Question 1

In a barter economy,

Accepted Answer

A)  money trades for goods,goods trade for services,and services trade for money. 
B)  goods and services trade for other goods and services. 
C)  some goods are more readily accepted in exchange than others. 
D)  making exchanges takes less time (on average)than in a money economy. 
E)  b and c 
A)  money trades for goods,goods trade for services,and services trade for money. 
B)  goods and services trade for other goods and services. 
C)  some goods are more readily accepted in exchange than others. 
D)  making exchanges takes less time (on average)than in a money economy. 
E)  b and c

Question 2

Demand deposits are checking accounts that pay no interest.

Accepted Answer

A) True 
 B)False

Question 3

The dollar amount of reserves a bank must hold is equal to the required reserve ratio times the bank's

Accepted Answer

A)  checkable deposits. 
B)  total liabilities. 
C)  total assets. 
D)  sum of the bank's savings and checkable deposits. 
A)  checkable deposits. 
B)  total liabilities. 
C)  total assets. 
D)  sum of the bank's savings and checkable deposits.

Question 4

Refer to Exhibit 12-4.If Bank XYZ's assets rise by 4 percent and its liabilities rise by 2 percent,by what percentage would its bank capital change compared to its original bank capital (i.e.compared to the value originally in blank (A)),ceteris paribus?

Accepted Answer

A)  2 percent 
B)  3 percent 
C)  9.1 percent 
D)  6 percent 
E)  There is not enough information provided to answer this question. 
A)  2 percent 
B)  3 percent 
C)  9.1 percent 
D)  6 percent 
E)  There is not enough information provided to answer this question.

Question 5

M1 is comprised of currency held outside banks + traveler's checks + __________.

Accepted Answer

A)  credit cards 
B)  savings deposits 
C)  gold 
D)  checkable deposits 
E)  money market mutual funds 
A)  credit cards 
B)  savings deposits 
C)  gold 
D)  checkable deposits 
E)  money market mutual funds

Question 6

Bank capital equals assets minus liabilities.

Accepted Answer

A) True 
 B)False

Question 7

Explain why it is not necessary for paper money to be backed by some commodity (e.g.gold)before it can have value.

Accepted Answer

The U.S.money supply is no longer backed

Question 8

To an economist,the terms "money" and "wealth" are synonyms.

Accepted Answer

A) True 
 B)False

Question 9

Prior to 2008,the Fed ____________ interest on any reserves,so banks ______________ financial incentive to create loans with their excess reserves.

Accepted Answer

A)  paid,had no 
B)  did not pay,had no 
C)  paid,had a 
D)  did not pay; had a 
A)  paid,had no 
B)  did not pay,had no 
C)  paid,had a 
D)  did not pay; had a

Question 10

Excess reserves are the amount by which total reserves exceed required reserves.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements is false?

Accepted Answer

A)  Currency is money,but money is more than just currency. 
B)  M1 is a component of M2. 
C)  Retail money market mutual funds are part of M2,but institutional money market mutual funds are not. 
D)  Credit cards are money since they are widely accepted for purposes of exchange. 
E)  Money reduces the transaction costs of making exchanges. 
A)  Currency is money,but money is more than just currency. 
B)  M1 is a component of M2. 
C)  Retail money market mutual funds are part of M2,but institutional money market mutual funds are not. 
D)  Credit cards are money since they are widely accepted for purposes of exchange. 
E)  Money reduces the transaction costs of making exchanges.

Question 12

Which of the following represents a double coincidence of wants?

Accepted Answer

A)  Smith has what Jones has and neither wants what the other has. 
B)  Smith has what Jones wants but Jones doesn't have what Smith wants. 
C)  Smith has what Jones wants and Jones has what Smith wants. 
D)  Smith wants what Jones has,Jones wants what Brown has,and Brown wants what Smith has. 
E)  none of the above 
A)  Smith has what Jones has and neither wants what the other has. 
B)  Smith has what Jones wants but Jones doesn't have what Smith wants. 
C)  Smith has what Jones wants and Jones has what Smith wants. 
D)  Smith wants what Jones has,Jones wants what Brown has,and Brown wants what Smith has. 
E)  none of the above

Question 13

Fractional reserve banking originated

Accepted Answer

A)  when the United States Congress passed a law regarding the required reserve ratio. 
B)  when goldsmiths realized they could issue warehouse receipts beyond gold on deposits. 
C)  with the establishment of the Federal Reserve System. 
D)  in the United States with the Clayton Act. 
A)  when the United States Congress passed a law regarding the required reserve ratio. 
B)  when goldsmiths realized they could issue warehouse receipts beyond gold on deposits. 
C)  with the establishment of the Federal Reserve System. 
D)  in the United States with the Clayton Act.

