Question 1

Although checking deposits are considered money,they are actually

Accepted Answer

A)  fictitious numbers in persons' checkbooks. 
B)  backed by commodities like gold. 
C)  not very useful for making payments. 
D)  bookkeeping entries in bank balance sheets. 
A)  fictitious numbers in persons' checkbooks. 
B)  backed by commodities like gold. 
C)  not very useful for making payments. 
D)  bookkeeping entries in bank balance sheets.

Question 2

A single bank is limited in its ability to create money because

Accepted Answer

A)  loan recipients usually take the proceeds of the loan in cash. 
B)  the FDIC will not permit it to create money unless the loans are guaranteed by the federal government. 
C)  the money loaned will probably be deposited in another bank. 
D)  federal legislation prohibits banks from creating money except to finance international trade. 
A)  loan recipients usually take the proceeds of the loan in cash. 
B)  the FDIC will not permit it to create money unless the loans are guaranteed by the federal government. 
C)  the money loaned will probably be deposited in another bank. 
D)  federal legislation prohibits banks from creating money except to finance international trade.

Question 3

Which of the following was a result of the Dodd-Frank Act?

Accepted Answer

A)  restricted bank activities 
B)  established a new consumer protection agency 
C)  tougher regulations for banks 
D)  All of the above 
A)  restricted bank activities 
B)  established a new consumer protection agency 
C)  tougher regulations for banks 
D)  All of the above

Question 4

The money creation formula is oversimplified because it assumes that

Accepted Answer

A)  every recipient of a bank loan will redeposit the proceeds in another bank. 
B)  loan recipients will not take any of the proceeds in cash. 
C)  every bank lends out all excess reserves. 
D)  All of the above are correct. 
A)  every recipient of a bank loan will redeposit the proceeds in another bank. 
B)  loan recipients will not take any of the proceeds in cash. 
C)  every bank lends out all excess reserves. 
D)  All of the above are correct.

Question 5

Which of the following are not included in the M1 definition of the money supply?

Accepted Answer

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

Question 6

If fears of a terrorist attack are widespread and people lose faith in money,the economy could revert to a system of

Accepted Answer

A)  cash and checks. 
B)  double-entry bookkeeping. 
C)  barter. 
D)  financial intermediaries. 
A)  cash and checks. 
B)  double-entry bookkeeping. 
C)  barter. 
D)  financial intermediaries.

Question 7

The lion's share of purchases and transactions in the U.S.economy are made with coins and paper money.

Accepted Answer

A) True 
 B)False

Question 8

Bankers' business decisions effect the money supply because bankers

Accepted Answer

A)  are respected men and women. 
B)  have the ability to create money. 
C)  use a special accounting system developed by the Federal Reserve Board. 
D)  All of the above are correct. 
A)  are respected men and women. 
B)  have the ability to create money. 
C)  use a special accounting system developed by the Federal Reserve Board. 
D)  All of the above are correct.

Question 9

During the financial crisis of 2007-2009,the U.S.government determined that

Accepted Answer

A)  AIG was too big to fail but Lehman Brothers was not. 
B)  Lehman Brothers was too big to fail but AIG was not. 
C)  both Lehman Brothers and AIG were too big to fail. 
D)  neither Lehman Brothers nor AIG were too big to fail. 
A)  AIG was too big to fail but Lehman Brothers was not. 
B)  Lehman Brothers was too big to fail but AIG was not. 
C)  both Lehman Brothers and AIG were too big to fail. 
D)  neither Lehman Brothers nor AIG were too big to fail.

Question 10

The FDIC

Accepted Answer

A)  insures most bank deposits for up to $250,000. 
B)  eliminates the need for bank depositors to run to their bank when they hear bad news about the bank. 
C)  has been credited with reducing the number of bank failures since 1933. 
D)  All of the above are correct. 
A)  insures most bank deposits for up to $250,000. 
B)  eliminates the need for bank depositors to run to their bank when they hear bad news about the bank. 
C)  has been credited with reducing the number of bank failures since 1933. 
D)  All of the above are correct.

Question 11

The new $20 bills were designed with features to make counterfeiting more difficult.

Accepted Answer

A) True 
 B)False

Question 12

One reason why gold and silver have served as money is that they

Accepted Answer

A)  are easy to produce. 
B)  are easy to duplicate. 
C)  are durable. 
D)  All of the above are correct. 
A)  are easy to produce. 
B)  are easy to duplicate. 
C)  are durable. 
D)  All of the above are correct.

Question 13

An important effect of fractional reserve banking is that bankers have

Accepted Answer

A)  little control over total reserves. 
B)  total control over the amount of lending in the economy. 
C)  no control over the amount of reserves in the banking system. 
D)  some discretion over the money supply. 
A)  little control over total reserves. 
B)  total control over the amount of lending in the economy. 
C)  no control over the amount of reserves in the banking system. 
D)  some discretion over the money supply.

