Question 1

-Refer to Table 12.2. If excess reserves equal $2,000, what must the reserve requirement be equal to?

Accepted Answer

A)  3 percent 
B)  10 percent 
C)  15 percent 
D)  20 percent 
E)  25 percent 
A)  3 percent 
B)  10 percent 
C)  15 percent 
D)  20 percent 
E)  25 percent

Question 2

Which of the following statements apply to international banking facilities (IBFs)?

Accepted Answer

A)  IBFs are subject to U.S. interest rate regulations. 
B)  IBFs are located all over the world. 
C)  IBFs do not require FDIC deposit insurance premiums. 
D)  IBFs offer a higher interest rate spread than normal U.S. banks. 
E)  IBFs allow European residents to participate in the American stock exchanges. 
A)  IBFs are subject to U.S. interest rate regulations. 
B)  IBFs are located all over the world. 
C)  IBFs do not require FDIC deposit insurance premiums. 
D)  IBFs offer a higher interest rate spread than normal U.S. banks. 
E)  IBFs allow European residents to participate in the American stock exchanges.

Question 3

The maximum amount by which the entire banking system can create money is equal to:

Accepted Answer

A)  a fraction of its excess reserves. 
B)  a fraction of its required reserves. 
C)  a multiple of its total reserves. 
D)  a multiple of its excess reserves. 
E)  its excess reserves. 
A)  a fraction of its excess reserves. 
B)  a fraction of its required reserves. 
C)  a multiple of its total reserves. 
D)  a multiple of its excess reserves. 
E)  its excess reserves.

Question 4

Which of the following is not true about a special drawing right (SDR)?

Accepted Answer

A)  The SDR is a composite currency. 
B)  The value of the SDR is an average of the values of the currencies of major industrial countries. 
C)  The SDR was created in 1980 by the World Bank. 
D)  The SDR is an international reserve asset. 
E)  The SDR is used to settle international debts. 
A)  The SDR is a composite currency. 
B)  The value of the SDR is an average of the values of the currencies of major industrial countries. 
C)  The SDR was created in 1980 by the World Bank. 
D)  The SDR is an international reserve asset. 
E)  The SDR is used to settle international debts.

Question 5

Suppose the reserve requirement is 10 percent and a person deposits $1,500 in a local bank. The local bank can now create a maximum of:

Accepted Answer

A)  $150 in additional money, by lending $150. 
B)  $15,000 in additional money, by lending $15,000. 
C)  $1,500 in additional money, by lending $1,500. 
D)  $1,350 in additional money, by lending $1,350. 
E)  $135 in additional money, by lending $135. 
A)  $150 in additional money, by lending $150. 
B)  $15,000 in additional money, by lending $15,000. 
C)  $1,500 in additional money, by lending $1,500. 
D)  $1,350 in additional money, by lending $1,350. 
E)  $135 in additional money, by lending $135.

Question 6

If Brazil experienced a period of rapid and unexpected inflation, causing Brazilians to lose confidence in the local currency (real) as a store of value, which of the following would be least likely to occur?

Accepted Answer

A)  The value of the Brazilian real would depreciate on the foreign exchange market. 
B)  Foreign currency would be used as a substitute for the real. 
C)  The real would be used as a store of value in other countries 
D)  Brazilians would save less. 
E)  The purchasing power of the real would decrease. 
A)  The value of the Brazilian real would depreciate on the foreign exchange market. 
B)  Foreign currency would be used as a substitute for the real. 
C)  The real would be used as a store of value in other countries 
D)  Brazilians would save less. 
E)  The purchasing power of the real would decrease.

Question 7

Which of the following is true of International Banking Facilities (IBFs) in the U.S.?

