Question 1

For barter to occur there must be

Accepted Answer

A) hyperinflation. 
B) a double coincidence of wants for each good to be exchanged. 
C) one person who pays cash. 
D) two people willing to pay with credit. 
A) hyperinflation. 
B) a double coincidence of wants for each good to be exchanged. 
C) one person who pays cash. 
D) two people willing to pay with credit.

Question 2

Of the items in the following lists, which go from most liquid to least liquid?

Accepted Answer

A) a checking account, a house, a six-month certificate of deposit, shares of stock 
B) a six-month certificate of deposit, shares of stock, a house, a checking account 
C) a checking account, a certificate of deposit, shares of stock, a house 
D)  a house, a six-month certificate of deposit, shares of stock, a checking account 
A) a checking account, a house, a six-month certificate of deposit, shares of stock 
B) a six-month certificate of deposit, shares of stock, a house, a checking account 
C) a checking account, a certificate of deposit, shares of stock, a house 
D)  a house, a six-month certificate of deposit, shares of stock, a checking account

Question 3

Which of the following actions has no effect on the total money supply?

Accepted Answer

A) The Federal Open Market Committee buys government securities. 
B) The Federal Open Market Committee sells government securities. 
C) There is a transfer of deposits from one bank to another bank. 
D) There is change in the money multiplier. 
A) The Federal Open Market Committee buys government securities. 
B) The Federal Open Market Committee sells government securities. 
C) There is a transfer of deposits from one bank to another bank. 
D) There is change in the money multiplier.

Question 4

The actual money multiplier multiplied by the change in total reserves is the

Accepted Answer

A) federal funds rate. 
B) discount rate. 
C) potential money multiplier. 
D) actual change in the money supply. 
A) federal funds rate. 
B) discount rate. 
C) potential money multiplier. 
D) actual change in the money supply.

Question 5

What is liquidity?
 Why is money the most liquid of all assets?
 What is the cost of this liquidity?

Accepted Answer

Liquidity is the degree to which an asse

Question 6

If the Federal Reserve buys $500 of government securities when the required reserve ratio is 20 percent, the maximum potential change in the money supply is a(n)

Accepted Answer

A) increase by $100. 
B) increase by $2,500. 
C) decrease by $100. 
D) decrease by $2,500. 
A) increase by $100. 
B) increase by $2,500. 
C) decrease by $100. 
D) decrease by $2,500.

Question 7

In the United States, where do depository institutions hold their reserves?

Accepted Answer

A) in their own vaults in the form of precious metals such as gold and silver 
B) in accounts with the U.S. Department of the Treasury 
C) either as vault cash or on reserve with Federal Reserve district banks 
D) All reserves must be held at a Federal Reserve district bank. 
A) in their own vaults in the form of precious metals such as gold and silver 
B) in accounts with the U.S. Department of the Treasury 
C) either as vault cash or on reserve with Federal Reserve district banks 
D) All reserves must be held at a Federal Reserve district bank.

Question 8

Which of the following is a time deposit with a fixed maturity date offered by banks and other financial institutions?

Accepted Answer

A) savings deposit 
B) money market deposit account 
C) time deposit 
D) small-denomination certificate of deposit 
A) savings deposit 
B) money market deposit account 
C) time deposit 
D) small-denomination certificate of deposit

Question 9

The formula is the

Accepted Answer

A) federal funds rate. 
B) discount rate. 
C) potential money multiplier. 
D) actual change in the money supply. 
A) federal funds rate. 
B) discount rate. 
C) potential money multiplier. 
D) actual change in the money supply.

Question 10

The reserve ratio is 10 percent. If the bank receives a customer deposit of $100,000, then an immediate effect is

Accepted Answer

A) a reduction in the bank's total assets of exactly $10,000. 
B) a reduction in the bank's total liabilities of exactly $10,000. 
C) no change in the bank's total assets or total liabilities. 
D) an increase in the bank's reserves of exactly $10,000. 
A) a reduction in the bank's total assets of exactly $10,000. 
B) a reduction in the bank's total liabilities of exactly $10,000. 
C) no change in the bank's total assets or total liabilities. 
D) an increase in the bank's reserves of exactly $10,000.

Question 11

The level of reserves in the monetary system is determined by

Accepted Answer

A) the Federal Open Market Committee. 
B) the Treasury Department. 
C) Congress. 
D) the President of the United States. 
A) the Federal Open Market Committee. 
B) the Treasury Department. 
C) Congress. 
D) the President of the United States.

Question 12

If Joe buys a coffee at Starbucks, his money serves as a

Accepted Answer

A) unit of accounting. 
B) standard of deferred payment. 
C) store of value. 
D) medium of exchange. 
A) unit of accounting. 
B) standard of deferred payment. 
C) store of value. 
D) medium of exchange.

Question 13

If the money multiplier is 2.4 and the Fed buys $8 million in securities on the open market, transaction deposits could potentially

Accepted Answer

A) increase by $19.2 million. 
B) increase by $8 million. 
C) decrease by $19.2 million. 
D) decrease by $16.5 million. 
A) increase by $19.2 million. 
B) increase by $8 million. 
C) decrease by $19.2 million. 
D) decrease by $16.5 million.

