Question 1

What is a reserve requirement and what function does a reserve serve?

Accepted Answer

The reserve requirement is the minimum a

Question 2

The term fractional reserves refers to:

Accepted Answer

A)  The fact that reserves are split among many banks. 
B)  Reserves being a fraction of total deposits. 
C)  The ratio of required reserves to total loans. 
D)  The ratio of excess reserves to total loans. 
A)  The fact that reserves are split among many banks. 
B)  Reserves being a fraction of total deposits. 
C)  The ratio of required reserves to total loans. 
D)  The ratio of excess reserves to total loans.

Question 3

Suppose the entire banking system has $70,000 in excess reserves and a required reserve ratio of 25 percent.The deposit-creation potential of the banking system is:

Accepted Answer

A)  $2,800 
B)  $70,000 
C)  $280,000 
D)  $1,750,000 
A)  $2,800 
B)  $70,000 
C)  $280,000 
D)  $1,750,000

Question 4

If total reserves for a bank are $10,000,excess reserves are zero,and demand deposits are $100,000,then the money multiplier must be:

Accepted Answer

A)  5. 
B)  10. 
C)  15. 
D)  20. 
A)  5. 
B)  10. 
C)  15. 
D)  20.

Question 5

Which of the following is not an essential characteristic of money?

Accepted Answer

A)  It is a store of value. 
B)  It is backed by gold or silver. 
C)  It is a standard of value. 
D)  It is a medium of exchange. 
A)  It is a store of value. 
B)  It is backed by gold or silver. 
C)  It is a standard of value. 
D)  It is a medium of exchange.

Question 6

The reserve requirement directly limits the ability of banks to:

Accepted Answer

A)  Change their interest rates. 
B)  Advertise their services. 
C)  Accept additional deposits. 
D)  Make new loans. 
A)  Change their interest rates. 
B)  Advertise their services. 
C)  Accept additional deposits. 
D)  Make new loans.

Question 7

Which of the following is not an essential characteristic of money?

Accepted Answer

A)  It serves as a benchmark for barter. 
B)  It serves as a store of value. 
C)  It serves as a medium of exchange. 
D)  It serves as a standard of value. 
A)  It serves as a benchmark for barter. 
B)  It serves as a store of value. 
C)  It serves as a medium of exchange. 
D)  It serves as a standard of value.

Question 8

Professor Williams tutors her next-door neighbor's son in economics.Instead of paying her for this service,the neighbor washes the professor's car.This is an example of:

Accepted Answer

A)  A market transaction. 
B)  Barter. 
C)  A monetary transaction. 
D)  A store of value. 
A)  A market transaction. 
B)  Barter. 
C)  A monetary transaction. 
D)  A store of value.

Question 9

The overwhelming majority of the basic money supply in the U.S.is in the form of:

Accepted Answer

A)  Traveler's checks and currency in circulation. 
B)  Currency in circulation and savings accounts. 
C)  Transactions accounts and currency in circulation. 
D)  Credit card balances and transactions accounts. 
A)  Traveler's checks and currency in circulation. 
B)  Currency in circulation and savings accounts. 
C)  Transactions accounts and currency in circulation. 
D)  Credit card balances and transactions accounts.

Question 10

Which of the following is affected by changes in aggregate demand?

Accepted Answer

A)  Total output but not employment or prices. 
B)  Employment and prices but not total output. 
C)  Prices and total output but not employment. 
D)  Prices,employment and total output. 
A)  Total output but not employment or prices. 
B)  Employment and prices but not total output. 
C)  Prices and total output but not employment. 
D)  Prices,employment and total output.

Question 11

One News Wire article in the text,titled "How Would You Like to Pay for That?" points out that a greater percentage of noncash payments were made with debit and credit cards than with checks.In this case debit and credit cards function as a:

Accepted Answer

A)  Medium of exchange. 
B)  Store of value. 
C)  Standard of value. 
D)  Unit of account. 
A)  Medium of exchange. 
B)  Store of value. 
C)  Standard of value. 
D)  Unit of account.

