Question 1

People in developing countries may want to participate in a rotating savings and credit association (ROSCAS) because:

Accepted Answer

A)  such associations are part of the black market and they offer attractive returns. 
B)  such associations promise a guaranteed return unlike other banking institutions. 
C)  such associations allow participating individuals to invest their savings abroad. 
D)  such associations allow all but the last member to receive funds faster than they could save on their own. 
E)  most governments encourage it. 
A)  such associations are part of the black market and they offer attractive returns. 
B)  such associations promise a guaranteed return unlike other banking institutions. 
C)  such associations allow participating individuals to invest their savings abroad. 
D)  such associations allow all but the last member to receive funds faster than they could save on their own. 
E)  most governments encourage it.

Question 2

If a bank has $500 in excess reserves and the reserve requirement is 20 percent, then the maximum amount by which this individual bank can increase the money supply is _____.

Accepted Answer

A)  $100 
B)  $400 
C)  $500 
D)  $1,000 
E)  $2,500 
A)  $100 
B)  $400 
C)  $500 
D)  $1,000 
E)  $2,500

Question 3

The measure of money supply that includes the fewest types of assets:

Accepted Answer

A)  is M4. 
B)  is M2. 
C)  is M3. 
D)  is M1. 
E)  is M0. 
A)  is M4. 
B)  is M2. 
C)  is M3. 
D)  is M1. 
E)  is M0.

Question 4

The interest rate charged on a Eurodollar loan will be:

Accepted Answer

A)  higher than the interest rate charged on a U.S. loan. 
B)  lower than the interest rate charged on a U.S. deposit. 
C)  essentially equal to the interest rate charged on a Eurodollar deposit. 
D)  lower than the London interbank offer rate. 
E)  lower than the interest rate charged on a U.S. loan. 
A)  higher than the interest rate charged on a U.S. loan. 
B)  lower than the interest rate charged on a U.S. deposit. 
C)  essentially equal to the interest rate charged on a Eurodollar deposit. 
D)  lower than the London interbank offer rate. 
E)  lower than the interest rate charged on a U.S. loan.

Question 5

The table given below records the amount of new deposits, the value of required reserves, and total amount loaned out by Banks 1, 2, and 3.?
  
-Refer to Table 12.3. If the reserve requirement changed to 8 percent, then total loans in the economy would be equal to _____.

Accepted Answer

A)  $170,000 
B)  $115,000 
C)  $70,000 
D)  $90,000 
E)  $150,000 
A)  $170,000 
B)  $115,000 
C)  $70,000 
D)  $90,000 
E)  $150,000

Question 6

When depository institutions have negative excess reserves, it indicates that the banking system is not "loaned up."

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is true of the European Currency Unit?

Accepted Answer

A)  It was used by the European nations as a medium of exchanging goods and services. 
B)  It was an accounting entry that was transferred between two European nations. 
C)  It was replaced by the euro in the early 1980s. 
D)  It was denominated in the British pound. 
E)  It was a primary international reserve asset of most of the nations across the world. 
A)  It was used by the European nations as a medium of exchanging goods and services. 
B)  It was an accounting entry that was transferred between two European nations. 
C)  It was replaced by the euro in the early 1980s. 
D)  It was denominated in the British pound. 
E)  It was a primary international reserve asset of most of the nations across the world.

Question 8

If Julia deposits $2,000 (which she has until now kept in her closet as cash) in her savings account, then the M1 money supply will decrease.

Accepted Answer

A) True 
 B)False

Question 9

When you save $1,500 for a spring-break vacation in Cancun, you are using money as a standard of deferred payment.

Accepted Answer

A) True 
 B)False

Question 10

Credit can be described as:

Accepted Answer

A)  money used as a standard of deferred payment. 
B)  savings made available to borrowers. 
C)  fiduciary currency. 
D)  a form of liquid asset. 
E)  bank loans converted into commodity money. 
A)  money used as a standard of deferred payment. 
B)  savings made available to borrowers. 
C)  fiduciary currency. 
D)  a form of liquid asset. 
E)  bank loans converted into commodity money.

Question 11

Calculate the dollar price of a German automobile worth 40,000 euros, if the dollar per euro exchange rate is 1.5.

Accepted Answer

A)  $41,500 
B)  $26,700 
C)  $60,000 
D)  $50,000 
E)  $38,500 
A)  $41,500 
B)  $26,700 
C)  $60,000 
D)  $50,000 
E)  $38,500

Question 12

The U.S. dollar is a composite currency.