Accepted Answer

A)  IBFs were legalized by the Federal Reserve Board in 1970. 
B)  IBFs are bookkeeping systems set up in existing bank offices of the U.S. to record international banking transactions 
C)  IBFs are "shell" bank branches of U.S. banks in the Caribbean. 
D)  Loans extended by the IBFs are subject to reserve requirements and interest rate regulations. 
E)  IBFs are allowed to extend loans to the residents and businesses of the United States and not to the nonresidents. 
A)  IBFs were legalized by the Federal Reserve Board in 1970. 
B)  IBFs are bookkeeping systems set up in existing bank offices of the U.S. to record international banking transactions 
C)  IBFs are "shell" bank branches of U.S. banks in the Caribbean. 
D)  Loans extended by the IBFs are subject to reserve requirements and interest rate regulations. 
E)  IBFs are allowed to extend loans to the residents and businesses of the United States and not to the nonresidents.

Question 8

An asset is said to be illiquid when:

Accepted Answer

A)  it lacks purchasing power. 
B)  it cannot act as a store of value. 
C)  it is an illegal tender. 
D)  it cannot be readily exchanged for goods. 
E)  it cannot be used to settle debts. 
A)  it lacks purchasing power. 
B)  it cannot act as a store of value. 
C)  it is an illegal tender. 
D)  it cannot be readily exchanged for goods. 
E)  it cannot be used to settle debts.

Question 9

Which of the following is true of offshore banking?

Accepted Answer

A)  The offshore banks are mainly concentrated in the European Union and the transactions are generally denominated in euro. 
B)  The offshore banks operate with costly restrictions and pay higher taxes than the domestic banks. 
C)  The offshore banks usually charge higher rates of interest on consumption loans than the domestic banks. 
D)  Offshore banks in the U.S. are able to offer a higher rate on dollar deposits and a lower rate on dollar loans than their domestic competitors. 
E)  Offshore banking transactions are considerably less risky than domestic transactions as they are closely monitored by the government of the nations in which they operate. 
A)  The offshore banks are mainly concentrated in the European Union and the transactions are generally denominated in euro. 
B)  The offshore banks operate with costly restrictions and pay higher taxes than the domestic banks. 
C)  The offshore banks usually charge higher rates of interest on consumption loans than the domestic banks. 
D)  Offshore banks in the U.S. are able to offer a higher rate on dollar deposits and a lower rate on dollar loans than their domestic competitors. 
E)  Offshore banking transactions are considerably less risky than domestic transactions as they are closely monitored by the government of the nations in which they operate.

Question 10

If a bank's required reserves equal $270,000. Suppose the bank holds no excess reserves, and the reserve requirement is equal to 18 percent, what is the value of the bank's total deposits?

Accepted Answer

A)  $900,000 
B)  $1,500,000 
C)  $48,000 
D)  $486,000 
E)  $150,000 
A)  $900,000 
B)  $1,500,000 
C)  $48,000 
D)  $486,000 
E)  $150,000

Question 11

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 deposits in the economy would be equal to:

Accepted Answer

A)  $125,000. 
B)  $160,000. 
C)  $77,500. 
D)  $80,000. 
E)  $75,000. 
A)  $125,000. 
B)  $160,000. 
C)  $77,500. 
D)  $80,000. 
E)  $75,000.

Question 12

Using money as a unit of account lowers information costs compared to barter exchanges.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following facilities give bank customers access to services over a much wider geographic area than any single bank's branches can cover?

Accepted Answer

A)  Traveler's checks 
B)  Saving account checks 
C)  ATM networks 
D)  Demand drafts 
E)  Certificates of deposit 
A)  Traveler's checks 
B)  Saving account checks 
C)  ATM networks 
D)  Demand drafts 
E)  Certificates of deposit

Question 14

Which of the following is the most popular instrument for financing Islamic investments?

Accepted Answer

A)  Murabaha 
B)  Mortgage 
C)  Microfinance 
D)  Riba 
E)  Mudaraba 
A)  Murabaha 
B)  Mortgage 
C)  Microfinance 
D)  Riba 
E)  Mudaraba

Question 15

When do we say that a bank is loaned up?

