Question 1

Agraria sends wheat to Cyberia in exchange for computers and technology goods.This is an example of

Accepted Answer

A)  unidirectional trade. 
B)  joint venture. 
C)  barter. 
D)  monetary exchange. 
A)  unidirectional trade. 
B)  joint venture. 
C)  barter. 
D)  monetary exchange.

Question 2

A bank run involves a large flow of money

Accepted Answer

A)  into bank depositors' accounts. 
B)  into checking and savings accounts. 
C)  out of depositors' accounts. 
D)  out of individuals' cash reserves into money market funds. 
A)  into bank depositors' accounts. 
B)  into checking and savings accounts. 
C)  out of depositors' accounts. 
D)  out of individuals' cash reserves into money market funds.

Question 3

The official definition of the money supply that includes coins,paper money,travelers' checks,conventional checking accounts,and other checkable deposits at banks and savings institutions is called ____.

Accepted Answer

A)  M1 
B)  M2 
C)  M3 
D)  L 
A)  M1 
B)  M2 
C)  M3 
D)  L

Question 4

Paper money in the United States is

Accepted Answer

A)  backed by gold in Fort Knox. 
B)  partially backed by gold and silver. 
C)  entirely fiat money. 
D)  fully convertible into gold at fixed prices. 
A)  backed by gold in Fort Knox. 
B)  partially backed by gold and silver. 
C)  entirely fiat money. 
D)  fully convertible into gold at fixed prices.

Question 5

If the banking system has $5 million in excess reserves,and the required reserve ratio is 25 percent,what is the maximum amount by which the money supply can be increased?

Accepted Answer

A)  $25 million 
B)  $20 million 
C)  $5 million 
D)  $2.5 million 
A)  $25 million 
B)  $20 million 
C)  $5 million 
D)  $2.5 million

Question 6

Fiat money is

Accepted Answer

A)  always backed by gold or silver. 
B)  useful in buying Italian cars. 
C)  only backed by government decree. 
D)  not as liquid as precious metals. 
A)  always backed by gold or silver. 
B)  useful in buying Italian cars. 
C)  only backed by government decree. 
D)  not as liquid as precious metals.

Question 7

A bank run involves a large inflow of money into commercial banks.

Accepted Answer

A) True 
 B)False

Question 8

Some bank regulation limits the types of assets that banks may own.The intent of this regulation is to

Accepted Answer

A)  protect banks from competition. 
B)  provide banks with a minimum level of profits. 
C)  limit the level of bank profits. 
D)  maintain bank safety. 
E)  All of the above are correct. 
A)  protect banks from competition. 
B)  provide banks with a minimum level of profits. 
C)  limit the level of bank profits. 
D)  maintain bank safety. 
E)  All of the above are correct.

Question 9

The basic equation for a bank's balance sheet is ____.

Accepted Answer

A)  assets = liabilities − net worth 
B)  net worth = assets − liabilities 
C)  net worth = assets + liabilities 
D)  liabilities = net worth + assets 
A)  assets = liabilities − net worth 
B)  net worth = assets − liabilities 
C)  net worth = assets + liabilities 
D)  liabilities = net worth + assets

Question 10

The fractional reserve system of banking evolved because

Accepted Answer

A)  goldsmiths did not have safes large enough to hold all their gold deposits. 
B)  there was always a dire need for additional money. 
C)  goldsmiths knew that on any given day, only a few depositors would come to claim their deposits. 
D)  goldsmiths knew that they would not be prosecuted for lending out money they did not have. 
A)  goldsmiths did not have safes large enough to hold all their gold deposits. 
B)  there was always a dire need for additional money. 
C)  goldsmiths knew that on any given day, only a few depositors would come to claim their deposits. 
D)  goldsmiths knew that they would not be prosecuted for lending out money they did not have.

Question 11

Excess reserves are put to use by a bank when it

Accepted Answer

A)  puts cash in the vault to back existing loans. 
B)  pays off the mortgage on its building. 
C)  sells government securities. 
D)  makes loans to its customers. 
A)  puts cash in the vault to back existing loans. 
B)  pays off the mortgage on its building. 
C)  sells government securities. 
D)  makes loans to its customers.

Question 12

Do bankers create money?

Accepted Answer

A)  No, they cannot do this as private businesses. 
B)  No, they are prevented by federal law. 
C)  Yes, through multiple deposit creation. 
D)  Yes, by opening checking accounts for customers. 
A)  No, they cannot do this as private businesses. 
B)  No, they are prevented by federal law. 
C)  Yes, through multiple deposit creation. 
D)  Yes, by opening checking accounts for customers.

Question 13

What is the criticism leveled against deposit insurance by the FDIC?

Accepted Answer

Depositors who are freed from any risk o

Question 14

As of December 2010+,the largest single component of M2 consists of

Accepted Answer

A)  checkable deposits at banks. 
B)  cash, coins, and other currency. 
C)  savings deposits. 
D)  gold and silver in commodity accounts. 
A)  checkable deposits at banks. 
B)  cash, coins, and other currency. 
C)  savings deposits. 
D)  gold and silver in commodity accounts.

