Question 1

Which of the following functions like money but is not included in M1?

Accepted Answer

A)  Checking accounts 
B)  Cash 
C)  Traveler's checks 
D)  Money-market mutual funds 
A)  Checking accounts 
B)  Cash 
C)  Traveler's checks 
D)  Money-market mutual funds D

Question 2

Required reserves represent:

Accepted Answer

A)  A leakage from the flow of money. 
B)  The desire on the part of some banks to hold funds and not lend them out. 
C)  Dollars that can be lent. 
D)  A flaw in the banking system. 
A)  A leakage from the flow of money. 
B)  The desire on the part of some banks to hold funds and not lend them out. 
C)  Dollars that can be lent. 
D)  A flaw in the banking system. A

Question 3

Transactions accounts make up almost one third of the basic money supply.

Accepted Answer

A) True 
 B)False  False

Question 4

Deposit creation possibilities are greater with a larger minimum reserve requirement.

Accepted Answer

A) True 
 B)False

Question 5

A bank may lend an amount equal to its:

Accepted Answer

A)  Required reserves. 
B)  Total reserves. 
C)  Total assets. 
D)  Excess reserves. 
A)  Required reserves. 
B)  Total reserves. 
C)  Total assets. 
D)  Excess reserves.

Question 6

Which of the following does not occur when a bank makes a loan?

Accepted Answer

A)  It creates money. 
B)  It creates a transactions-account balance for the borrower. 
C)  The money supply increases. 
D)  It transfers money from spenders to savers. 
A)  It creates money. 
B)  It creates a transactions-account balance for the borrower. 
C)  The money supply increases. 
D)  It transfers money from spenders to savers.

Question 7

Which of the following requires U.S.banks to maintain a minimum reserve ratio?

Accepted Answer

A)  The Organization of Commercial Banks 
B)  The U.S.Treasury 
C)  The Federal Reserve 
D)  Congress 
A)  The Organization of Commercial Banks 
B)  The U.S.Treasury 
C)  The Federal Reserve 
D)  Congress

Question 8

If total reserves for a bank are $150,000,excess reserves are zero,and demand deposits are $1,000,000,then the money multiplier must be:

Accepted Answer

A)  0.15. 
B)  1.50. 
C)  6.67. 
D)  20.00 
A)  0.15. 
B)  1.50. 
C)  6.67. 
D)  20.00

Question 9

In order to simplify market transactions,an economy must use:

Accepted Answer

A)  U.S.dollars. 
B)  A form of money. 
C)  Barter. 
D)  GolD. 
A)  U.S.dollars. 
B)  A form of money. 
C)  Barter. 
D)  GolD.

Question 10

If the required reserve ratio decreases,the money multiplier decreases.

Accepted Answer

A) True 
 B)False

Question 11

The reserve ratio is the ratio of:

Accepted Answer

A)  Bank reserves to total transaction deposits. 
B)  Bank reserves to savings account balances. 
C)  Bank transactions deposits to required reserves. 
D)  Required reserves to excess reserves. 
A)  Bank reserves to total transaction deposits. 
B)  Bank reserves to savings account balances. 
C)  Bank transactions deposits to required reserves. 
D)  Required reserves to excess reserves.

Question 12

A transactions account is considered to be inconvenient for most people because a trip to the bank is required to access the funds in it.

Accepted Answer

A) True 
 B)False

Question 13

Suppose the entire banking system has $10,000 in excess reserves and a required reserve ratio of 20 percent.The deposit-creation potential of the banking system is:

Accepted Answer

A)  $200,000 
B)  $50,000 
C)  $20,000 
D)  $500 
A)  $200,000 
B)  $50,000 
C)  $20,000 
D)  $500

Question 14

If the required reserve ratio is 5 percent,the money multiplier is:

Accepted Answer

A)  0.05. 
B)  5.0. 
C)  10.0. 
D)  20.0 
A)  0.05. 
B)  5.0. 
C)  10.0. 
D)  20.0

Question 15

Martin takes $150 out of his checking account and hides it in his house as cash.The immediate result of this transaction is that M1:

Accepted Answer

A)  Does not change in value. 
B)  Decreases by $150. 
C)  Decreases by more than $150. 
D)  Increases by $150. 
A)  Does not change in value. 
B)  Decreases by $150. 
C)  Decreases by more than $150. 
D)  Increases by $150.

Question 16

The make up of almost all the basic U.S.money supply is currency and

Accepted Answer

A)  Transaction accounts. 
B)  Piggy banks. 
C)  Traveler checks. 
D)  Credit Cards. 
A)  Transaction accounts. 
B)  Piggy banks. 
C)  Traveler checks. 
D)  Credit Cards.