Question 14

Excess reserves make a bank less vulnerable to runs,but bankers do not like to hold excess reserves because holding excess reserves

Accepted Answer

A)  are disliked by depositors. 
B)  means lower profits for banks. 
C)  are discouraged by government regulators. 
D)  All of the above are correct. 
A)  are disliked by depositors. 
B)  means lower profits for banks. 
C)  are discouraged by government regulators. 
D)  All of the above are correct.

Question 15

Which of the following would be an asset to a bank?

Accepted Answer

A)  cash in the vault 
B)  a loan to a university student 
C)  a government security 
D)  All of the above are correct. 
A)  cash in the vault 
B)  a loan to a university student 
C)  a government security 
D)  All of the above are correct.

Question 16

Which of the following is an example of money serving as a medium of exchange?

Accepted Answer

A)  Richard puts money into a piggy bank. 
B)  Ellen deposits cash into a money market account. 
C)  Sean puts a new $20 bill into his currency collection. 
D)  Marian buys a carbo-loaded drink before a marathon. 
A)  Richard puts money into a piggy bank. 
B)  Ellen deposits cash into a money market account. 
C)  Sean puts a new $20 bill into his currency collection. 
D)  Marian buys a carbo-loaded drink before a marathon.

Question 17

Bank regulation exists because public authorities are convinced that

Accepted Answer

A)  the balance between public interest and safety does not affect profitability, and should be removed from the hands of managers. 
B)  the balance between bank profitability and public interest cannot be handled with legislation, but can be handled with regulation. 
C)  the balance between bank profitability and safety cannot be left to profit-maximizing managers. 
D)  the balance between bank safety and public interest can best be obtained by reliance on the market. 
A)  the balance between public interest and safety does not affect profitability, and should be removed from the hands of managers. 
B)  the balance between bank profitability and public interest cannot be handled with legislation, but can be handled with regulation. 
C)  the balance between bank profitability and safety cannot be left to profit-maximizing managers. 
D)  the balance between bank safety and public interest can best be obtained by reliance on the market.

Question 18

The oversimplified money multiplier formula,when the required reserve ratio is m,is

Accepted Answer

A)  change in money supply = change in reserves × m. 
B)  change in money supply = (1/m) /change in reserves. 
C)  change in money supply = (1/m) × change in reserves. 
D)  change in money supply = m/change in reserves. 
A)  change in money supply = change in reserves × m. 
B)  change in money supply = (1/m) /change in reserves. 
C)  change in money supply = (1/m) × change in reserves. 
D)  change in money supply = m/change in reserves.

Question 19

The U.S.government will probably return soon to a system of paper money backed by gold.

Accepted Answer

A) True 
 B)False

Question 20

Systemic risks are most likely to exist with regard to

Accepted Answer

A)  small governments. 
B)  large governments. 
C)  small financial institutions. 
D)  large financial institutions. 
A)  small governments. 
B)  large governments. 
C)  small financial institutions. 
D)  large financial institutions.

Although checking deposits are considered money,they are actually

A single bank is limited in its ability to create money because

Which of the following was a result of the Dodd-Frank Act?

The money creation formula is oversimplified because it assumes that

Which of the following are not included in the M1 definition of the money supply?

If fears of a terrorist attack are widespread and people lose faith in money,the economy could revert to a system of

The lion's share of purchases and transactions in the U.S.economy are made with coins and paper money.

Bankers' business decisions effect the money supply because bankers

During the financial crisis of 2007-2009,the U.S.government determined that

The FDIC

The new $20 bills were designed with features to make counterfeiting more difficult.

One reason why gold and silver have served as money is that they

An important effect of fractional reserve banking is that bankers have

Excess reserves make a bank less vulnerable to runs,but bankers do not like to hold excess reserves because holding excess reserves

Which of the following would be an asset to a bank?

Which of the following is an example of money serving as a medium of exchange?

Bank regulation exists because public authorities are convinced that

The oversimplified money multiplier formula,when the required reserve ratio is m,is

The U.S.government will probably return soon to a system of paper money backed by gold.

Systemic risks are most likely to exist with regard 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

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Exam 12: Money and the Banking System

Although checking deposits are considered money,they are actually

A single bank is limited in its ability to create money because

Which of the following was a result of the Dodd-Frank Act?

The money creation formula is oversimplified because it assumes that

Which of the following are not included in the M1 definition of the money supply?

If fears of a terrorist attack are widespread and people lose faith in money,the economy could revert to a system of

The lion's share of purchases and transactions in the U.S.economy are made with coins and paper money.

Bankers' business decisions effect the money supply because bankers

During the financial crisis of 2007-2009,the U.S.government determined that

The FDIC

The new $20 bills were designed with features to make counterfeiting more difficult.

One reason why gold and silver have served as money is that they

An important effect of fractional reserve banking is that bankers have

Excess reserves make a bank less vulnerable to runs,but bankers do not like to hold excess reserves because holding excess reserves

Which of the following would be an asset to a bank?

Which of the following is an example of money serving as a medium of exchange?

Bank regulation exists because public authorities are convinced that

The oversimplified money multiplier formula,when the required reserve ratio is m,is

The U.S.government will probably return soon to a system of paper money backed by gold.

Systemic risks are most likely to exist with regard 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