Question 1

As far as reserves and deposits are concerned, describe the assets and liabilities of a bank.

Accepted Answer

The major liabilities of a bank are the

Question 2

The FDIC fee system encourages depository institutions to

Accepted Answer

A) make riskier loans than they would otherwise. 
B) reject loans that probably would have been profitable. 
C) seek only a modest rate of return. 
D) operate their institutions in too conservative a fashion. 
A) make riskier loans than they would otherwise. 
B) reject loans that probably would have been profitable. 
C) seek only a modest rate of return. 
D) operate their institutions in too conservative a fashion.

Question 3

Asymmetric information before a transaction takes place generates the problem of

Accepted Answer

A) flawed bank regulation. 
B) intermediation. 
C) adverse selection. 
D) bank runs. 
A) flawed bank regulation. 
B) intermediation. 
C) adverse selection. 
D) bank runs.

Question 4

What are reserves?
 Discuss the various types of reserves used in the U.S. banking system.

Accepted Answer

Reserves are assets held by a depository

Question 5

Which one of the following is included in M2 but NOT in M1?

Accepted Answer

A) coins and currency 
B) transaction deposits 
C) a savings deposit without a set maturity 
D) large-denomination time deposits 
A) coins and currency 
B) transaction deposits 
C) a savings deposit without a set maturity 
D) large-denomination time deposits

Question 6

The Federal Reserve System was established in which year?

Accepted Answer

A) 1865 
B) 1913 
C) 1929 
D) 1941 
A) 1865 
B) 1913 
C) 1929 
D) 1941

Question 7

In a fiduciary monetary system, money is backed by

Accepted Answer

A) the public's confidence that the assets will continue to be accepted as money. 
B) the intrinsic value of the materials used to make the assets. 
C) the assets of the institutions that issue the various assets used as money. 
D) gold. 
A) the public's confidence that the assets will continue to be accepted as money. 
B) the intrinsic value of the materials used to make the assets. 
C) the assets of the institutions that issue the various assets used as money. 
D) gold.

Question 8

Assuming a reserve ratio of 10 percent, if a bank sells $100,000 in securities how much can the bank loan out?

Accepted Answer

A) $90,000 
B) $100,000 
C) $110,000 
D) $10,000 
A) $90,000 
B) $100,000 
C) $110,000 
D) $10,000

Question 9

Which of the following is included in M2 but NOT in M1?

Accepted Answer

A) small-denomination time deposits 
B) transaction deposits 
C) currency 
D) traveler's checks 
A) small-denomination time deposits 
B) transaction deposits 
C) currency 
D) traveler's checks

Question 10

If banks engage in fractional reserve banking, it means that

Accepted Answer

A) they never run short of currency. 
B) they hold less than 100 percent of their deposits as reserves. 
C) a fraction of their legal reserves are held as top-grade government securities. 
D) they do not hold any excess reserves. 
A) they never run short of currency. 
B) they hold less than 100 percent of their deposits as reserves. 
C) a fraction of their legal reserves are held as top-grade government securities. 
D) they do not hold any excess reserves.

Question 11

The central bank for the United States is

Accepted Answer

A) Chase Manhattan Bank. 
B) the Congressional Bank. 
C) the Federal Reserve System. 
D) First National Bank of New York. 
A) Chase Manhattan Bank. 
B) the Congressional Bank. 
C) the Federal Reserve System. 
D) First National Bank of New York.

Question 12

In a barter system, we would expect to see

Accepted Answer

A) many different units of money. 
B) money and goods exchanged for each other. 
C) wide-spread financial institutions. 
D) goods traded directly for other goods and services. 
A) many different units of money. 
B) money and goods exchanged for each other. 
C) wide-spread financial institutions. 
D) goods traded directly for other goods and services.

Question 13

Which of the following is NOT part of M1?

Accepted Answer

A) money market deposit accounts 
B) coin and currency 
C) checking deposits 
D) traveler's checks 
A) money market deposit accounts 
B) coin and currency 
C) checking deposits 
D) traveler's checks

Question 14

The Fed is said to be the "lender of last resort" in that

Accepted Answer

A) it stands ready to lend to any depository institution that it has decided should not fail. 
B) it makes loans to individuals whom commercial banks do not believe are credit-worthy. 
C) it charges a higher interest rate to borrowers than does any other bank. 
D) it functions as the government's bank only when commercial banks fail to do so. 
A) it stands ready to lend to any depository institution that it has decided should not fail. 
B) it makes loans to individuals whom commercial banks do not believe are credit-worthy. 
C) it charges a higher interest rate to borrowers than does any other bank. 
D) it functions as the government's bank only when commercial banks fail to do so.