Accepted Answer

A) True 
 B)False

Question 13

Commercial banks act as middlemen between savers and borrowers, therefore they are called _____.

Accepted Answer

A)  lenders of the last resort 
B)  financial intermediaries 
C)  banker's banks 
D)  thrift institutions 
E)  profitable institutions 
A)  lenders of the last resort 
B)  financial intermediaries 
C)  banker's banks 
D)  thrift institutions 
E)  profitable institutions

Question 14

The U.S. banks have been facing greater competition from the Eurocurrency market because of the establishment of international banking facilities.

Accepted Answer

A) True 
 B)False

Question 15

The higher the rate of inflation in Cuba, the greater the probability that Cuban residents will substitute U.S. currency for Cuban currency.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is a reason why the Japanese yen is considered money?

Accepted Answer

A)  It is backed by gold. 
B)  Its value over the years has varied significantly. 
C)  Goods in Japan are priced in terms of the yen, the most liquid asset of the economy. 
D)  It is backed by silver. 
E)  It is an asset that lacks liquidity. 
A)  It is backed by gold. 
B)  Its value over the years has varied significantly. 
C)  Goods in Japan are priced in terms of the yen, the most liquid asset of the economy. 
D)  It is backed by silver. 
E)  It is an asset that lacks liquidity.

Question 17

The euro is a composite currency; its value is an average of the changing values of several national currencies.

Accepted Answer

A) True 
 B)False

Question 18

Under the system of fractional reserve banking, the reserve requirement is the ratio of excess reserves to total reserves.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is true of unit banking?

Accepted Answer

A)  It is the dominant form of banking in the United Sates. 
B)  It occurs when national banks open interstate branch offices. 
C)  It implies that every financial institution should maintain its account with the Federal Reserve. 
D)  It occurs when a bank is not allowed to operate in more than one location. 
E)  It refers to the monopolization of the banking industry. 
A)  It is the dominant form of banking in the United Sates. 
B)  It occurs when national banks open interstate branch offices. 
C)  It implies that every financial institution should maintain its account with the Federal Reserve. 
D)  It occurs when a bank is not allowed to operate in more than one location. 
E)  It refers to the monopolization of the banking industry.

Question 20

Assume that the reserve requirement is 25 percent and that the amount of checkable deposits in Federal Bank is $200. If the bank has loaned out $120, then the bank's excess reserves must equal:

Accepted Answer

A)  $0. 
B)  $25. 
C)  $30. 
D)  $80. 
E)  $225. 
A)  $0. 
B)  $25. 
C)  $30. 
D)  $80. 
E)  $225.

Exam 12: Money and Banking

People in developing countries may want to participate in a rotating savings and credit association (ROSCAS) because:

If a bank has $500 in excess reserves and the reserve requirement is 20 percent, then the maximum amount by which this individual bank can increase the money supply is _____.

The measure of money supply that includes the fewest types of assets:

The interest rate charged on a Eurodollar loan will be:

The table given below records the amount of new deposits, the value of required reserves, and total amount loaned out by Banks 1, 2, and 3.? -Refer to Table 12.3. If the reserve requirement changed to 8 percent, then total loans in the economy would be equal to _____.

When depository institutions have negative excess reserves, it indicates that the banking system is not "loaned up."

Which of the following is true of the European Currency Unit?

If Julia deposits $2,000 (which she has until now kept in her closet as cash) in her savings account, then the M1 money supply will decrease.

When you save $1,500 for a spring-break vacation in Cancun, you are using money as a standard of deferred payment.

Credit can be described as:

Calculate the dollar price of a German automobile worth 40,000 euros, if the dollar per euro exchange rate is 1.5.

The U.S. dollar is a composite currency.

Commercial banks act as middlemen between savers and borrowers, therefore they are called _____.

The U.S. banks have been facing greater competition from the Eurocurrency market because of the establishment of international banking facilities.

The higher the rate of inflation in Cuba, the greater the probability that Cuban residents will substitute U.S. currency for Cuban currency.

Which of the following is a reason why the Japanese yen is considered money?

The euro is a composite currency; its value is an average of the changing values of several national currencies.

Under the system of fractional reserve banking, the reserve requirement is the ratio of excess reserves to total reserves.

Which of the following is true of unit banking?

Assume that the reserve requirement is 25 percent and that the amount of checkable deposits in Federal Bank is $200. If the bank has loaned out $120, then the bank's excess reserves must equal:

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

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