Question 1

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 2

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 3

If checkable deposits in Bank A total $300 million and the required reserve ratio is 10 percent,then required reserves at Bank A equal

Accepted Answer

A) $3.0 million. 
B) $30.0 million. 
C) $3.3 million. 
D) $300,000 
A) $3.0 million. 
B) $30.0 million. 
C) $3.3 million. 
D) $300,000

Question 4

Bank deposits at the Federal Reserve = $40 billion,vault cash = $2 billion,the required reserve ratio = 0.10,and total checkable deposits = $400 billion.It follows that required reserves equal __________ billion, (total)reserves equal __________ billion and excess reserves equal __________ billion.

Accepted Answer

A) $42;$42;$2 
B) $42;$40;$2 
C) $2;$40;$38 
D) $38;$40;$2 
E) $40;$42;$2 
A) $42;$42;$2 
B) $42;$40;$2 
C) $2;$40;$38 
D) $38;$40;$2 
E) $40;$42;$2

Question 5

Discuss some of the economic symbolism thought by many to be contained in L.Frank Baum's book The Wonderful Wizard of Oz.

Accepted Answer

Many people believe that Baum's well-kno

Question 6

When economists say that banks must hold a percentage of their total deposits in reserve form,what does this mean?

Accepted Answer

A) It means that banks must hold a fraction of their customers' deposits either as bank deposits at the Federal Reserve,or as vault cash,or both. 
B) It means that banks reserve the right to turn away customers a certain percentage of the time. 
C) It means that the fraction of vault cash a bank has cannot be greater than the fraction of bank deposits (it has)at the Federal Reserve. 
D) Essentially,it means that total reserves are greater than required reserves. 
E) none of the above 
A) It means that banks must hold a fraction of their customers' deposits either as bank deposits at the Federal Reserve,or as vault cash,or both. 
B) It means that banks reserve the right to turn away customers a certain percentage of the time. 
C) It means that the fraction of vault cash a bank has cannot be greater than the fraction of bank deposits (it has)at the Federal Reserve. 
D) Essentially,it means that total reserves are greater than required reserves. 
E) none of the above

Question 7

To a bank,a loan the bank has made to its borrowers 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 8

If reserves equal $29 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 $10 million. 
D) bank deposits at the Federal Reserve equal $0. 
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 $10 million. 
D) bank deposits at the Federal Reserve equal $0. 
E) There is not enough information to answer the question.

Question 9

If a person uses money to buy a pair of shoes,money is functioning as

Accepted Answer

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

Question 10

Required reserves are a set percentage of total reserves that must be held in cash in a bank's vault or in the bank's reserve account at the Fed.

Accepted Answer

A) True 
 B)False

Question 11

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 12

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 13

Which set of prices would you expect to see (posted,quoted)in a barter economy?

Accepted Answer

A) 1 horse = 10 pieces of gold;1 kettle = 1 piece of gold 
B) 1 horse = 10 kettles;1 kettle = 1/10 horse 
C) 1 horse = $200;1 kettle = $20 
D) 1 horse = 10 kettles;1 kettle = 10 apples;1 apple = 1 orange 
E) b and d 
A) 1 horse = 10 pieces of gold;1 kettle = 1 piece of gold 
B) 1 horse = 10 kettles;1 kettle = 1/10 horse 
C) 1 horse = $200;1 kettle = $20 
D) 1 horse = 10 kettles;1 kettle = 10 apples;1 apple = 1 orange 
E) b and d

Question 14

Saying that it takes twice as many dollars to buy one ticket for a concert than two tickets for a movie refers to the use of money as a

Accepted Answer

A) medium of exchange. 
B) unit of account. 
C) store of value. 
D) means of achieving the double coincidence of wants. 
A) medium of exchange. 
B) unit of account. 
C) store of value. 
D) means of achieving the double coincidence of wants.

Question 15

There was an economic depression in the U.S in 1893 that some people blamed on the gold standard.