Question 15

What would cause a bank run?

Accepted Answer

A) Depositors feel that the bank does not have sufficient assets to cover their deposits. 
B) Depositors feel that they are earning too low of a return on their deposits. 
C) Borrowers feel that they are being charged too high of an interest rate on their loans. 
D) Bank managers choose to hold more excess reserves. 
A) Depositors feel that the bank does not have sufficient assets to cover their deposits. 
B) Depositors feel that they are earning too low of a return on their deposits. 
C) Borrowers feel that they are being charged too high of an interest rate on their loans. 
D) Bank managers choose to hold more excess reserves.

Question 16

With a reserve ratio of 10 percent, the maximum potential money multiplier is

Accepted Answer

A) 1. 
B) 5. 
C) 10. 
D) 100. 
A) 1. 
B) 5. 
C) 10. 
D) 100.

Question 17

In 2010, President Obama signed into law that made the Federal Reserve as the nation's

Accepted Answer

A) largest private bank. 
B) federal income tax collector. 
C) fiscal policy making unit. 
D) regulator of systemic financial risk. 
A) largest private bank. 
B) federal income tax collector. 
C) fiscal policy making unit. 
D) regulator of systemic financial risk.

Question 18

The larger is the reserve ratio

Accepted Answer

A) the greater is the increase in the money supply for an increase in bank deposits. 
B) the more likely it is there will be currency drains. 
C) the smaller is the maximum potential money multiplier. 
D) the more difficult it is for the Federal Reserve to control the money supply. 
A) the greater is the increase in the money supply for an increase in bank deposits. 
B) the more likely it is there will be currency drains. 
C) the smaller is the maximum potential money multiplier. 
D) the more difficult it is for the Federal Reserve to control the money supply.

Question 19

A system in which money is issued by the government and its value is based uniquely on the public's faith that the currency represents command over goods and services is the

Accepted Answer

A) transactions approach. 
B) liquidity approach. 
C) fiduciary monetary system. 
D) transaction deposits. 
A) transactions approach. 
B) liquidity approach. 
C) fiduciary monetary system. 
D) transaction deposits.

Question 20

The M2 measure of money is suggested by the ________ approach to measuring money.

Accepted Answer

A) investment 
B) liquidity 
C) transactions 
D) security 
A) investment 
B) liquidity 
C) transactions 
D) security

As far as reserves and deposits are concerned, describe the assets and liabilities of a bank.

The FDIC fee system encourages depository institutions to

Asymmetric information before a transaction takes place generates the problem of

What are reserves? Discuss the various types of reserves used in the U.S. banking system.

Which one of the following is included in M2 but NOT in M1?

The Federal Reserve System was established in which year?

In a fiduciary monetary system, money is backed by

Assuming a reserve ratio of 10 percent, if a bank sells $100,000 in securities how much can the bank loan out?

Which of the following is included in M2 but NOT in M1?

If banks engage in fractional reserve banking, it means that

The central bank for the United States is

In a barter system, we would expect to see

Which of the following is NOT part of M1?

The Fed is said to be the "lender of last resort" in that

What would cause a bank run?

With a reserve ratio of 10 percent, the maximum potential money multiplier is

In 2010, President Obama signed into law that made the Federal Reserve as the nation's

The larger is the reserve ratio

A system in which money is issued by the government and its value is based uniquely on the public's faith that the currency represents command over goods and services is the

The M2 measure of money is suggested by the ________ approach to measuring money.

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

As far as reserves and deposits are concerned, describe the assets and liabilities of a bank.

The FDIC fee system encourages depository institutions to

Asymmetric information before a transaction takes place generates the problem of

What are reserves? Discuss the various types of reserves used in the U.S. banking system.

Which one of the following is included in M2 but NOT in M1?

The Federal Reserve System was established in which year?

In a fiduciary monetary system, money is backed by

Assuming a reserve ratio of 10 percent, if a bank sells $100,000 in securities how much can the bank loan out?

Which of the following is included in M2 but NOT in M1?

If banks engage in fractional reserve banking, it means that

The central bank for the United States is

In a barter system, we would expect to see

Which of the following is NOT part of M1?

The Fed is said to be the "lender of last resort" in that

What would cause a bank run?

With a reserve ratio of 10 percent, the maximum potential money multiplier is

In 2010, President Obama signed into law that made the Federal Reserve as the nation's

The larger is the reserve ratio

A system in which money is issued by the government and its value is based uniquely on the public's faith that the currency represents command over goods and services is the

The M2 measure of money is suggested by the ________ approach to measuring money.

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