Question 1

Barter transactions typically take place between two individuals with the same goods to supply.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements is correct?

Accepted Answer

A) from the bank's point of view, ​loans to customers are assets of the bank 
B) from the bank's point of view, ​loans to customers are liabilities of the bank 
C) ​from the customer's point of view, loans to customers are assets of the customer 
D) ​from the customer's point of view, loans to customers are liabilities of the customer 
E) ​a and b only  
F) a and d only 
A) from the bank's point of view, ​loans to customers are assets of the bank 
B) from the bank's point of view, ​loans to customers are liabilities of the bank 
C) ​from the customer's point of view, loans to customers are assets of the customer 
D) ​from the customer's point of view, loans to customers are liabilities of the customer 
E) ​a and b only  
F) a and d only

Question 3

The amount of money held in checking accounts is significantly greater than money in the form of currency.

Accepted Answer

A) True 
 B)False

Question 4

Fiat money has value because it

Accepted Answer

A) is backed by gold. 
B) can be used to buy goods and services. 
C) can be exchanged for precious metals at a fixed price. 
D) can be divided into smaller units. 
E) All of the above are correct. 
A) is backed by gold. 
B) can be used to buy goods and services. 
C) can be exchanged for precious metals at a fixed price. 
D) can be divided into smaller units. 
E) All of the above are correct.

Question 5

When prices for goods and services are quoted in money terms, this is an example of money being used as a store of value.

Accepted Answer

A) True 
 B)False

Question 6

Most banks in the United States are owned by the government and operate as nonprofit institutions.

Accepted Answer

A) True 
 B)False

Question 7

Absent regulation of the money supply, the money supply would likely reflect the business cycle.

Accepted Answer

A) True 
 B)False

Question 8

One conceptual problem in assigning assets to M1, M2, etc.is

Accepted Answer

A) distinguishing money from "near monies." 
B) the problem of measuring asset size. 
C) the need to agree on a unit of account. 
D) the different size of financial assets. 
A) distinguishing money from "near monies." 
B) the problem of measuring asset size. 
C) the need to agree on a unit of account. 
D) the different size of financial assets.

Question 9

The new $20 bills are being introduced by the U.S.Treasury primarily to diminish

Accepted Answer

A) inflation. 
B) poverty. 
C) counterfeiting. 
D) bank failures. 
A) inflation. 
B) poverty. 
C) counterfeiting. 
D) bank failures.

Question 10

The largest portion of the M1 money supply consists of

Accepted Answer

A) coins in circulation. 
B) paper currency in circulation. 
C) savings deposits at credit unions. 
D) checkable deposits. 
A) coins in circulation. 
B) paper currency in circulation. 
C) savings deposits at credit unions. 
D) checkable deposits.

Question 11

The primary benefit of a monetary system of exchange compared to a barter system is the increased

Accepted Answer

A) ability to record transactions. 
B) time necessary to find trading partners. 
C) time devoted to shopping. 
D) efficiency in arranging transactions. 
A) ability to record transactions. 
B) time necessary to find trading partners. 
C) time devoted to shopping. 
D) efficiency in arranging transactions.

Question 12

The principal innovation that increases the safety of bank deposits is

Accepted Answer

A) computerized accounting systems. 
B) credit cards. 
C) automatic teller machines. 
D) deposit insurance. 
A) computerized accounting systems. 
B) credit cards. 
C) automatic teller machines. 
D) deposit insurance.

Question 13

The balance sheet of a solvent bank will show

Accepted Answer

A) assets = liabilities − net worth. 
B) assets = liabilities + net worth. 
C) net worth = assets + liabilities. 
D) liabilities = assets + net worth. 
A) assets = liabilities − net worth. 
B) assets = liabilities + net worth. 
C) net worth = assets + liabilities. 
D) liabilities = assets + net worth.

Question 14

Barter is a system of

Accepted Answer

A) trade without the use of money. 
B) trading one good for another. 
C) the double coincidence of wants. 
D) All of the above are correct. 
A) trade without the use of money. 
B) trading one good for another. 
C) the double coincidence of wants. 
D) All of the above are correct.

Question 15

The money creation process generated by an injection of reserves stops when

Accepted Answer

A) people deposit their loans into other banks. 
B) reserve requirements are raised. 
C) the increase in required reserves equals the size of the injection. 
D) bankers begin to fear runs and stop making loans. 
A) people deposit their loans into other banks. 
B) reserve requirements are raised. 
C) the increase in required reserves equals the size of the injection. 
D) bankers begin to fear runs and stop making loans.

Question 16

An IOU held by a bank, and signed by a customer is a liability.

Accepted Answer

A) True 
 B)False

Question 17

Banks in the United States may create new money equal to their amount of required reserves.

Accepted Answer

A) True 
 B)False

Question 18

Systemic risks are most likely to exist with regard to

Accepted Answer

A) small governments. 
B) large governments. 
C) small financial institutions. 
D) large financial institutions. 
A) small governments. 
B) large governments. 
C) small financial institutions. 
D) large financial institutions.

Question 19

What may limit the size of the money supply expansion to an amount less than indicated by the oversimplified deposit creation formula?

Accepted Answer

The oversimplified deposit creation form

Question 20

In which of the following monetary aggregates are Treasury Bills included?

Accepted Answer

A) M1 only 
B) M2 only 
C) both M1 and M2 
D) neither M1 nor M2 
A) M1 only 
B) M2 only 
C) both M1 and M2 
D) neither M1 nor M2

Exam 29: Money and the Banking System

Barter transactions typically take place between two individuals with the same goods to supply.

Which of the following statements is correct?

The amount of money held in checking accounts is significantly greater than money in the form of currency.

Fiat money has value because it

When prices for goods and services are quoted in money terms, this is an example of money being used as a store of value.

Most banks in the United States are owned by the government and operate as nonprofit institutions.

Absent regulation of the money supply, the money supply would likely reflect the business cycle.

One conceptual problem in assigning assets to M1, M2, etc.is

The new $20 bills are being introduced by the U.S.Treasury primarily to diminish

The largest portion of the M1 money supply consists of

The primary benefit of a monetary system of exchange compared to a barter system is the increased

The principal innovation that increases the safety of bank deposits is

The balance sheet of a solvent bank will show

Barter is a system of

The money creation process generated by an injection of reserves stops when

An IOU held by a bank, and signed by a customer is a liability.

Banks in the United States may create new money equal to their amount of required reserves.

Systemic risks are most likely to exist with regard to

What may limit the size of the money supply expansion to an amount less than indicated by the oversimplified deposit creation formula?

In which of the following monetary aggregates are Treasury Bills included?

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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