Question 14

-The potential money multiplier for the banking system in the above table is

Accepted Answer

A) 5. 
B) 9. 
C) 1. 
D) 10. 
A) 5. 
B) 9. 
C) 1. 
D) 10.

Question 15

-According to the above table, the value of M2 is

Accepted Answer

A) $3,807 billion. 
B) $5,237 billion. 
C) $6,237 billion. 
D) $6,253 billion. 
A) $3,807 billion. 
B) $5,237 billion. 
C) $6,237 billion. 
D) $6,253 billion.

Question 16

The Fed

Accepted Answer

A) is responsible for minting coins. 
B) distributes Federal Reserve notes, which are paper currency. 
C) is responsible for conducting U.S. fiscal policy. 
D) has 15 Federal Reserve banks and governing boards in New York and Chicago. 
A) is responsible for minting coins. 
B) distributes Federal Reserve notes, which are paper currency. 
C) is responsible for conducting U.S. fiscal policy. 
D) has 15 Federal Reserve banks and governing boards in New York and Chicago.

Question 17

Possession of information by one party in a financial transaction but not by the other party is

Accepted Answer

A) asymmetric information. 
B) symmetric information. 
C) informational hazard. 
D) financial intermediation. 
A) asymmetric information. 
B) symmetric information. 
C) informational hazard. 
D) financial intermediation.

Question 18

Asymmetric information is a situation in which

Accepted Answer

A) information possessed by one party in a transaction is not known by another party. 
B) information possessed by one party in a transaction is also known by another party. 
C) the government has information that it chooses to pass along to private firms. 
D) private firms have information that they choose to pass along to the government. 
A) information possessed by one party in a transaction is not known by another party. 
B) information possessed by one party in a transaction is also known by another party. 
C) the government has information that it chooses to pass along to private firms. 
D) private firms have information that they choose to pass along to the government.

Question 19

Which function of money allows for comparison shopping?

Accepted Answer

A) medium of exchange 
B) unit of accounting 
C) store of value 
D) standard of deferred payment 
A) medium of exchange 
B) unit of accounting 
C) store of value 
D) standard of deferred payment

Question 20

If a $1 million open market purchase by the Fed generates a new deposit at a bank that immediately causes the bank's reserves held at the Fed to increase by $1 million, then the T-account effects are that the bank's assets and liabilities ________ by $1 million and that the Fed's assets and liabilities ________ by $1 million.

Accepted Answer

A) decline; decline 
B) increase; decline 
C) decline; increase 
D) increase; increase 
A) decline; decline 
B) increase; decline 
C) decline; increase 
D) increase; increase

For barter to occur there must be

Of the items in the following lists, which go from most liquid to least liquid?

Which of the following actions has no effect on the total money supply?

The actual money multiplier multiplied by the change in total reserves is the

What is liquidity? Why is money the most liquid of all assets? What is the cost of this liquidity?

If the Federal Reserve buys $500 of government securities when the required reserve ratio is 20 percent, the maximum potential change in the money supply is a(n)

In the United States, where do depository institutions hold their reserves?

Which of the following is a time deposit with a fixed maturity date offered by banks and other financial institutions?

The formula is the

The reserve ratio is 10 percent. If the bank receives a customer deposit of $100,000, then an immediate effect is

The level of reserves in the monetary system is determined by

If Joe buys a coffee at Starbucks, his money serves as a

If the money multiplier is 2.4 and the Fed buys $8 million in securities on the open market, transaction deposits could potentially

-The potential money multiplier for the banking system in the above table is

-According to the above table, the value of M2 is

The Fed

Possession of information by one party in a financial transaction but not by the other party is

Asymmetric information is a situation in which

Which function of money allows for comparison shopping?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Exam 14: Money Banking and Central Banking

For barter to occur there must be

Of the items in the following lists, which go from most liquid to least liquid?

Which of the following actions has no effect on the total money supply?

The actual money multiplier multiplied by the change in total reserves is the

What is liquidity? Why is money the most liquid of all assets? What is the cost of this liquidity?

If the Federal Reserve buys $500 of government securities when the required reserve ratio is 20 percent, the maximum potential change in the money supply is a(n)

In the United States, where do depository institutions hold their reserves?

Which of the following is a time deposit with a fixed maturity date offered by banks and other financial institutions?

The formula is the

The reserve ratio is 10 percent. If the bank receives a customer deposit of $100,000, then an immediate effect is

The level of reserves in the monetary system is determined by

If Joe buys a coffee at Starbucks, his money serves as a

If the money multiplier is 2.4 and the Fed buys $8 million in securities on the open market, transaction deposits could potentially

-The potential money multiplier for the banking system in the above table is

-According to the above table, the value of M2 is

The Fed

Possession of information by one party in a financial transaction but not by the other party is

Asymmetric information is a situation in which

Which function of money allows for comparison shopping?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters