Question 1

Modern paper money is fiat money because it is backed only by the faith the holder has in the government that issued it.

Accepted Answer

A) True 
 B)False

Question 2

Why are credit cards not considered part of the money supply?

Accepted Answer

Credit cards lengthen the period of time

Question 3

Paper money has been in use since the

Accepted Answer

A)  Roman Empire. 
B)  eleventh century in China. 
C)  Civil War in the United States. 
D)  development of money-center banking in nineteenth-century London. 
A)  Roman Empire. 
B)  eleventh century in China. 
C)  Civil War in the United States. 
D)  development of money-center banking in nineteenth-century London.

Question 4

If depositors become worried about the safety of their deposit accounts,they may trigger a

Accepted Answer

A)  deposit surplus. 
B)  bank run. 
C)  fiscal policy crisis. 
D)  required reserve increase. 
A)  deposit surplus. 
B)  bank run. 
C)  fiscal policy crisis. 
D)  required reserve increase.

Question 5

Fractional reserve banking takes its name from the fact that banks

Accepted Answer

A)  hold only a fraction of their reserves at the bank itself. 
B)  keep only a fraction of their total deposits on reserve. 
C)  lend only a fraction of their total reserves to customers. 
D)  reserve only a fraction of their activity for lending. 
A)  hold only a fraction of their reserves at the bank itself. 
B)  keep only a fraction of their total deposits on reserve. 
C)  lend only a fraction of their total reserves to customers. 
D)  reserve only a fraction of their activity for lending.

Question 6

The required reserve ratio is 10 percent,but banks actually keep 20 percent on reserve.The actual money multiplier will be

Accepted Answer

A) 10. 
B) 9. 
C) 5. 
D) 2. 
E) 1. 
A) 10. 
B) 9. 
C) 5. 
D) 2. 
E) 1.

Question 7

Due to the private nature of bank ownership,there is often a difference between bankers' goals and macroeconomic objectives.

Accepted Answer

A) True 
 B)False

Question 8

The principal innovation that increases the safety of bank deposits is

Accepted Answer

A)  computerized accounting systems. 
B)  credit cards. 
C)  automatic teller machines. 
D)  deposit insurance. 
A)  computerized accounting systems. 
B)  credit cards. 
C)  automatic teller machines. 
D)  deposit insurance.

Question 9

Explain why monetary policy is needed specifically with regard to the existence of excess reserves.Compare and contrast the effectiveness of monetary policy during the Great Depression and the Great Recession?

Accepted Answer

During a recession,banks will maintain e

Question 10

The only major disadvantage of paper money is that it is hard to divide into smaller denominations.

Accepted Answer

A) True 
 B)False

Question 11

One principle that nearly all economists agree on when defining money is that it should be

Accepted Answer

A)  spendable. 
B)  liquid. 
C)  accepted as payment. 
D)  easily transferable. 
E)  All of the above are correct. 
A)  spendable. 
B)  liquid. 
C)  accepted as payment. 
D)  easily transferable. 
E)  All of the above are correct.

Question 12

Most banks in the United States are owned by the government and operate as nonprofit institutions.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following assets is most liquid?

Accepted Answer

A)  short-term government bonds 
B)  savings accounts 
C)  checking accounts 
D)  currency and coins 
A)  short-term government bonds 
B)  savings accounts 
C)  checking accounts 
D)  currency and coins

Question 14

The maximum increase in the money supply possible from a deposit of $D into the banking system where R is the reserve requirement is

Accepted Answer

A)  (1/R)(D − R). 
B)  R × D. 
C)  (1/R)(1 − R)D. 
D)  (1/R)D. 
A)  (1/R)(D − R). 
B)  R × D. 
C)  (1/R)(1 − R)D. 
D)  (1/R)D.

Question 15

Which of the following are included in the M2 definition of the money supply?

Accepted Answer

A)  cash and currency 
B)  checkable deposits 
C)  money market deposit accounts 
D)  money market mutual funds 
E)  All of the above are included. 
A)  cash and currency 
B)  checkable deposits 
C)  money market deposit accounts 
D)  money market mutual funds 
E)  All of the above are included.

