the economy.

Question 18

During a period of economic depression,such as has existed for a long period in Japan,a profit-oriented bank will act in such a way that

Accepted Answer

A)  dampens the fluctuations. 
B)  makes the depression worse. 
C)  is neutral with respect to the fluctuations. 
D)  is counter-cyclical and stabilizing. 
A)  dampens the fluctuations. 
B)  makes the depression worse. 
C)  is neutral with respect to the fluctuations. 
D)  is counter-cyclical and stabilizing.

Question 19

The net worth of a bank is

Accepted Answer

A)  equal to the value of assets. 
B)  equal to the value of deposits. 
C)  equal to the value of liabilities. 
D)  the value of assets less liabilities. 
E)  the value of loans and securities. 
A)  equal to the value of assets. 
B)  equal to the value of deposits. 
C)  equal to the value of liabilities. 
D)  the value of assets less liabilities. 
E)  the value of loans and securities.

Question 20

The Ponderosa Bank receives a new deposit of $2,500.The reserves requirement is 20 percent.How much can this bank loan out as a result of this deposit?

Accepted Answer

A)  $25,000 
B)  $12,500 
C)  $3,125 
D)  $2,000 
E)  $500 
A)  $25,000 
B)  $12,500 
C)  $3,125 
D)  $2,000 
E)  $500

Price levels rarely remain the same.This implies that

Bank failures in the U.S.

A principal disadvantage of conventional checking accounts compared to money market mutual funds is that checking accounts

The money multiplier yielded by the deposit creation formula assumes that

The banking system of the United States is a fractional reserve system.What dangers does this pose for the safety of the banking system?

Agraria uses bushels of wheat to quote prices.In this case,bushels of wheat act as a

The new $20 bills are being introduced by the U.S.Treasury primarily to diminish

Banks try to keep their excess reserves at a maximum in order to maximize profits.

Most checkable deposits are insured up to $250,000 by

Which of the following is a drawback of FDIC insurance?

What is a barter system? What are the drawbacks of this system?

What is fiat money? Why is fiat money important in the United States today?

With the invention of banking,one important aspect of money was that

The narrowest definition of the money supply (M1)includes

The largest portion of the M1 money supply consists of

Identify the basis on which you measure the liquidity of an asset.

One aspect of bank accounting is that many liabilities of banks are

During a period of economic depression,such as has existed for a long period in Japan,a profit-oriented bank will act in such a way that

The net worth of a bank is

The Ponderosa Bank receives a new deposit of $2,500.The reserves requirement is 20 percent.How much can this bank loan out as a result of this deposit?

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

Price levels rarely remain the same.This implies that

Bank failures in the U.S.

A principal disadvantage of conventional checking accounts compared to money market mutual funds is that checking accounts

The money multiplier yielded by the deposit creation formula assumes that

The banking system of the United States is a fractional reserve system.What dangers does this pose for the safety of the banking system?

Agraria uses bushels of wheat to quote prices.In this case,bushels of wheat act as a

The new $20 bills are being introduced by the U.S.Treasury primarily to diminish

Banks try to keep their excess reserves at a maximum in order to maximize profits.

Most checkable deposits are insured up to $250,000 by

Which of the following is a drawback of FDIC insurance?

What is a barter system? What are the drawbacks of this system?

What is fiat money? Why is fiat money important in the United States today?

With the invention of banking,one important aspect of money was that

The narrowest definition of the money supply (M1)includes

The largest portion of the M1 money supply consists of

Identify the basis on which you measure the liquidity of an asset.

One aspect of bank accounting is that many liabilities of banks are

During a period of economic depression,such as has existed for a long period in Japan,a profit-oriented bank will act in such a way that

The net worth of a bank is

The Ponderosa Bank receives a new deposit of $2,500.The reserves requirement is 20 percent.How much can this bank loan out as a result of this deposit?

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