Question 17

The reserve ratio is equal to:

Accepted Answer

A)  Bank reserves plus total deposits. 
B)  Bank reserves divided by total deposits. 
C)  Total deposits minus bank reserves. 
D)  Total deposits divided by bank reserves. 
A)  Bank reserves plus total deposits. 
B)  Bank reserves divided by total deposits. 
C)  Total deposits minus bank reserves. 
D)  Total deposits divided by bank reserves.

Question 18

Money is functioning as a medium of exchange when you:

Accepted Answer

A)  Buy lunch at a fast food restaurant for yourself and your friend. 
B)  Use it to compare the cost of a steak dinner to the cost of a hamburger. 
C)  Decide to save your cash for gas and eat leftover pizza for dinner. 
D)  Borrow a DVD from your friend and she borrows your textbook. 
A)  Buy lunch at a fast food restaurant for yourself and your friend. 
B)  Use it to compare the cost of a steak dinner to the cost of a hamburger. 
C)  Decide to save your cash for gas and eat leftover pizza for dinner. 
D)  Borrow a DVD from your friend and she borrows your textbook.

Question 19

Ceteris paribus,if Tamika pays off a loan at the bank then over time:

Accepted Answer

A)  Deposit creation takes place. 
B)  The money supply becomes larger. 
C)  There is no change in the money supply. 
D)  The money supply becomes smaller. 
A)  Deposit creation takes place. 
B)  The money supply becomes larger. 
C)  There is no change in the money supply. 
D)  The money supply becomes smaller.

Question 20

When a bank makes a loan,dollars leave the banking system so the money supply decreases.

Accepted Answer

A) True 
 B)False

Which of the following functions like money but is not included in M1?

Required reserves represent:

Transactions accounts make up almost one third of the basic money supply.

Deposit creation possibilities are greater with a larger minimum reserve requirement.

A bank may lend an amount equal to its:

Which of the following does not occur when a bank makes a loan?

Which of the following requires U.S.banks to maintain a minimum reserve ratio?

If total reserves for a bank are $150,000,excess reserves are zero,and demand deposits are $1,000,000,then the money multiplier must be:

In order to simplify market transactions,an economy must use:

If the required reserve ratio decreases,the money multiplier decreases.

The reserve ratio is the ratio of:

A transactions account is considered to be inconvenient for most people because a trip to the bank is required to access the funds in it.

Suppose the entire banking system has $10,000 in excess reserves and a required reserve ratio of 20 percent.The deposit-creation potential of the banking system is:

If the required reserve ratio is 5 percent,the money multiplier is:

Martin takes $150 out of his checking account and hides it in his house as cash.The immediate result of this transaction is that M1:

The make up of almost all the basic U.S.money supply is currency and

The reserve ratio is equal to:

Money is functioning as a medium of exchange when you:

Ceteris paribus,if Tamika pays off a loan at the bank then over time:

When a bank makes a loan,dollars leave the banking system so the money supply decreases.

The Challenge of Economics

The US Economy

Supply and Demand

Consumer Demand

Supply Decisions

Competition

Monopoly

The Labor Market

Government Intervention

The Business Cycle

Aggregate Supply and Demand

Fiscal Policy

Monetary Policy

Economic Growth

Theory and Reality

International Trade

Filters

Exam 13: Money and Banks

Which of the following functions like money but is not included in M1?

Required reserves represent:

Transactions accounts make up almost one third of the basic money supply.

Deposit creation possibilities are greater with a larger minimum reserve requirement.

A bank may lend an amount equal to its:

Which of the following does not occur when a bank makes a loan?

Which of the following requires U.S.banks to maintain a minimum reserve ratio?

If total reserves for a bank are $150,000,excess reserves are zero,and demand deposits are $1,000,000,then the money multiplier must be:

In order to simplify market transactions,an economy must use:

If the required reserve ratio decreases,the money multiplier decreases.

The reserve ratio is the ratio of:

A transactions account is considered to be inconvenient for most people because a trip to the bank is required to access the funds in it.

Suppose the entire banking system has $10,000 in excess reserves and a required reserve ratio of 20 percent.The deposit-creation potential of the banking system is:

If the required reserve ratio is 5 percent,the money multiplier is:

Martin takes $150 out of his checking account and hides it in his house as cash.The immediate result of this transaction is that M1:

The make up of almost all the basic U.S.money supply is currency and

The reserve ratio is equal to:

Money is functioning as a medium of exchange when you:

Ceteris paribus,if Tamika pays off a loan at the bank then over time:

When a bank makes a loan,dollars leave the banking system so the money supply decreases.

The Challenge of Economics

The US Economy

Supply and Demand

Consumer Demand

Supply Decisions

Competition

Monopoly

The Labor Market

Government Intervention

The Business Cycle

Aggregate Supply and Demand

Fiscal Policy

Monetary Policy

Economic Growth

Theory and Reality

International Trade

Filters