Question 1

A depositor cannot directly write checks against:

Accepted Answer

A) demand deposits. 
B) transaction deposits. 
C) nontransaction deposits. 
D) money market mutual fund accounts. 
A) demand deposits. 
B) transaction deposits. 
C) nontransaction deposits. 
D) money market mutual fund accounts.

Question 2

An increase in the excess reserves banks want to hold, together with people depositing currency into their demand deposit accounts, would:

Accepted Answer

A) increase the money supply. 
B) decrease the money supply. 
C) leave the money supply unchanged. 
D) have an indeterminate effect on the money supply. 
A) increase the money supply. 
B) decrease the money supply. 
C) leave the money supply unchanged. 
D) have an indeterminate effect on the money supply.

Question 3

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 money could the excess reserves be used to create in the banking system 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 4

The more widely held and accepted credit cards are, the more money people would be expected to hold in the form of currency.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is false?

Accepted Answer

A) Demand deposits and other checkable deposits have replaced paper and metallic currency as the major source of money used for transactions in the United States. 
B) Credit cards are not money; they are substitutes for the use of money in exchange. 
C) Most of the money that we use for day-to-day transactions is not official legal tender. 
D) Our money is money because of confidence that we have in private financial institutions as well as our government. 
E) None of the above is false; all are true. 
A) Demand deposits and other checkable deposits have replaced paper and metallic currency as the major source of money used for transactions in the United States. 
B) Credit cards are not money; they are substitutes for the use of money in exchange. 
C) Most of the money that we use for day-to-day transactions is not official legal tender. 
D) Our money is money because of confidence that we have in private financial institutions as well as our government. 
E) None of the above is false; all are true.

Question 6

A bank's actual reserves can be calculated by:

Accepted Answer

A) multiplying its demand deposits by the required reserve ratio. 
B) multiplying its excess reserves by the required reserve ratio. 
C) subtracting its required reserves from its excess reserves. 
D) adding its required reserves and its excess reserves. 
E) subtracting its excess reserves from its required reserves. 
A) multiplying its demand deposits by the required reserve ratio. 
B) multiplying its excess reserves by the required reserve ratio. 
C) subtracting its required reserves from its excess reserves. 
D) adding its required reserves and its excess reserves. 
E) subtracting its excess reserves from its required reserves.

Question 7

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 10 percent, what is the level of the bank's excess reserves? How much could it loan out as a result?

Accepted Answer

A) $700,000; $700,000 
B) $700,000; $7,000,000 
C) $300,000; $300,000 
D) $300,000; $3,000,000 
A) $700,000; $700,000 
B) $700,000; $7,000,000 
C) $300,000; $300,000 
D) $300,000; $3,000,000

Question 8

Assume the reserve requirement is 10 percent.First National Bank has vault cash and deposits with the Fed of $40 million, loans and securities of $360 million, and demand deposits of $400 million.First National:

Accepted Answer

A) is not in a position to extend additional loans. 
B) could extend a maximum of $10 million of additional loans. 
C) could extend a maximum of $20 million of additional loans. 
D) could extend a maximum of $40 million of additional loans. 
A) is not in a position to extend additional loans. 
B) could extend a maximum of $10 million of additional loans. 
C) could extend a maximum of $20 million of additional loans. 
D) could extend a maximum of $40 million of additional loans.

Question 9

An important effect of fractional reserve banking is that:

Accepted Answer

A) bankers' choices about how much to lend can affect the money supply. 
B) the commercial banking system has complete control over total reserves. 
C) bankers always turn every dollar of excess reserves into loans. 
D) a new bank deposit allows a bank to extend loans of the same amount to borrowers. 
E) none of the above. 
A) bankers' choices about how much to lend can affect the money supply. 
B) the commercial banking system has complete control over total reserves. 
C) bankers always turn every dollar of excess reserves into loans. 
D) a new bank deposit allows a bank to extend loans of the same amount to borrowers. 
E) none of the above.

Question 10

If Billy Bob's National Bank of Slingblade confronts a 10 percent reserve requirement and has excess reserves of $20,000, what is the maximum amount of additional loans that the bank can extend?

Accepted Answer

A) $2,000 
B) $18,000 
C) $20,000 
D) $200,000 
A) $2,000 
B) $18,000 
C) $20,000 
D) $200,000

Question 11

Fiat money has value because:

Accepted Answer

A) it is backed by gold. 
B) it is divisible. 
C) it can be used to buy things. 
D) it can be exchanged for a commodity backing it. 
E) all of the above are true. 
A) it is backed by gold. 
B) it is divisible. 
C) it can be used to buy things. 
D) it can be exchanged for a commodity backing it. 
E) all of the above are true.