Question 16

A run on a bank may occur if

Accepted Answer

A)  depositors withdraw some funds to invest in the stock market. 
B)  required reserves are increased. 
C)  interest rates are raised. 
D)  depositors lose confidence in the bank and attempt to withdraw all their funds. 
E)  All of the above are correct. 
A)  depositors withdraw some funds to invest in the stock market. 
B)  required reserves are increased. 
C)  interest rates are raised. 
D)  depositors lose confidence in the bank and attempt to withdraw all their funds. 
E)  All of the above are correct.

Question 17

The concept of money as a "unit of account" involves the use of money to

Accepted Answer

A)  speed transactions. 
B)  reduce shopping time. 
C)  protect against inflation. 
D)  quote prices. 
A)  speed transactions. 
B)  reduce shopping time. 
C)  protect against inflation. 
D)  quote prices.

Question 18

Why are the following included in the broader definition of supply known as M2?
(a)money market deposit accounts
(b)money market mutual funds
(c)savings accounts

Accepted Answer

(a)Money market deposit accounts: They a

Question 19

Which of the following is included in M1?

Accepted Answer

A)  savings accounts 
B)  money market deposit accounts 
C)  money market mutual funds 
D)  travelers' checks 
E)  None of the above are included. 
A)  savings accounts 
B)  money market deposit accounts 
C)  money market mutual funds 
D)  travelers' checks 
E)  None of the above are included.

Question 20

Under fractional banking,when a bank lends to a customer

Accepted Answer

A)  the money supply increases. 
B)  bank profitability is decreased. 
C)  the bank is protected from a run. 
D)  bank credit decreases. 
A)  the money supply increases. 
B)  bank profitability is decreased. 
C)  the bank is protected from a run. 
D)  bank credit decreases.

Modern paper money is fiat money because it is backed only by the faith the holder has in the government that issued it.

Why are credit cards not considered part of the money supply?

Paper money has been in use since the

If depositors become worried about the safety of their deposit accounts,they may trigger a

Fractional reserve banking takes its name from the fact that banks

The required reserve ratio is 10 percent,but banks actually keep 20 percent on reserve.The actual money multiplier will be

Due to the private nature of bank ownership,there is often a difference between bankers' goals and macroeconomic objectives.

The principal innovation that increases the safety of bank deposits is

Explain why monetary policy is needed specifically with regard to the existence of excess reserves.Compare and contrast the effectiveness of monetary policy during the Great Depression and the Great Recession?

The only major disadvantage of paper money is that it is hard to divide into smaller denominations.

One principle that nearly all economists agree on when defining money is that it should be

Most banks in the United States are owned by the government and operate as nonprofit institutions.

Which of the following assets is most liquid?

The maximum increase in the money supply possible from a deposit of $D into the banking system where R is the reserve requirement is

Which of the following are included in the M2 definition of the money supply?

A run on a bank may occur if

The concept of money as a "unit of account" involves the use of money to

Why are the following included in the broader definition of supply known as M2? (a)money market deposit accounts (b)money market mutual funds (c)savings accounts

Which of the following is included in M1?

Under fractional banking,when a bank lends to a customer

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

Modern paper money is fiat money because it is backed only by the faith the holder has in the government that issued it.

Why are credit cards not considered part of the money supply?

Paper money has been in use since the

If depositors become worried about the safety of their deposit accounts,they may trigger a

Fractional reserve banking takes its name from the fact that banks

The required reserve ratio is 10 percent,but banks actually keep 20 percent on reserve.The actual money multiplier will be

Due to the private nature of bank ownership,there is often a difference between bankers' goals and macroeconomic objectives.

The principal innovation that increases the safety of bank deposits is

Explain why monetary policy is needed specifically with regard to the existence of excess reserves.Compare and contrast the effectiveness of monetary policy during the Great Depression and the Great Recession?

The only major disadvantage of paper money is that it is hard to divide into smaller denominations.

One principle that nearly all economists agree on when defining money is that it should be

Most banks in the United States are owned by the government and operate as nonprofit institutions.

Which of the following assets is most liquid?

The maximum increase in the money supply possible from a deposit of $D into the banking system where R is the reserve requirement is

Which of the following are included in the M2 definition of the money supply?

A run on a bank may occur if

The concept of money as a "unit of account" involves the use of money to

Why are the following included in the broader definition of supply known as M2? (a)money market deposit accounts (b)money market mutual funds (c)savings accounts

Which of the following is included in M1?

Under fractional banking,when a bank lends to a customer

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