Question 1

If checkable deposits rise,it follows that the

Accepted Answer

A) required reserve ratio will fall. 
B) dollar amount of reserves will rise. 
C) dollar amount of vault cash will rise. 
D) required reserve ratio will rise. 
E) none of the above 
A) required reserve ratio will fall. 
B) dollar amount of reserves will rise. 
C) dollar amount of vault cash will rise. 
D) required reserve ratio will rise. 
E) none of the above

Question 2

A bank has $50,000 in excess reserves and the required reserve ratio is 10 percent.This means the bank could have __________ in checkable deposit liabilities and __________ in (total)reserves.

Accepted Answer

A) $500,000;$90,000 
B) $100,000;$20,000 
C) $50,000;$25,000 
D) $250,000;$75,000 
A) $500,000;$90,000 
B) $100,000;$20,000 
C) $50,000;$25,000 
D) $250,000;$75,000

Question 3

To a bank,a checkable deposit is classified as

Accepted Answer

A) an asset. 
B) a liability. 
C) vault cash. 
D) excess reserves. 
E) bank capital. 
A) an asset. 
B) a liability. 
C) vault cash. 
D) excess reserves. 
E) bank capital.

Question 4

Money evolved out of the self-interested actions of

Accepted Answer

A) economists. 
B) governments. 
C) a few kings and queens. 
D) individuals. 
A) economists. 
B) governments. 
C) a few kings and queens. 
D) individuals.

Question 5

A medium of exchange 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 6

A financial system is a means of bringing together savers and borrowers.

Accepted Answer

A) True 
 B)False

Question 7

A bank has $10,000 in excess reserves and the required reserve ratio is 20 percent.This means the bank could have __________ in checkable deposit liabilities and __________ in total reserves.

Accepted Answer

A) $80,000,$10,000 
B) $100,000,$20,000 
C) $50,000,$25,000 
D) $100,000,$30,000 
A) $80,000,$10,000 
B) $100,000,$20,000 
C) $50,000,$25,000 
D) $100,000,$30,000

Question 8

Which of the following statements is true?

Accepted Answer

A) Savings deposits are a part of M2,but not M1. 
B) M1 is sometimes referred to as the "broad definition of the money supply". 
C) Time deposits are a part of M1,but not M2. 
D) M1 is a larger dollar amount than M2. 
A) Savings deposits are a part of M2,but not M1. 
B) M1 is sometimes referred to as the "broad definition of the money supply". 
C) Time deposits are a part of M1,but not M2. 
D) M1 is a larger dollar amount than M2.

Question 9

When a country imposes capital controls,it is controlling the

Accepted Answer

A) amount of money flowing in or out of the country. 
B) amount of reserves that banks must hold. 
C) portion of bank deposits that must be held at its central bank. 
D) portion of bank deposits that must be used for loans to the government. 
A) amount of money flowing in or out of the country. 
B) amount of reserves that banks must hold. 
C) portion of bank deposits that must be held at its central bank. 
D) portion of bank deposits that must be used for loans to the government.

Question 10

The existence and use of the Internet has lowered the transaction costs of making some exchanges.

Accepted Answer

A) True 
 B)False

Question 11

M2 includes M1 plus all of the following except

Accepted Answer

A) savings deposits. 
B) retail money market mutual funds. 
C) short-term U.S.government securities. 
D) small-denomination time deposits. 
A) savings deposits. 
B) retail money market mutual funds. 
C) short-term U.S.government securities. 
D) small-denomination time deposits.

Question 12

If reserves equal $59 million and vault cash equals $29 million,it follows that

Accepted Answer

A) bank deposits at the Federal Reserve equal $29 million. 
B) currency in the hands of the public equals $29 million. 
C) excess reserves equal $30 million. 
D) bank deposits at the Federal Reserve equal $30 million. 
E) There is not enough information to answer the question. 
A) bank deposits at the Federal Reserve equal $29 million. 
B) currency in the hands of the public equals $29 million. 
C) excess reserves equal $30 million. 
D) bank deposits at the Federal Reserve equal $30 million. 
E) There is not enough information to answer the question.

Question 13

Bank capital equals assets minus liabilities.

Accepted Answer

A) True 
 B)False

Question 14

Reserves held beyond the required amount are called __________ reserves.

