Question 1

Describe the differences between M1 and M2.

Accepted Answer

M1 is the narrow definition of the money

Question 2

A unit of account is

Accepted Answer

A)  anything that is generally accepted in exchange for goods and services. 
B)  a common measurement in which relative values are expressed. 
C)  an item's ability to hold value over time. 
D)  the exchange of goods and services for other goods and services. 
E)  both a and d 
A)  anything that is generally accepted in exchange for goods and services. 
B)  a common measurement in which relative values are expressed. 
C)  an item's ability to hold value over time. 
D)  the exchange of goods and services for other goods and services. 
E)  both a and d

Question 3

Bank A has checkable deposits of $10 million and total reserves of $1 million.The required reserve ratio is 9 percent.The bank has required reserves of

Accepted Answer

A)  $910,000. 
B)  $90,000. 
C)  $900,000. 
D)  $1,000,000. 
E)  There is not enough information provided to answer this question. 
A)  $910,000. 
B)  $90,000. 
C)  $900,000. 
D)  $1,000,000. 
E)  There is not enough information provided to answer this question.

Question 4

If a bank's assets are $500 million and its liabilities are $380 million,then its net worth (bank capital)is ____________________.If the bank's assets then rise by 6 percent at the same time that its liabilities rise by 5 percent,the percentage change in the bank's net worth will be approximately _______________ percent.

Accepted Answer

A)  $440 million; 10.2 
B)  $120 million; 1.2 
C)  $100 million; 11.2 
D)  $120 million; 9.2 
A)  $440 million; 10.2 
B)  $120 million; 1.2 
C)  $100 million; 11.2 
D)  $120 million; 9.2

Question 5

In banking,another term for bank capital is

Accepted Answer

A)  net worth. 
B)  total liabilities. 
C)  total assets. 
D)  checkable deposits. 
A)  net worth. 
B)  total liabilities. 
C)  total assets. 
D)  checkable deposits.

Question 6

A unit of account is

Accepted Answer

A)  a bank account. 
B)  a savings account. 
C)  a common measurement in which values are expressed. 
D)  the same as a medium of exchange. 
E)  none of the above 
A)  a bank account. 
B)  a savings account. 
C)  a common measurement in which values are expressed. 
D)  the same as a medium of exchange. 
E)  none of the above

Question 7

Inflation does the greatest harm to money's function as a

Accepted Answer

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

Question 8

If peanuts were widely accepted for purposes of exchange,then

Accepted Answer

A)  peanuts would be money. 
B)  peanuts would be less valuable than they are currently. 
C)  we would observe people using peanuts to purchase cars. 
D)  a and c 
E)  a and b 
A)  peanuts would be money. 
B)  peanuts would be less valuable than they are currently. 
C)  we would observe people using peanuts to purchase cars. 
D)  a and c 
E)  a and b

Question 9

The amount of required reserves a bank holds depends on the

Accepted Answer

A)  required reserve ratio. 
B)  demand-deposit ratio. 
C)  excess-reserve ratio. 
D)  currency ratio. 
A)  required reserve ratio. 
B)  demand-deposit ratio. 
C)  excess-reserve ratio. 
D)  currency ratio.

Question 10

Reserves equal bank deposits at the Fed plus vault cash.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not a component of M1?

Accepted Answer

A)  currency held outside banks 
B)  traveler's checks 
C)  savings deposits 
D)  checkable deposits 
A)  currency held outside banks 
B)  traveler's checks 
C)  savings deposits 
D)  checkable deposits

Question 12

Historically,which of the following goods have evolved into money?

Accepted Answer

A)  gold 
B)  salt 
C)  cattle 
D)  cocoa beans 
E)  all of the above 
A)  gold 
B)  salt 
C)  cattle 
D)  cocoa beans 
E)  all of the above

Question 13

A bank has $7 million in checkable deposits and $1.2 million in total reserves.If the required reserve ratio is 10 percent,then the bank has

Accepted Answer

A)  required reserves of $700,000. 
B)  excess reserves of $500,000. 
C)  excess reserves of $1,080,000. 
D)  required reserves of $120,000. 
E)  a and b 
A)  required reserves of $700,000. 
B)  excess reserves of $500,000. 
C)  excess reserves of $1,080,000. 
D)  required reserves of $120,000. 
E)  a and b

Question 14

M2 is comprised of

Accepted Answer

A)  small-denomination time deposits + savings deposits + money market accounts. 
B)  small-denomination time deposits + credit cards + money market accounts + gold deposits. 
C)  M1 + small-denomination time deposits + savings deposits + retail money market mutual funds. 
D)  M1 + small denomination time deposits + credit cards + money market accounts. 
A)  small-denomination time deposits + savings deposits + money market accounts. 
B)  small-denomination time deposits + credit cards + money market accounts + gold deposits. 
C)  M1 + small-denomination time deposits + savings deposits + retail money market mutual funds. 
D)  M1 + small denomination time deposits + credit cards + money market accounts.