Question 12

Suppose First National Bank has zero excess reserves.If the required reserve ratio increases,which of the following will happen immediately?

Accepted Answer

A)  Bank assets will decrease. 
B)  The bank will not have enough required reserves. 
C)  The money multiplier will increase. 
D)  Total reserves will increase. 
A)  Bank assets will decrease. 
B)  The bank will not have enough required reserves. 
C)  The money multiplier will increase. 
D)  Total reserves will increase.

Question 13

Suppose Caroline finds $10,000 under her bed and deposits it in her checking account.If the required reserve ratio is 25 percent,this deposit has the potential of increasing the money supply by:

Accepted Answer

A)  $2,500. 
B)  $10,000. 
C)  $30,000. 
D)  $50,000. 
A)  $2,500. 
B)  $10,000. 
C)  $30,000. 
D)  $50,000.

Question 14

If total reserves for a bank are $200,000,excess reserves are zero,and demand deposits are $1,000,000,then the money multiplier must be:

Accepted Answer

A)  5. 
B)  10. 
C)  15. 
D)  20 
A)  5. 
B)  10. 
C)  15. 
D)  20

Question 15

Use the following balance sheet for XYZ Bank,which is one of many banks in a banking system.
Table 13.1-XYZ Bank balance sheet  
-Refer to Table 13.1.With total reserves of $50,000 and a required reserve ratio of 25 percent,potential deposit creation for the banking system is equal to:

Accepted Answer

A)  Zero. 
B)  $50,000. 
C)  $200,000. 
D)  $250,000. 
A)  Zero. 
B)  $50,000. 
C)  $200,000. 
D)  $250,000.

Question 16

Suppose a bank has $100,000 in deposits,a minimum reserve requirement of 5 percent,and bank reserves of $12,000.Then it can make new loans in the amount of:

Accepted Answer

A)  $12,000 
B)  $7,000 
C)  $5,000 
D)  $2,000 
A)  $12,000 
B)  $7,000 
C)  $5,000 
D)  $2,000

Question 17

Use the following balance sheet for Bank of the Universe,which is one of many banks in a banking system.
Table 13.2-Bank of the Universe Balance Sheet  
-Refer to Table 13.2.With a required reserve ratio of 8 percent,Bank of the Universe can make new loans in the amount of:

Accepted Answer

A)  $70,000. 
B)  $80,000. 
C)  $150,000. 
D)  $770,000. 
A)  $70,000. 
B)  $80,000. 
C)  $150,000. 
D)  $770,000.

Question 18

Money is functioning as a store of value if you:

Accepted Answer

A)  Buy your textbooks online at a reduced price. 
B)  Put it in a savings account so you can buy a new car next summer. 
C)  Walk all over the mall searching for the best prices. 
D)  Shop at thrift stores and garage sales. 
A)  Buy your textbooks online at a reduced price. 
B)  Put it in a savings account so you can buy a new car next summer. 
C)  Walk all over the mall searching for the best prices. 
D)  Shop at thrift stores and garage sales.

Question 19

Banks are most profitable when:

Accepted Answer

A)  Loans are initiated. 
B)  Borrowers open a checking account. 
C)  They sell traveler checks. 
D)  They help customers. 
A)  Loans are initiated. 
B)  Borrowers open a checking account. 
C)  They sell traveler checks. 
D)  They help customers.

Question 20

As the size of purchases becomes larger,a greater percentage of the purchases are made using:

Accepted Answer

A)  Cash. 
B)  Checks and debit cards. 
C)  Barter. 
D)  Traveler's checks. 
A)  Cash. 
B)  Checks and debit cards. 
C)  Barter. 
D)  Traveler's checks.

What is a reserve requirement and what function does a reserve serve?

The term fractional reserves refers to:

Suppose the entire banking system has $70,000 in excess reserves and a required reserve ratio of 25 percent.The deposit-creation potential of the banking system is:

If total reserves for a bank are $10,000,excess reserves are zero,and demand deposits are $100,000,then the money multiplier must be:

Which of the following is not an essential characteristic of money?

