Question 1

The banking system receives a new cash deposit of $250,000.Total deposits eventually rise by $1 million.The value of the reserve ratio is

Accepted Answer

A) 25. 
B) 4. 
C) 0.50. 
D) 0.25. 
E) 0.20. 
A) 25. 
B) 4. 
C) 0.50. 
D) 0.25. 
E) 0.20.

Question 2

As of December 31, 2010, the assets listed on the balance sheet of Bank A were: $1.5 million in cash reserves, and $6 million in outstanding loans to its customers.Its liabilities totaled $6.5 million in checking deposits.What was the bank's net worth on that date?

Accepted Answer

A) $1 million 
B) $4.5 million 
C) $5 million. 
D) $14 million. 
E) Zero 
A) $1 million 
B) $4.5 million 
C) $5 million. 
D) $14 million. 
E) Zero

Question 3

A run on a bank may occur if

Accepted Answer

A) depositors withdraw some funds to invest in the stock market. 
B) required reserves are increased. 
C) interest rates are raised. 
D) depositors lose confidence in the bank and attempt to withdraw all their funds. 
E) All of the above are correct. 
A) depositors withdraw some funds to invest in the stock market. 
B) required reserves are increased. 
C) interest rates are raised. 
D) depositors lose confidence in the bank and attempt to withdraw all their funds. 
E) All of the above are correct.

Question 4

On the Micronesian island of Yap, it is easier to make purchases with stone wheel currency than it is to make purchases with paper currency including the U.S.dollar.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is the term used to describe a failing bank selling off a substantial amount of assets in a short time period in order to remain solvent?

Accepted Answer

A) fire sale 
B) short sale 
C) long sale 
D) liquidity sale 
A) fire sale 
B) short sale 
C) long sale 
D) liquidity sale

Question 6

Define the following terms and explain their importance to the study of macroeconomics: "a.money" "b.M1" "c.near money" "d.bank run"

Accepted Answer

a.Money is the standard object used in t

Question 7

Barter transactions involve a double coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 8

In comparison to commodity money, paper money

Accepted Answer

A) is not portable. 
B) has no intrinsic value. 
C) is not divisible. 
D) cannot be stored. 
E) All of the above are correct. 
A) is not portable. 
B) has no intrinsic value. 
C) is not divisible. 
D) cannot be stored. 
E) All of the above are correct.

Question 9

A "near money" is an asset that can be

Accepted Answer

A) indistinguishable from commodity money. 
B) spent easily. 
C) a close substitute for money. 
D) only issued by a bank. 
A) indistinguishable from commodity money. 
B) spent easily. 
C) a close substitute for money. 
D) only issued by a bank.

Question 10

Gold and silver have historically been the most common form of commodity money.

Accepted Answer

A) True 
 B)False

Question 11

One inconvenience of commodity money is the need for

Accepted Answer

A) money to be divisible. 
B) uniform quality. 
C) portability. 
D) All of the above are correct. 
A) money to be divisible. 
B) uniform quality. 
C) portability. 
D) All of the above are correct.

Question 12

Bank failures in the U.S.

Accepted Answer

A) occurred frequently through the 1960s and declined since then. 
B) occurred infrequently through the 1960s and have become more common since then. 
C) occurred frequently through the 1930s, declined after that time, and became more common in 2008. 
D) occurred infrequently through the 1930s, increased after that time, and became less common in 2008. 
A) occurred frequently through the 1960s and declined since then. 
B) occurred infrequently through the 1960s and have become more common since then. 
C) occurred frequently through the 1930s, declined after that time, and became more common in 2008. 
D) occurred infrequently through the 1930s, increased after that time, and became less common in 2008.

Question 13

What is a barter system?
 What are the drawbacks of this system?

Accepted Answer

Barter is a type of trade in which goods

Question 14

Money is almost always used to quote prices.This illustrates the function of money as a

Accepted Answer

A) medium of exchange. 
B) store of value. 
C) unit of account. 
D) commodity value. 
A) medium of exchange. 
B) store of value. 
C) unit of account. 
D) commodity value.

Question 15

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 16

If depositors become worried about the safety of their deposit accounts, they may trigger a

Accepted Answer

A) deposit surplus. 
B) bank run. 
C) fiscal policy crisis. 
D) required reserve increase. 
A) deposit surplus. 
B) bank run. 
C) fiscal policy crisis. 
D) required reserve increase.

Question 17

The one disadvantage of paper money is that it is easier to

Accepted Answer

A) duplicate and counterfeit. 
B) carry. 
C) divide. 
D) store and use at a later time. 
A) duplicate and counterfeit. 
B) carry. 
C) divide. 
D) store and use at a later time.

Question 18

The distinction between M1 and M2 is based on

Accepted Answer

A) portability-the ease with which an asset can be moved. 
B) divisibility-the ease with which an asset can be used to make smaller payments. 
C) liquidity-the ease with which an asset can be converted into cash. 
D) storability-how long an asset will retain its value. 
A) portability-the ease with which an asset can be moved. 
B) divisibility-the ease with which an asset can be used to make smaller payments. 
C) liquidity-the ease with which an asset can be converted into cash. 
D) storability-how long an asset will retain its value.

Question 19

In order for barter trades to occur, there must be a

Accepted Answer

A) singularity of interests. 
B) bargaining intermediary. 
C) double coincidence of wants. 
D) sufficient supply of cash. 
A) singularity of interests. 
B) bargaining intermediary. 
C) double coincidence of wants. 
D) sufficient supply of cash.

Question 20

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.

Exam 29: Money and the Banking System

The banking system receives a new cash deposit of $250,000.Total deposits eventually rise by $1 million.The value of the reserve ratio is

As of December 31, 2010, the assets listed on the balance sheet of Bank A were: $1.5 million in cash reserves, and $6 million in outstanding loans to its customers.Its liabilities totaled $6.5 million in checking deposits.What was the bank's net worth on that date?

A run on a bank may occur if

On the Micronesian island of Yap, it is easier to make purchases with stone wheel currency than it is to make purchases with paper currency including the U.S.dollar.

Which of the following is the term used to describe a failing bank selling off a substantial amount of assets in a short time period in order to remain solvent?

Define the following terms and explain their importance to the study of macroeconomics: "a.money" "b.M1" "c.near money" "d.bank run"

Barter transactions involve a double coincidence of wants.

In comparison to commodity money, paper money

A "near money" is an asset that can be

Gold and silver have historically been the most common form of commodity money.

One inconvenience of commodity money is the need for

Bank failures in the U.S.

What is a barter system? What are the drawbacks of this system?

Money is almost always used to quote prices.This illustrates the function of money as a

The FDIC

If depositors become worried about the safety of their deposit accounts, they may trigger a

The one disadvantage of paper money is that it is easier to

The distinction between M1 and M2 is based on

In order for barter trades to occur, there must be a

An important effect of fractional reserve banking is that bankers have

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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