Question 1

During the 2007-2009 financial crisis, the U.S.government decided that Lehman Brothers was not too big to fail and that AIG was too big to fail.

Accepted Answer

A) True 
 B)False

Question 2

E-cash cards are considered a major portion of the modern money supply.

Accepted Answer

A) True 
 B)False

Question 3

The most common form of trading goods for goods is

Accepted Answer

A) bilateral trade. 
B) government commodity distribution. 
C) status-based trades. 
D) barter. 
E) payments in kind. 
A) bilateral trade. 
B) government commodity distribution. 
C) status-based trades. 
D) barter. 
E) payments in kind.

Question 4

On which of the following assets are you most likely to earn interest income?

Accepted Answer

A) cash and currency 
B) checkable deposits 
C) money market deposit accounts 
D) gold and other precious metals 
E) All of the above are correct. 
A) cash and currency 
B) checkable deposits 
C) money market deposit accounts 
D) gold and other precious metals 
E) All of the above are correct.

Question 5

In September 2007 the British bank Northern Rock which specialized in home mortgages experienced a noteworthy bank run.

Accepted Answer

A) True 
 B)False

Question 6

The value of the deposit multiplier is 1 divided by the required reserve ratio.

Accepted Answer

A) True 
 B)False

Question 7

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 8

When people trade goods for money, money is being used as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 9

Discuss some of the government regulations designed to ensure depositors' safety and to control the money supply.

Accepted Answer

Deposit insurance: The principal innovat

Question 10

The government regulates the banking industry by

Accepted Answer

A) conducting frequent audits and examinations. 
B) limiting the kinds of assets that a bank may own. 
C) limiting the quantity of some kinds of assets that a bank may own. 
D) All of the above are correct. 
A) conducting frequent audits and examinations. 
B) limiting the kinds of assets that a bank may own. 
C) limiting the quantity of some kinds of assets that a bank may own. 
D) All of the above are correct.

Question 11

Which of the following is included in M1?

Accepted Answer

A) savings accounts 
B) money market deposit accounts 
C) money market mutual funds 
D) travelers' checks 
E) None of the above are included. 
A) savings accounts 
B) money market deposit accounts 
C) money market mutual funds 
D) travelers' checks 
E) None of the above are included.

Question 12

Which of the following are included in the M2 definition of the money supply?

Accepted Answer

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

Question 13

A liability to a bank is

Accepted Answer

A) something that the bank owns. 
B) something that the bank owes. 
C) something a customer owes the bank. 
D) the value of bank buildings and hardware. 
A) something that the bank owns. 
B) something that the bank owes. 
C) something a customer owes the bank. 
D) the value of bank buildings and hardware.

Question 14

Due to new methods of electronically transferring assets from savings accounts to checking accounts, many economists favor moving savings accounts from

Accepted Answer

A) M1 into M2. 
B) M2 into M3. 
C) M3 into M2. 
D) M2 into M1. 
A) M1 into M2. 
B) M2 into M3. 
C) M3 into M2. 
D) M2 into M1.

Question 15

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 16

Many economists believe that savings accounts should be added to M1 because they

Accepted Answer

A) are larger in size than conventional checking accounts. 
B) pay larger interest than checking accounts. 
C) can be transferred quickly into checkable accounts. 
D) are also insured by the federal government. 
A) are larger in size than conventional checking accounts. 
B) pay larger interest than checking accounts. 
C) can be transferred quickly into checkable accounts. 
D) are also insured by the federal government.

Question 17

Fiat money is money

Accepted Answer

A) backed by land. 
B) backed by gold or silver. 
C) that can be converted to gold or silver. 
D) because a government says it is. 
A) backed by land. 
B) backed by gold or silver. 
C) that can be converted to gold or silver. 
D) because a government says it is.

Question 18

Under fractional banking, when a bank lends to a customer

Accepted Answer

A) the money supply increases. 
B) bank profitability is decreased. 
C) the bank is protected from a run. 
D) bank credit decreases. 
A) the money supply increases. 
B) bank profitability is decreased. 
C) the bank is protected from a run. 
D) bank credit decreases.

Question 19

In addition to fiscal policy, the other main tool used to affect aggregate demand is

Accepted Answer

A) trade policy. 
B) industrial policy. 
C) planning policy. 
D) monetary policy. 
A) trade policy. 
B) industrial policy. 
C) planning policy. 
D) monetary policy.

Question 20

An asset of a bank is

Accepted Answer

A) the value of money that is on deposit. 
B) the amount a depositor may legally borrow. 
C) something of value that the bank owes to a depositor. 
D) something of value that a bank owns. 
A) the value of money that is on deposit. 
B) the amount a depositor may legally borrow. 
C) something of value that the bank owes to a depositor. 
D) something of value that a bank owns.

Exam 29: Money and the Banking System

During the 2007-2009 financial crisis, the U.S.government decided that Lehman Brothers was not too big to fail and that AIG was too big to fail.

E-cash cards are considered a major portion of the modern money supply.

The most common form of trading goods for goods is

On which of the following assets are you most likely to earn interest income?

In September 2007 the British bank Northern Rock which specialized in home mortgages experienced a noteworthy bank run.

The value of the deposit multiplier is 1 divided by the required reserve ratio.

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

When people trade goods for money, money is being used as a medium of exchange.

Discuss some of the government regulations designed to ensure depositors' safety and to control the money supply.

The government regulates the banking industry by

Which of the following is included in M1?

Which of the following are included in the M2 definition of the money supply?

A liability to a bank is

Due to new methods of electronically transferring assets from savings accounts to checking accounts, many economists favor moving savings accounts from

Recently, the financial crisis led to a bank run in

Many economists believe that savings accounts should be added to M1 because they

Fiat money is money

Under fractional banking, when a bank lends to a customer

In addition to fiscal policy, the other main tool used to affect aggregate demand is

An asset of a bank is

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

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

He 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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