Accepted Answer

A) True 
 B)False

Question 16

Asymmetric information exists when

Accepted Answer

A) both parties to an exchange have all relevant facts about that exchange. 
B) a good that is either nonrivalrous or nonexcludable is being sold on a market. 
C) the two parties to an exchange differ in what they know about the good being exchanged. 
D) neither party to an exchange is knowledgeable about the quality of the good being exchanged. 
A) both parties to an exchange have all relevant facts about that exchange. 
B) a good that is either nonrivalrous or nonexcludable is being sold on a market. 
C) the two parties to an exchange differ in what they know about the good being exchanged. 
D) neither party to an exchange is knowledgeable about the quality of the good being exchanged.

Question 17

Your neighbor has knowledge of economics and you would like her to share it with you.You own a car,a CD player and a new pair of running shoes.You wish to make a trade,but the neighbor does not want what you have.The problem can be stated as follows: You are not satisfying the

Accepted Answer

A) rule of transaction costs. 
B) double coincidence of wants. 
C) law of marketability. 
D) terms of a common denominator. 
A) rule of transaction costs. 
B) double coincidence of wants. 
C) law of marketability. 
D) terms of a common denominator.

Question 18

The M2 money supply

Accepted Answer

A) includes M1. 
B) is commonly referred to as the broad definition of the money supply. 
C) includes savings deposits. 
D) is larger than M1. 
E) all of the above 
A) includes M1. 
B) is commonly referred to as the broad definition of the money supply. 
C) includes savings deposits. 
D) is larger than M1. 
E) all of the above

Question 19

In which situation are transaction costs most likely to be the lowest?

Accepted Answer

A) Rodney buys antiques;he is currently looking for an eighteenth-century table. 
B) Cathy is looking for someone who is willing to trade accounting services (in return)for law services. 
C) Rodriguez wants to buy a house with two master bedrooms. 
D) Melinda wants to buy a McDonald's Big Mac (she will not be asking for a special order). 
A) Rodney buys antiques;he is currently looking for an eighteenth-century table. 
B) Cathy is looking for someone who is willing to trade accounting services (in return)for law services. 
C) Rodriguez wants to buy a house with two master bedrooms. 
D) Melinda wants to buy a McDonald's Big Mac (she will not be asking for a special order).

Question 20

The potential buyer of a house has less information about the house than the seller of the house.This is a case of

Accepted Answer

A) externality information. 
B) free ridership. 
C) asymmetric information. 
D) biased information. 
E) a public good not being a private good. 
A) externality information. 
B) free ridership. 
C) asymmetric information. 
D) biased information. 
E) a public good not being a private good.

Exam 12: Money,banking,and the Financial System

M2 is comprised of

Money's basic advantage as compared to barter is that

If checkable deposits in Bank A total $300 million and the required reserve ratio is 10 percent,then required reserves at Bank A equal

Bank deposits at the Federal Reserve = $40 billion,vault cash = $2 billion,the required reserve ratio = 0.10,and total checkable deposits = $400 billion.It follows that required reserves equal __________ billion, (total)reserves equal __________ billion and excess reserves equal __________ billion.

Discuss some of the economic symbolism thought by many to be contained in L.Frank Baum's book The Wonderful Wizard of Oz.

When economists say that banks must hold a percentage of their total deposits in reserve form,what does this mean?

To a bank,a loan the bank has made to its borrowers is classified as

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

If a person uses money to buy a pair of shoes,money is functioning as

Required reserves are a set percentage of total reserves that must be held in cash in a bank's vault or in the bank's reserve account at the Fed.

Which of the following represents a double coincidence of wants?

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?

Which set of prices would you expect to see (posted,quoted)in a barter economy?

Saying that it takes twice as many dollars to buy one ticket for a concert than two tickets for a movie refers to the use of money as a

There was an economic depression in the U.S in 1893 that some people blamed on the gold standard.

Asymmetric information exists when

Your neighbor has knowledge of economics and you would like her to share it with you.You own a car,a CD player and a new pair of running shoes.You wish to make a trade,but the neighbor does not want what you have.The problem can be stated as follows: You are not satisfying the

The M2 money supply

In which situation are transaction costs most likely to be the lowest?

The potential buyer of a house has less information about the house than the seller of the house.This is a case of

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

Stocks, bonds, futures, and Options

Filters

Bank deposits at the Federal Reserve = $40 billion,vault cash = $2 billion,the required reserve ratio = 0.10,and total checkable deposits = $400 billion.It follows that required reserves equal billion, (total)reserves equal billion and excess reserves equal __ billion.