The reserve requirement directly limits the ability of banks to:

Which of the following is not an essential characteristic of money?

Professor Williams tutors her next-door neighbor's son in economics.Instead of paying her for this service,the neighbor washes the professor's car.This is an example of:

The overwhelming majority of the basic money supply in the U.S.is in the form of:

Which of the following is affected by changes in aggregate demand?

One News Wire article in the text,titled "How Would You Like to Pay for That?" points out that a greater percentage of noncash payments were made with debit and credit cards than with checks.In this case debit and credit cards function as a:

Suppose First National Bank has zero excess reserves.If the required reserve ratio increases,which of the following will happen immediately?

Suppose Caroline finds $10,000 under her bed and deposits it in her checking account.If the required reserve ratio is 25 percent,this deposit has the potential of increasing the money supply by:

If total reserves for a bank are $200,000,excess reserves are zero,and demand deposits are $1,000,000,then the money multiplier must be:

Use the following balance sheet for XYZ Bank,which is one of many banks in a banking system. Table 13.1-XYZ Bank balance sheet -Refer to Table 13.1.With total reserves of $50,000 and a required reserve ratio of 25 percent,potential deposit creation for the banking system is equal to:

Suppose a bank has $100,000 in deposits,a minimum reserve requirement of 5 percent,and bank reserves of $12,000.Then it can make new loans in the amount of:

Use the following balance sheet for Bank of the Universe,which is one of many banks in a banking system. Table 13.2-Bank of the Universe Balance Sheet -Refer to Table 13.2.With a required reserve ratio of 8 percent,Bank of the Universe can make new loans in the amount of:

Money is functioning as a store of value if you:

Banks are most profitable when:

As the size of purchases becomes larger,a greater percentage of the purchases are made using:

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

What is a reserve requirement and what function does a reserve serve?

The term fractional reserves refers to:

Suppose the entire banking system has $70,000 in excess reserves and a required reserve ratio of 25 percent.The deposit-creation potential of the banking system is:

If total reserves for a bank are $10,000,excess reserves are zero,and demand deposits are $100,000,then the money multiplier must be:

Which of the following is not an essential characteristic of money?

The reserve requirement directly limits the ability of banks to:

Which of the following is not an essential characteristic of money?

Professor Williams tutors her next-door neighbor's son in economics.Instead of paying her for this service,the neighbor washes the professor's car.This is an example of:

The overwhelming majority of the basic money supply in the U.S.is in the form of:

Which of the following is affected by changes in aggregate demand?

One News Wire article in the text,titled "How Would You Like to Pay for That?" points out that a greater percentage of noncash payments were made with debit and credit cards than with checks.In this case debit and credit cards function as a:

Suppose First National Bank has zero excess reserves.If the required reserve ratio increases,which of the following will happen immediately?

Suppose Caroline finds $10,000 under her bed and deposits it in her checking account.If the required reserve ratio is 25 percent,this deposit has the potential of increasing the money supply by:

If total reserves for a bank are $200,000,excess reserves are zero,and demand deposits are $1,000,000,then the money multiplier must be:

Use the following balance sheet for XYZ Bank,which is one of many banks in a banking system. Table 13.1-XYZ Bank balance sheet -Refer to Table 13.1.With total reserves of $50,000 and a required reserve ratio of 25 percent,potential deposit creation for the banking system is equal to:

Suppose a bank has $100,000 in deposits,a minimum reserve requirement of 5 percent,and bank reserves of $12,000.Then it can make new loans in the amount of:

Use the following balance sheet for Bank of the Universe,which is one of many banks in a banking system. Table 13.2-Bank of the Universe Balance Sheet -Refer to Table 13.2.With a required reserve ratio of 8 percent,Bank of the Universe can make new loans in the amount of:

Money is functioning as a store of value if you:

Banks are most profitable when:

As the size of purchases becomes larger,a greater percentage of the purchases are made using:

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