Accepted Answer

A) redundant 
B) precautionary 
C) excess 
D) surplus 
A) redundant 
B) precautionary 
C) excess 
D) surplus

Question 15

Barter is

Accepted Answer

A) the exchange of money for goods and then the exchange of those goods for money. 
B) the exchange of money for money,or the exchange of money for stocks and bonds. 
C) the exchange of goods and services for goods and services without the use of money. 
D) any exchange,with or without the use of money,in which the participants negotiate (or barter)the price of the goods to be exchanged. 
A) the exchange of money for goods and then the exchange of those goods for money. 
B) the exchange of money for money,or the exchange of money for stocks and bonds. 
C) the exchange of goods and services for goods and services without the use of money. 
D) any exchange,with or without the use of money,in which the participants negotiate (or barter)the price of the goods to be exchanged.

Question 16

Compared to barter,money __________ transaction costs,making transactions __________ time-consuming.

Accepted Answer

A) increases;more 
B) increases;less 
C) reduces;more 
D) reduces;less 
A) increases;more 
B) increases;less 
C) reduces;more 
D) reduces;less

Question 17

According to the textbook,The Wonderful Wizard of Oz is alleged to be a story about

Accepted Answer

A) the California gold strikes of 1849. 
B) the end of the gold standard in 1934. 
C) the presidential election of 1896. 
D) the financial panic of 1907. 
A) the California gold strikes of 1849. 
B) the end of the gold standard in 1934. 
C) the presidential election of 1896. 
D) the financial panic of 1907.

Question 18

According to the textbook,in the book version of The Wonderful Wizard of Oz,Dorothy's slippers are

Accepted Answer

A) gold. 
B) silver. 
C) ruby. 
D) paper. 
A) gold. 
B) silver. 
C) ruby. 
D) paper.

Question 19

Consider the following data: currency (held outside banks)= $354 billion,checkable deposits = $250 billion,traveler's checks = $4 billion,small-denomination time deposits = $200 billion,savings deposits = $100 billion,retail money market mutual funds = $160 billion.M1 equals __________ billion and M2 equals __________ billion.

Accepted Answer

A) $608;$1,068 
B) $708;$1,038 
C) $708;$948 
D) $694;$1,038 
E) none of the above 
A) $608;$1,068 
B) $708;$1,038 
C) $708;$948 
D) $694;$1,038 
E) none of the above

Question 20

A house is $100,000,a computer is $2,000,and a car is $20,000.In this context,money is principally functioning as a

Accepted Answer

A) unit of account. 
B) store of value. 
C) medium of exchange. 
D) none of the above 
A) unit of account. 
B) store of value. 
C) medium of exchange. 
D) none of the above

Exam 12: Money,banking,and the Financial System

If checkable deposits rise,it follows that the

A bank has $50,000 in excess reserves and the required reserve ratio is 10 percent.This means the bank could have __________ in checkable deposit liabilities and __________ in (total)reserves.

To a bank,a checkable deposit is classified as

Money evolved out of the self-interested actions of

A medium of exchange is

A financial system is a means of bringing together savers and borrowers.

A bank has $10,000 in excess reserves and the required reserve ratio is 20 percent.This means the bank could have __________ in checkable deposit liabilities and __________ in total reserves.

Which of the following statements is true?

When a country imposes capital controls,it is controlling the

The existence and use of the Internet has lowered the transaction costs of making some exchanges.

M2 includes M1 plus all of the following except

If reserves equal $59 million and vault cash equals $29 million,it follows that

Bank capital equals assets minus liabilities.

Reserves held beyond the required amount are called __________ reserves.

Barter is

Compared to barter,money __________ transaction costs,making transactions __________ time-consuming.

According to the textbook,The Wonderful Wizard of Oz is alleged to be a story about

According to the textbook,in the book version of The Wonderful Wizard of Oz,Dorothy's slippers are

A house is $100,000,a computer is $2,000,and a car is $20,000.In this context,money is principally functioning as a

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, controlled, and Relative

Supply,demand,and Price: Applications

Macroeconomic Measurements, part I: Prices and Unemployment

Macroeconomic Measurements, part II: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self-Regulating Economy

Keynesian Macroeconomics and Economic Instability: a Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, technology, ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

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

Globalization and International Impacts on the Economy

The Economic Case for and Against Government: Five Topics Considered

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A bank has $50,000 in excess reserves and the required reserve ratio is 10 percent.This means the bank could have in checkable deposit liabilities and in (total)reserves.

A bank has $10,000 in excess reserves and the required reserve ratio is 20 percent.This means the bank could have in checkable deposit liabilities and in total reserves.

Compared to barter,money transaction costs,making transactions time-consuming.