Question 15

Banks try to keep their level of excess reserves low because

Accepted Answer

A)  the Fed charges a penalty for holdings of excess reserves. 
B)  they are concerned that the money multiplier will become too large. 
C)  they wish to maximize profits. 
D)  bank regulators levy fines on the amount of excess reserves. 
A)  the Fed charges a penalty for holdings of excess reserves. 
B)  they are concerned that the money multiplier will become too large. 
C)  they wish to maximize profits. 
D)  bank regulators levy fines on the amount of excess reserves.

Question 16

The net worth of a bank

Accepted Answer

A)  determines the level of bank loans possible. 
B)  is determined by subtracting liabilities from assets. 
C)  is determined by subtracting assets from liabilities. 
D)  can never be a negative value. 
A)  determines the level of bank loans possible. 
B)  is determined by subtracting liabilities from assets. 
C)  is determined by subtracting assets from liabilities. 
D)  can never be a negative value.

Question 17

Recently,the financial crisis led to a bank run in

Accepted Answer

A)  Brazil. 
B)  Germany and France. 
C)  Japan. 
D)  England. 
A)  Brazil. 
B)  Germany and France. 
C)  Japan. 
D)  England.

Question 18

If the reserve requirement is 20 percent and a new deposit of $10,000 in cash is made by a customer to their checking account,by how much are excess reserves increased?

Accepted Answer

A)  $10,000 
B)  $8,000 
C)  $4,000 
D)  $2,000 
A)  $10,000 
B)  $8,000 
C)  $4,000 
D)  $2,000

Question 19

The composition of M2 as of April 2010 includes saving deposits at savings banks and credit unions.

Accepted Answer

A) True 
 B)False

Question 20

The moral hazard problem refers to

Accepted Answer

A)  difficulty banks have in satisfying the government's reserve requirement. 
B)  depositors making a run on the bank, even though the bank is insured. 
C)  banks taking on more risk in their lending because they know their depositors are insured. 
D)  banks issuing bank notes that compete with the government's currency. 
A)  difficulty banks have in satisfying the government's reserve requirement. 
B)  depositors making a run on the bank, even though the bank is insured. 
C)  banks taking on more risk in their lending because they know their depositors are insured. 
D)  banks issuing bank notes that compete with the government's currency.

Agraria sends wheat to Cyberia in exchange for computers and technology goods.This is an example of

A bank run involves a large flow of money

The official definition of the money supply that includes coins,paper money,travelers' checks,conventional checking accounts,and other checkable deposits at banks and savings institutions is called ____.

Paper money in the United States is

If the banking system has $5 million in excess reserves,and the required reserve ratio is 25 percent,what is the maximum amount by which the money supply can be increased?

Fiat money is

A bank run involves a large inflow of money into commercial banks.

Some bank regulation limits the types of assets that banks may own.The intent of this regulation is to

The basic equation for a bank's balance sheet is ____.

The fractional reserve system of banking evolved because

Excess reserves are put to use by a bank when it

Do bankers create money?

What is the criticism leveled against deposit insurance by the FDIC?

As of December 2010+,the largest single component of M2 consists of

Banks try to keep their level of excess reserves low because

The net worth of a bank

Recently,the financial crisis led to a bank run in

If the reserve requirement is 20 percent and a new deposit of $10,000 in cash is made by a customer to their checking account,by how much are excess reserves increased?

The composition of M2 as of April 2010 includes saving deposits at savings banks and credit unions.

The moral hazard problem refers to

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

Exam 12: Money and the Banking System

Agraria sends wheat to Cyberia in exchange for computers and technology goods.This is an example of

A bank run involves a large flow of money

The official definition of the money supply that includes coins,paper money,travelers' checks,conventional checking accounts,and other checkable deposits at banks and savings institutions is called ____.

Paper money in the United States is

If the banking system has $5 million in excess reserves,and the required reserve ratio is 25 percent,what is the maximum amount by which the money supply can be increased?

Fiat money is

A bank run involves a large inflow of money into commercial banks.

Some bank regulation limits the types of assets that banks may own.The intent of this regulation is to

The basic equation for a bank's balance sheet is ____.

The fractional reserve system of banking evolved because

Excess reserves are put to use by a bank when it

Do bankers create money?

What is the criticism leveled against deposit insurance by the FDIC?

As of December 2010+,the largest single component of M2 consists of

Banks try to keep their level of excess reserves low because

The net worth of a bank

Recently,the financial crisis led to a bank run in

If the reserve requirement is 20 percent and a new deposit of $10,000 in cash is made by a customer to their checking account,by how much are excess reserves increased?

The composition of M2 as of April 2010 includes saving deposits at savings banks and credit unions.

The moral hazard problem refers to

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