Accepted Answer

A)  When its debtors don't want to repay 
B)  When it is susceptible to a bank panic 
C)  When its excess reserves equal zero 
D)  When it is part of a fractional reserve banking system 
E)  When its required reserves are equal to its excess reserves 
A)  When its debtors don't want to repay 
B)  When it is susceptible to a bank panic 
C)  When its excess reserves equal zero 
D)  When it is part of a fractional reserve banking system 
E)  When its required reserves are equal to its excess reserves

Question 16

Which of the following is true of a certificate of deposit?

Accepted Answer

A)  They are accounts at savings and loan associations. 
B)  The funds in this deposit account are not given out in the form of loans. 
C)  The funds in this account must be deposited for a specified period of time. 
D)  The value of the deposit should be more than $100,000. 
E)  The deposits earn very little or no interest. 
A)  They are accounts at savings and loan associations. 
B)  The funds in this deposit account are not given out in the form of loans. 
C)  The funds in this account must be deposited for a specified period of time. 
D)  The value of the deposit should be more than $100,000. 
E)  The deposits earn very little or no interest.

Question 17

Total reserve holdings over and above required reserves constitute the minimum amount of loans a depository institution can make.

Accepted Answer

A) True 
 B)False

Question 18

Stocks and bonds are considered to be highly illiquid assets while real estate is considered to be a liquid asset.

Accepted Answer

A) True 
 B)False

Question 19

-Refer to Table 12.2. With a reserve requirement of 20 percent, the bank has excess reserves of _____.

Accepted Answer

A)  $5,000 
B)  $3,000 
C)  $2,000 
D)  $1,000 
E)  $2,500 
A)  $5,000 
B)  $3,000 
C)  $2,000 
D)  $1,000 
E)  $2,500

Question 20

Assume that the reserve requirement is 10 percent. A $1,000 cash deposit into a savings account will immediately increase the bank's required reserves by _____.

Accepted Answer

A)  $10,000. 
B)  $500. 
C)  $100. 
D)  $1,500. 
E)  $10. 
A)  $10,000. 
B)  $500. 
C)  $100. 
D)  $1,500. 
E)  $10.

Exam 12: Money and Banking

-Refer to Table 12.2. If excess reserves equal $2,000, what must the reserve requirement be equal to?

Which of the following statements apply to international banking facilities (IBFs)?

The maximum amount by which the entire banking system can create money is equal to:

Which of the following is not true about a special drawing right (SDR)?

Suppose the reserve requirement is 10 percent and a person deposits $1,500 in a local bank. The local bank can now create a maximum of:

If Brazil experienced a period of rapid and unexpected inflation, causing Brazilians to lose confidence in the local currency (real) as a store of value, which of the following would be least likely to occur?

Which of the following is true of International Banking Facilities (IBFs) in the U.S.?

An asset is said to be illiquid when:

Which of the following is true of offshore banking?

If a bank's required reserves equal $270,000. Suppose the bank holds no excess reserves, and the reserve requirement is equal to 18 percent, what is the value of the bank's total deposits?

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 deposits in the economy would be equal to:

Using money as a unit of account lowers information costs compared to barter exchanges.

Which of the following facilities give bank customers access to services over a much wider geographic area than any single bank's branches can cover?

Which of the following is the most popular instrument for financing Islamic investments?

When do we say that a bank is loaned up?

Which of the following is true of a certificate of deposit?

Total reserve holdings over and above required reserves constitute the minimum amount of loans a depository institution can make.

Stocks and bonds are considered to be highly illiquid assets while real estate is considered to be a liquid asset.

-Refer to Table 12.2. With a reserve requirement of 20 percent, the bank has excess reserves of _____.

Assume that the reserve requirement is 10 percent. A $1,000 cash deposit into a savings account will immediately increase the bank's required reserves by _____.

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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