Question 1

As a standard of deferred payment, money can be used to:

Accepted Answer

A)  express debt obligations in the form of purchasing power. 
B)  foster barter activity. 
C)  facilitate exchanges of goods and services. 
D)  achieve a common denominator for measuring the value of goods and services. 
E)  ascertain the liquidity of financial assets. 
A)  express debt obligations in the form of purchasing power. 
B)  foster barter activity. 
C)  facilitate exchanges of goods and services. 
D)  achieve a common denominator for measuring the value of goods and services. 
E)  ascertain the liquidity of financial assets.

Question 2

If banks are prevented from lending out funds, there will be no money creation in an economy.

Accepted Answer

A) True 
 B)False

Question 3

Scarcity and durability characterize the property of money as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is a transactions account?

Accepted Answer

A)  Currency 
B)  Travelers' checks 
C)  A savings account 
D)  A credit card balance 
E)  A demand deposit 
A)  Currency 
B)  Travelers' checks 
C)  A savings account 
D)  A credit card balance 
E)  A demand deposit

Question 5

The _____ account for about 60 percent of deposit and loan activity in the Eurocurrency market.

Accepted Answer

A)  ECUs 
B)  U.S. dollar 
C)  Euroyen 
D)  Euros 
E)  Eurodollars 
A)  ECUs 
B)  U.S. dollar 
C)  Euroyen 
D)  Euros 
E)  Eurodollars

Question 6

If a banking system receives an initial deposit of $150,000 and the reserve requirement is 40 percent, the total deposit in the banking system (including the initial deposit) can be expanded by _____.

Accepted Answer

A)  $375,000 
B)  $150,000 
C)  $60,000 
D)  $250,000 
E)  $450,000 
A)  $375,000 
B)  $150,000 
C)  $60,000 
D)  $250,000 
E)  $450,000

Question 7

An increase in the amount of excess reserves held by a bank helps to increase the economy's money supply.

Accepted Answer

A) True 
 B)False

Question 8

The available credit limit we have in a credit card reflects the amount of money we hold in our savings account.

Accepted Answer

A) True 
 B)False

Question 9

The main source of earning profits for banks is:

Accepted Answer

A)  government securities. 
B)  saving accounts. 
C)  reserves. 
D)  loans. 
E)  checking account fees. 
A)  government securities. 
B)  saving accounts. 
C)  reserves. 
D)  loans. 
E)  checking account fees.

Question 10

In the 1980s, the number of bank failures increased dramatically in the United States, most of which were uninsured.

Accepted Answer

A) True 
 B)False

Question 11

Money fails to act as a store of value when:

Accepted Answer

A)  it is no longer backed by gold. 
B)  the inflation rate is very high. 
C)  the goods produced in an economy are indivisible. 
D)  the economy goes into a recession. 
E)  coins are replaced by paper money. 
A)  it is no longer backed by gold. 
B)  the inflation rate is very high. 
C)  the goods produced in an economy are indivisible. 
D)  the economy goes into a recession. 
E)  coins are replaced by paper money.

Question 12

In the United States, the reserve requirement is set by the:

Accepted Answer

A)  Bank of America. 
B)  federal government. 
C)  U.S. Treasury. 
D)  Federal Reserve Board. 
E)  Department of Commerce. 
A)  Bank of America. 
B)  federal government. 
C)  U.S. Treasury. 
D)  Federal Reserve Board. 
E)  Department of Commerce.

Question 13

The M2 measure of money supply includes all of the following, except:

Accepted Answer

A)  demand deposits. 
B)  U.S. government securities. 
C)  savings deposits. 
D)  money market deposits. 
E)  certificates of deposit. 
A)  demand deposits. 
B)  U.S. government securities. 
C)  savings deposits. 
D)  money market deposits. 
E)  certificates of deposit.

Question 14

Which of the following is true of the banks that operate under Islamic law?

Accepted Answer

A)  Islamic banks are not allowed to lend out to private firms. 
B)  Islamic banks do not function as intermediaries between borrowers and lenders. 
C)  Islamic Banks are not allowed to offer checking accounts or traveler's checks. 
D)  Islamic banks are required to offer trade-related services free of cost. 
E)  Islamic banks do not charge interest on loans or pay interest on deposits. 
A)  Islamic banks are not allowed to lend out to private firms. 
B)  Islamic banks do not function as intermediaries between borrowers and lenders. 
C)  Islamic Banks are not allowed to offer checking accounts or traveler's checks. 
D)  Islamic banks are required to offer trade-related services free of cost. 
E)  Islamic banks do not charge interest on loans or pay interest on deposits.

Question 15

A Eurodollar loan is a(n):

Accepted Answer

A)  ECU-denominated loan issued by a U.S. bank. 
B)  dollar-denominated loan payable to a European bank. 
C)  ECU-denominated loan that is subject to banking regulations in both the United States and Europe. 
D)  dollar-denominated loan issued outside the U.S. domestic banking system. 
E)  loan by the European Community to the U.S. government. 
A)  ECU-denominated loan issued by a U.S. bank. 
B)  dollar-denominated loan payable to a European bank. 
C)  ECU-denominated loan that is subject to banking regulations in both the United States and Europe. 
D)  dollar-denominated loan issued outside the U.S. domestic banking system. 
E)  loan by the European Community to the U.S. government.