Question 14

A bank's assets are $400 million and its liabilities are $300 million,which means that the bank's net worth (bank capital)is ____________________.If the bank's assets rise by 8% at the same time that its liabilities rise by 5%,the bank's new net worth will then be _______________.

Accepted Answer

A)  $700 million; $713 million 
B)  $100 million; $117 million 
C)  $100 million; $102 million 
D)  $350 million; $360.5 million 
A)  $700 million; $713 million 
B)  $100 million; $117 million 
C)  $100 million; $102 million 
D)  $350 million; $360.5 million

Question 15

When people in a barter economy began to accept the good that had greater acceptability than all other goods,they weren't trying to create the institution of money.They were simply trying to __________.

Accepted Answer

A)  get along with their neighbors. 
B)  become rich. 
C)  make trading easier for themselves. 
D)  pay lower prices. 
E)  none of the above 
A)  get along with their neighbors. 
B)  become rich. 
C)  make trading easier for themselves. 
D)  pay lower prices. 
E)  none of the above

Question 16

In the Yap civilization of the South Pacific prior to 1920,large,heavy stones in the shape of a wheel were used as money.Which function of money was probably least served by this form of money?

Accepted Answer

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

Question 17

The Federal Reserve began paying interest on reserves in 2008.

Accepted Answer

A) True 
 B)False

Question 18

To a bank,reserves are classified as

Accepted Answer

A)  an asset. 
B)  a liability. 
C)  equity 
D)  a liability or an asset 
A)  an asset. 
B)  a liability. 
C)  equity 
D)  a liability or an asset

Question 19

Bank A has $25,500 in required reserves.The required reserve ratio is 10 percent.Bank A has checkable deposits of

Accepted Answer

A)  $2,550. 
B)  $255,000. 
C)  $2,550,000. 
D)  $25,500. 
A)  $2,550. 
B)  $255,000. 
C)  $2,550,000. 
D)  $25,500.

Question 20

When a bank makes a loan to one of its customers,to the bank the loan is classified as

Accepted Answer

A)  an asset. 
B)  a liability. 
C)  neither an asset nor a liability. 
D)  an asset in some cases and a liability in other cases,depending on the type of loan. 
A)  an asset. 
B)  a liability. 
C)  neither an asset nor a liability. 
D)  an asset in some cases and a liability in other cases,depending on the type of loan.

Exam 12: Government and Product Markets: Antitrust and Regulation

In a barter economy,

Demand deposits are checking accounts that pay no interest.

The dollar amount of reserves a bank must hold is equal to the required reserve ratio times the bank's

Refer to Exhibit 12-4.If Bank XYZ's assets rise by 4 percent and its liabilities rise by 2 percent,by what percentage would its bank capital change compared to its original bank capital (i.e.compared to the value originally in blank (A)),ceteris paribus?

M1 is comprised of currency held outside banks + traveler's checks + __________.

Bank capital equals assets minus liabilities.

Explain why it is not necessary for paper money to be backed by some commodity (e.g.gold)before it can have value.

To an economist,the terms "money" and "wealth" are synonyms.

Prior to 2008,the Fed ____________ interest on any reserves,so banks ______________ financial incentive to create loans with their excess reserves.

Excess reserves are the amount by which total reserves exceed required reserves.

Which of the following statements is false?

Which of the following represents a double coincidence of wants?

Fractional reserve banking originated

A bank's assets are $400 million and its liabilities are $300 million,which means that the bank's net worth (bank capital)is ____________________.If the bank's assets rise by 8% at the same time that its liabilities rise by 5%,the bank's new net worth will then be _______________.

When people in a barter economy began to accept the good that had greater acceptability than all other goods,they weren't trying to create the institution of money.They were simply trying to __________.

In the Yap civilization of the South Pacific prior to 1920,large,heavy stones in the shape of a wheel were used as money.Which function of money was probably least served by this form of money?

The Federal Reserve began paying interest on reserves in 2008.

To a bank,reserves are classified as

Bank A has $25,500 in required reserves.The required reserve ratio is 10 percent.Bank A has checkable deposits of

When a bank makes a loan to one of its customers,to the bank the loan is classified as

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free,controlled,and Relative

Supply,demand,and Price: Applications

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, oligopoly, and Game Theory

Factor Markets: With Emphasis on the Labor Market

Wages,union,and Labor

The Distribution of Income and Poverty

Interest,rent,and Profit

Market Failure: Externalities, public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government: Five Topics Considered

Stocks,bonds,futures,and Options

Stocks,bonds,futures,and Options

Filters

Prior to 2008,the Fed interest on any reserves,so banks __ financial incentive to create loans with their excess reserves.

A bank's assets are $400 million and its liabilities are $300 million,which means that the bank's net worth (bank capital)is ______.If the bank's assets rise by 8% at the same time that its liabilities rise by 5%,the bank's new net worth will then be _.