Question 1

If individuals will no longer accept a currency, is it still considered to be money?

Accepted Answer

A) No, because one of the main characteristics necessary for something to serve as money is that it must be generally acceptable. 
B) No, because of Gresham's Law. 
C) Yes, because the government identifies it as legal tender. 
D) Yes, because one of the main characteristics necessary for something to serve as money is that it must be generally acceptable. 
A) No, because one of the main characteristics necessary for something to serve as money is that it must be generally acceptable. 
B) No, because of Gresham's Law. 
C) Yes, because the government identifies it as legal tender. 
D) Yes, because one of the main characteristics necessary for something to serve as money is that it must be generally acceptable.

Question 2

Which of the following is the best definition of money?

Accepted Answer

A) anything generally accepted as a payment for goods or repayment of debt 
B) anything that is a liability of the federal government 
C) anything that is a liability of a commercial bank 
D) coins and currency in the hands of the public 
A) anything generally accepted as a payment for goods or repayment of debt 
B) anything that is a liability of the federal government 
C) anything that is a liability of a commercial bank 
D) coins and currency in the hands of the public

Question 3

If a bank had demand deposits of $80 million and it faced a 25 percent required reserve ratio, it would be required to have how many reserves?

Accepted Answer

A) $20 million 
B) $40 million 
C) $60 million 
D) $80 million 
A) $20 million 
B) $40 million 
C) $60 million 
D) $80 million

Question 4

Balance Sheet 15-B
A bank's assets consist of $1,000,000 in total reserves, $2,100,000 in loans, and a building worth $1,200,000. Its liabilities and capital consist of $3,000,000 in demand deposits and $1,300,000 in capital.
-Refer to Balance Sheet 15-B.If the required reserve ratio is 20 percent, what is the level of the bank's excess reserves? How much could it loan out as a result?

Accepted Answer

A) $600,000; $600,000 
B) $600,000; $3,000,000 
C) $400,000; $400,000 
D) $400,000; $2,000,000 
A) $600,000; $600,000 
B) $600,000; $3,000,000 
C) $400,000; $400,000 
D) $400,000; $2,000,000

Question 5

Which of the following backs our money supply?

Accepted Answer

A) The words "This note is legal tender." 
B) The faith in the government 
C) The faith in the government's ability to provide an instrument people will take in exchange for goods and services 
D) Precious metals 
A) The words "This note is legal tender." 
B) The faith in the government 
C) The faith in the government's ability to provide an instrument people will take in exchange for goods and services 
D) Precious metals

Question 6

Savings accounts are the most liquid of all assets because they can be quickly and easily transferred.

Accepted Answer

A) True 
 B)False

Question 7

First Safety, a commercial bank, has $6,000,000 of outstanding demand deposits and actual reserves of $1,700,000.If the reserve ratio is 25 percent, what is the maximum amount of new loans the bank can extend?

Accepted Answer

A) $100,000 
B) $425,000 
C) $200,000 
D) $1,500,000 
A) $100,000 
B) $425,000 
C) $200,000 
D) $1,500,000

Question 8

Suppose all banks are subject to a uniform reserve requirement of 20 percent and that the Gamblers Last Chance Bank of Las Vegas has zero excess reserves.If a new customer deposits $10,000, the bank can now extend new loans up to a maximum of:

Accepted Answer

A) $2,000. 
B) $8,000. 
C) $10,000. 
D) $50,000. 
E) $200,000. 
A) $2,000. 
B) $8,000. 
C) $10,000. 
D) $50,000. 
E) $200,000.

Question 9

Balance Sheet 15-A
A bank's assets consist of $500,000 in total reserves, $1,600,000 in loans, and a building worth $1,200,000. Its liabilities and capital consist of $2,000,000 in demand deposits and $1,300,000 in capital.
-Refer to Balance Sheet 15-A.If the required reserve ratio is 25 percent, what is the level of the bank's excess reserves? How much could it loan out as a result?

Accepted Answer

A) zero; zero 
B) $500,000; $500,000 
C) $500,000; $2,000,000 
D) $250,000; $1,000,000 
A) zero; zero 
B) $500,000; $500,000 
C) $500,000; $2,000,000 
D) $250,000; $1,000,000

Question 10

Banks create money when they increase demand deposits through the process of creating loans.

Accepted Answer

A) True 
 B)False

Question 11

If banks faced a 100 percent reserve requirement, a $10,000 addition to banking reserves would increase the money supply by:

Accepted Answer

A) $100. 
B) $1,000. 
C) $10,000. 
D) $100,000. 
E) $1,000,000. 
A) $100. 
B) $1,000. 
C) $10,000. 
D) $100,000. 
E) $1,000,000.

Question 12

The higher the interest rate paid on certificates of deposit and other nontransaction deposits, other things being equal, the less people would be expected to hold in demand deposits.

Accepted Answer

A) True 
 B)False

Question 13

The existence of inflation and other possible uncertainties reduces the usefulness of money as a store of value.

Accepted Answer

A) True 
 B)False

Question 14

Balance Sheet 15-B
A bank's assets consist of $1,000,000 in total reserves, $2,100,000 in loans, and a building worth $1,200,000. Its liabilities and capital consist of $3,000,000 in demand deposits and $1,300,000 in capital.
-Refer to Balance Sheet 15-B.If the bank is required to keep reserves equal to one-third of deposits, what is the level of the bank's excess reserves? How much could it loan out as a result?

Accepted Answer

A) zero; zero 
B) $300,000; $300,000 
C) $300,000; $900,000 
D) $700,000; $2,100,000 
A) zero; zero 
B) $300,000; $300,000 
C) $300,000; $900,000 
D) $700,000; $2,100,000

Question 15

Which of the following is included in M2 but is not included in M1?