Question 12

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 money could the excess reserves be used to create in the banking system 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 13

When two forms of money are available, people prefer to:

Accepted Answer

A) hoard the form of money that is less valuable. 
B) spend the form of money that is less valuable. 
C) save the form of money that is less valuable. 
D) invest the form of money that is less valuable. 
A) hoard the form of money that is less valuable. 
B) spend the form of money that is less valuable. 
C) save the form of money that is less valuable. 
D) invest the form of money that is less valuable.

Question 14

Which of the following is not a form of money?

Accepted Answer

A) checkable deposits 
B) travelers' checks 
C) currency 
D) coins 
E) credit cards 
A) checkable deposits 
B) travelers' checks 
C) currency 
D) coins 
E) credit cards

Question 15

What are the inherent disadvantages of a barter system?

Accepted Answer

In a barter system, the buyer may not ha

Question 16

An increase in demand deposits would ____ M1 and ____ M2.

Accepted Answer

A) increase; increase. 
B) not change; increase. 
C) decrease; decrease. 
D) not change; decrease. 
E) not change; not change. 
A) increase; increase. 
B) not change; increase. 
C) decrease; decrease. 
D) not change; decrease. 
E) not change; not change.

Question 17

What is fiat money? Why is fiat money important in the United States today?

Accepted Answer

Fiat (from the Latin for "let it be done

Question 18

When the U.S.banking system collapsed during 1929-1933, the money supply declined dramatically.

Accepted Answer

A) True 
 B)False

Question 19

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 10 percent, what is the level of the bank's excess reserves? How much money could the excess reserves be used to create in the banking system as a result?

Accepted Answer

A) $200,000; $200,000 
B) $200,000; $2,000,000 
C) $300,000; $300,000 
D) $300,000; $3,000,000 
A) $200,000; $200,000 
B) $200,000; $2,000,000 
C) $300,000; $300,000 
D) $300,000; $3,000,000

Question 20

Money almost always serves as the standard unit for quoting prices.This is another way of saying money serves as a:

Accepted Answer

A) medium of exchange. 
B) store of value. 
C) unit of account. 
D) commodity itself. 
E) all of the above are correct. 
A) medium of exchange. 
B) store of value. 
C) unit of account. 
D) commodity itself. 
E) all of the above are correct.

A depositor cannot directly write checks against:

An increase in the excess reserves banks want to hold, together with people depositing currency into their demand deposit accounts, would:

The more widely held and accepted credit cards are, the more money people would be expected to hold in the form of currency.

Which of the following is false?

A bank's actual reserves can be calculated by:

Assume the reserve requirement is 10 percent.First National Bank has vault cash and deposits with the Fed of $40 million, loans and securities of $360 million, and demand deposits of $400 million.First National:

An important effect of fractional reserve banking is that:

If Billy Bob's National Bank of Slingblade confronts a 10 percent reserve requirement and has excess reserves of $20,000, what is the maximum amount of additional loans that the bank can extend?

Fiat money has value because:

When two forms of money are available, people prefer to:

Which of the following is not a form of money?

What are the inherent disadvantages of a barter system?

An increase in demand deposits would M1 and M2.

What is fiat money? Why is fiat money important in the United States today?

When the U.S.banking system collapsed during 1929-1933, the money supply declined dramatically.

Money almost always serves as the standard unit for quoting prices.This is another way of saying money serves as a:

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

Exam 15: Monetary Institutions

A depositor cannot directly write checks against:

An increase in the excess reserves banks want to hold, together with people depositing currency into their demand deposit accounts, would:

The more widely held and accepted credit cards are, the more money people would be expected to hold in the form of currency.

Which of the following is false?

A bank's actual reserves can be calculated by:

Assume the reserve requirement is 10 percent.First National Bank has vault cash and deposits with the Fed of $40 million, loans and securities of $360 million, and demand deposits of $400 million.First National:

An important effect of fractional reserve banking is that:

If Billy Bob's National Bank of Slingblade confronts a 10 percent reserve requirement and has excess reserves of $20,000, what is the maximum amount of additional loans that the bank can extend?

Fiat money has value because:

When two forms of money are available, people prefer to:

Which of the following is not a form of money?

What are the inherent disadvantages of a barter system?

An increase in demand deposits would ____ M1 and ____ M2.

What is fiat money? Why is fiat money important in the United States today?

When the U.S.banking system collapsed during 1929-1933, the money supply declined dramatically.

Money almost always serves as the standard unit for quoting prices.This is another way of saying money serves as a:

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

An increase in demand deposits would M1 and M2.