Question 16

According to Gresham's Law:

Accepted Answer

A)  money with relatively high intrinsic value will be used for transactions. 
B)  money with relatively low intrinsic value will be used for transactions. 
C)  money with relatively high intrinsic value will cause inflation. 
D)  money with relatively low intrinsic value will cause inflation. 
E)  inflation increases the intrinsic value of money. 
A)  money with relatively high intrinsic value will be used for transactions. 
B)  money with relatively low intrinsic value will be used for transactions. 
C)  money with relatively high intrinsic value will cause inflation. 
D)  money with relatively low intrinsic value will cause inflation. 
E)  inflation increases the intrinsic value of money.

Question 17

Assume that an American investor decides to buy one-year Swiss bonds that are denominated in Swiss francs and pay 2 percent annual interest. For this purpose, $10,000 is exchanged into Swiss francs at an exchange rate of $1 = 2Fr to buy the bonds. How many dollars will the investor have after one year if the exchange rate is $1 = 1.5Fr?

Accepted Answer

A)  $10,000 
B)  $10,200 
C)  $15,300 
D)  $13,600 
E)  $7,650 
A)  $10,000 
B)  $10,200 
C)  $15,300 
D)  $13,600 
E)  $7,650

Question 18

The concept of double coincidence of wants refers to the fact that:

Accepted Answer

A)  for a financial asset to be exchanged, it needs to be priced correctly. 
B)  for barter to take place, both parties must accept what the other party has to offer. 
C)  people can never exactly agree on an equilibrium price. 
D)  different people value goods differently. 
E)  for barter to take place, both parties must have equal quantities of the same good. 
A)  for a financial asset to be exchanged, it needs to be priced correctly. 
B)  for barter to take place, both parties must accept what the other party has to offer. 
C)  people can never exactly agree on an equilibrium price. 
D)  different people value goods differently. 
E)  for barter to take place, both parties must have equal quantities of the same good.

Question 19

The thrift institutions:

Accepted Answer

A)  were nonprofit banking institutions. 
B)  were owned by the Federal Reserve. 
C)  historically offered only savings accounts, not checking accounts. 
D)  controlled the U.S. monetary policy prior to the establishment of the Federal Reserve. 
E)  were monitored by the Federal Deposit Insurance Corporation. 
A)  were nonprofit banking institutions. 
B)  were owned by the Federal Reserve. 
C)  historically offered only savings accounts, not checking accounts. 
D)  controlled the U.S. monetary policy prior to the establishment of the Federal Reserve. 
E)  were monitored by the Federal Deposit Insurance Corporation.

Question 20

Using money as a medium of exchange:

Accepted Answer

A)  requires people to match goods wanted with goods available. 
B)  inhibits economic transactions. 
C)  reduces the need for barter in the economy. 
D)  reduces the need for a banking system. 
E)  reduces the range of feasible exchanges in the economy. 
A)  requires people to match goods wanted with goods available. 
B)  inhibits economic transactions. 
C)  reduces the need for barter in the economy. 
D)  reduces the need for a banking system. 
E)  reduces the range of feasible exchanges in the economy.

As a standard of deferred payment, money can be used to:

If banks are prevented from lending out funds, there will be no money creation in an economy.

Scarcity and durability characterize the property of money as a medium of exchange.

Which of the following is a transactions account?

The _____ account for about 60 percent of deposit and loan activity in the Eurocurrency market.

If a banking system receives an initial deposit of $150,000 and the reserve requirement is 40 percent, the total deposit in the banking system (including the initial deposit) can be expanded by _____.

An increase in the amount of excess reserves held by a bank helps to increase the economy's money supply.

The available credit limit we have in a credit card reflects the amount of money we hold in our savings account.

The main source of earning profits for banks is:

In the 1980s, the number of bank failures increased dramatically in the United States, most of which were uninsured.

Money fails to act as a store of value when:

In the United States, the reserve requirement is set by the:

The M2 measure of money supply includes all of the following, except:

Which of the following is true of the banks that operate under Islamic law?

A Eurodollar loan is a(n):

According to Gresham's Law:

The concept of double coincidence of wants refers to the fact that:

The thrift institutions:

Using money as a medium of exchange:

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchapterange Rates and Financial Links Between Countries

Filters

Exam 12: Money and Banking

As a standard of deferred payment, money can be used to:

If banks are prevented from lending out funds, there will be no money creation in an economy.

Scarcity and durability characterize the property of money as a medium of exchange.

Which of the following is a transactions account?

The _____ account for about 60 percent of deposit and loan activity in the Eurocurrency market.

If a banking system receives an initial deposit of $150,000 and the reserve requirement is 40 percent, the total deposit in the banking system (including the initial deposit) can be expanded by _____.

An increase in the amount of excess reserves held by a bank helps to increase the economy's money supply.

The available credit limit we have in a credit card reflects the amount of money we hold in our savings account.

The main source of earning profits for banks is:

In the 1980s, the number of bank failures increased dramatically in the United States, most of which were uninsured.

Money fails to act as a store of value when:

In the United States, the reserve requirement is set by the:

The M2 measure of money supply includes all of the following, except:

Which of the following is true of the banks that operate under Islamic law?

A Eurodollar loan is a(n):

According to Gresham's Law:

The concept of double coincidence of wants refers to the fact that:

The thrift institutions:

Using money as a medium of exchange:

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchapterange Rates and Financial Links Between Countries

Filters