Accepted Answer

A) Eurodollar deposits 
B) savings accounts 
C) traveler's checks 
D) checkable deposits 
A) Eurodollar deposits 
B) savings accounts 
C) traveler's checks 
D) checkable deposits

Question 16

What is the initial impact of a $2,000 deposit if the reserve ratio is 10%?

Accepted Answer

A) $200 in excess reserves and $1,800 in required reserves 
B) $1,800 in excess reserves and $200 in required reserves 
C) $2,00 in excess reserves and zero required reserves 
D) zero excess reserves and $2,000 in required reserves 
E) none of the above 
A) $200 in excess reserves and $1,800 in required reserves 
B) $1,800 in excess reserves and $200 in required reserves 
C) $2,00 in excess reserves and zero required reserves 
D) zero excess reserves and $2,000 in required reserves 
E) none of the above

Question 17

Barter system is less desirable than using money for exchange because:

Accepted Answer

A) it is a more inefficient and a time-consuming process. 
B) gold and silver are risky and inconvenient to transport. 
C) it tends to promote inflation. 
D) gold and silver are relatively scarcer than other commodities. 
E) the government maintains too important a role in the money-creating process. 
A) it is a more inefficient and a time-consuming process. 
B) gold and silver are risky and inconvenient to transport. 
C) it tends to promote inflation. 
D) gold and silver are relatively scarcer than other commodities. 
E) the government maintains too important a role in the money-creating process.

Question 18

Money lowers the transaction cost when:

Accepted Answer

A) the economy is experiencing rapid inflation. 
B) its value is stable. 
C) the rate of inflation is uncertain. 
D) there is widespread deflation 
A) the economy is experiencing rapid inflation. 
B) its value is stable. 
C) the rate of inflation is uncertain. 
D) there is widespread deflation

Question 19

U.S.government bonds held by commercial banks are:

Accepted Answer

A) government assets and commercial bank assets. 
B) government assets and commercial bank liabilities. 
C) government liabilities and commercial bank assets. 
D) government liabilities and commercial bank liabilities. 
A) government assets and commercial bank assets. 
B) government assets and commercial bank liabilities. 
C) government liabilities and commercial bank assets. 
D) government liabilities and commercial bank liabilities.

Question 20

If a bank receiving a new deposit of $200,000 would be able, as a result, to increase their lending by at most $150,000, then the required reserve ratio equals:

Accepted Answer

A) 4%. 
B) 25%. 
C) 40%. 
D) 50%. 
A) 4%. 
B) 25%. 
C) 40%. 
D) 50%.

If individuals will no longer accept a currency, is it still considered to be money?

Which of the following is the best definition of money?

If a bank had demand deposits of $80 million and it faced a 25 percent required reserve ratio, it would be required to have how many reserves?

Which of the following backs our money supply?

Savings accounts are the most liquid of all assets because they can be quickly and easily transferred.

First Safety, a commercial bank, has $6,000,000 of outstanding demand deposits and actual reserves of $1,700,000.If the reserve ratio is 25 percent, what is the maximum amount of new loans the bank can extend?

Suppose all banks are subject to a uniform reserve requirement of 20 percent and that the Gamblers Last Chance Bank of Las Vegas has zero excess reserves.If a new customer deposits $10,000, the bank can now extend new loans up to a maximum of:

Banks create money when they increase demand deposits through the process of creating loans.

If banks faced a 100 percent reserve requirement, a $10,000 addition to banking reserves would increase the money supply by:

The higher the interest rate paid on certificates of deposit and other nontransaction deposits, other things being equal, the less people would be expected to hold in demand deposits.

The existence of inflation and other possible uncertainties reduces the usefulness of money as a store of value.

Which of the following is included in M2 but is not included in M1?

What is the initial impact of a $2,000 deposit if the reserve ratio is 10%?

Barter system is less desirable than using money for exchange because:

Money lowers the transaction cost when:

U.S.government bonds held by commercial banks are:

If a bank receiving a new deposit of $200,000 would be able, as a result, to increase their lending by at most $150,000, then the required reserve ratio equals:

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Firms in Competitive Markets

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Economics

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Exam 15: Monetary Institutions

If individuals will no longer accept a currency, is it still considered to be money?

Which of the following is the best definition of money?

If a bank had demand deposits of $80 million and it faced a 25 percent required reserve ratio, it would be required to have how many reserves?

Which of the following backs our money supply?

Savings accounts are the most liquid of all assets because they can be quickly and easily transferred.

First Safety, a commercial bank, has $6,000,000 of outstanding demand deposits and actual reserves of $1,700,000.If the reserve ratio is 25 percent, what is the maximum amount of new loans the bank can extend?

Suppose all banks are subject to a uniform reserve requirement of 20 percent and that the Gamblers Last Chance Bank of Las Vegas has zero excess reserves.If a new customer deposits $10,000, the bank can now extend new loans up to a maximum of:

Banks create money when they increase demand deposits through the process of creating loans.

If banks faced a 100 percent reserve requirement, a $10,000 addition to banking reserves would increase the money supply by:

The higher the interest rate paid on certificates of deposit and other nontransaction deposits, other things being equal, the less people would be expected to hold in demand deposits.

The existence of inflation and other possible uncertainties reduces the usefulness of money as a store of value.

Which of the following is included in M2 but is not included in M1?

What is the initial impact of a $2,000 deposit if the reserve ratio is 10%?

Barter system is less desirable than using money for exchange because:

Money lowers the transaction cost when:

U.S.government bonds held by commercial banks are:

If a bank receiving a new deposit of $200,000 would be able, as a result, to increase their lending by at most $150,000, then the required reserve ratio equals:

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Firms in Competitive Markets

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Economics

Filters