Question 15

A bank's assets are $670 million and its liabilities are $490 million,which means that the bank's net worth (bank capital)is ____________________.If the bank's assets rise by 6% at the same time that its liabilities rise by 4%,the bank's new net worth will then be _______________.

Accepted Answer

A)  $1,160 million; $168.8 million 
B)  $180 million; $168.8 million 
C)  $100 million; $104 million 
D)  $580 million; $160.5 million 
A)  $1,160 million; $168.8 million 
B)  $180 million; $168.8 million 
C)  $100 million; $104 million 
D)  $580 million; $160.5 million

Question 16

If a bank's reserves equal $422 million and vault cash equals $47 million,it follows that

Accepted Answer

A)  the bank's deposits at the Federal Reserve equal $422 million. 
B)  currency in the hands of the public equals $375 million. 
C)  excess reserves equal $42.2 million. 
D)  the bank's deposits at the Federal Reserve equal $42.2 million. 
E)  the bank's deposits at the Federal Reserve equal $375 million. 
A)  the bank's deposits at the Federal Reserve equal $422 million. 
B)  currency in the hands of the public equals $375 million. 
C)  excess reserves equal $42.2 million. 
D)  the bank's deposits at the Federal Reserve equal $42.2 million. 
E)  the bank's deposits at the Federal Reserve equal $375 million.

Question 17

The unit of account function of money refers to the

Accepted Answer

A)  fact that money and income are the same thing. 
B)  common denominator of measurement provided by money. 
C)  characteristic that all money is intrinsically valuable. 
D)  all of the above 
A)  fact that money and income are the same thing. 
B)  common denominator of measurement provided by money. 
C)  characteristic that all money is intrinsically valuable. 
D)  all of the above

Question 18

Refer to Exhibit 12-4.What is the required reserve ratio?

Accepted Answer

A)  12 percent 
B)  10 percent 
C)  11 percent 
D)  9 percent 
E)  There is not enough information provided to answer this question. 
A)  12 percent 
B)  10 percent 
C)  11 percent 
D)  9 percent 
E)  There is not enough information provided to answer this question.

Question 19

Money's basic advantage as compared to barter is that

Accepted Answer

A)  everybody has money but not everyone has the opportunity to barter. 
B)  a money system relies on a double coincidence of wants. 
C)  money reduces transaction costs. 
D)  money is the only medium you can use to store your wealth. 
A)  everybody has money but not everyone has the opportunity to barter. 
B)  a money system relies on a double coincidence of wants. 
C)  money reduces transaction costs. 
D)  money is the only medium you can use to store your wealth.

Question 20

According to the textbook,many people believe that the character Dorothy,in the book The Wonderful Wizard of Oz,represents

Accepted Answer

A)  presidential candidate Barry Goldwater. 
B)  President Abraham Lincoln. 
C)  President William McKinley. 
D)  presidential candidate William Jennings Bryan. 
A)  presidential candidate Barry Goldwater. 
B)  President Abraham Lincoln. 
C)  President William McKinley. 
D)  presidential candidate William Jennings Bryan.

Exam 12: Government and Product Markets: Antitrust and Regulation

Describe the differences between M1 and M2.

A unit of account is

Bank A has checkable deposits of $10 million and total reserves of $1 million.The required reserve ratio is 9 percent.The bank has required reserves of

In banking,another term for bank capital is

A unit of account is

Inflation does the greatest harm to money's function as a

If peanuts were widely accepted for purposes of exchange,then

The amount of required reserves a bank holds depends on the

Reserves equal bank deposits at the Fed plus vault cash.

Which of the following is not a component of M1?

Historically,which of the following goods have evolved into money?

A bank has $7 million in checkable deposits and $1.2 million in total reserves.If the required reserve ratio is 10 percent,then the bank has

M2 is comprised of

A bank's assets are $670 million and its liabilities are $490 million,which means that the bank's net worth (bank capital)is ____________________.If the bank's assets rise by 6% at the same time that its liabilities rise by 4%,the bank's new net worth will then be _______________.

If a bank's reserves equal $422 million and vault cash equals $47 million,it follows that

The unit of account function of money refers to the

Refer to Exhibit 12-4.What is the required reserve ratio?

Money's basic advantage as compared to barter is that

According to the textbook,many people believe that the character Dorothy,in the book The Wonderful Wizard of Oz,represents

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

A bank's assets are $670 million and its liabilities are $490 million,which means that the bank's net worth (bank capital)is ______.If the bank's assets rise by 6% at the same time that its liabilities rise by 4%,the bank's new net worth will then be _.