Question 1

Other things being equal, if you took money out of your savings deposit account and put it in a demand deposit account:

Accepted Answer

A) M1 would increase and M2 would increase. 
B) M1 would increase but M2 would not change. 
C) M1 would decrease and M2 would decrease. 
D) M1 would fall but M2 would not change. 
A) M1 would increase and M2 would increase. 
B) M1 would increase but M2 would not change. 
C) M1 would decrease and M2 would decrease. 
D) M1 would fall but M2 would not change.

Question 2

Explain Gresham's Law.

Accepted Answer

When there are two forms of money availa

Question 3

The primary benefit of monetary exchange compared to barter exchange is:

Accepted Answer

A) the possibility of tracking trade for tax purposes. 
B) increased time devoted to finding trade partners. 
C) increased time devoted to shopping for what we want. 
D) increased efficiency in arranging transactions. 
E) all of the above. 
A) the possibility of tracking trade for tax purposes. 
B) increased time devoted to finding trade partners. 
C) increased time devoted to shopping for what we want. 
D) increased efficiency in arranging transactions. 
E) all of the above.

Question 4

Which of the following did not contribute to the U.S.banking collapse of 1929-1933?

Accepted Answer

A) The Federal Reserve System and other government agencies did not act quickly or decisively enough. 
B) Deposit insurance did not exist at that time. 
C) The banking industry consisted of only a few very large banks. 
D) The fact that the economy was in a continuous downward spiral during this period undermined depositors' confidence in the solvency of the banks. 
A) The Federal Reserve System and other government agencies did not act quickly or decisively enough. 
B) Deposit insurance did not exist at that time. 
C) The banking industry consisted of only a few very large banks. 
D) The fact that the economy was in a continuous downward spiral during this period undermined depositors' confidence in the solvency of the banks.

Question 5

A bank receives a demand deposit of $2,000.The bank loans out $1,200 of this deposit and increases its excess reserves by $600.What is the required reserve ratio?

Accepted Answer

A) 10% 
B) 30% 
C) 40% 
D) 60% 
E) 70% 
A) 10% 
B) 30% 
C) 40% 
D) 60% 
E) 70%

Question 6

If a bank had the reserve requirement of 10 percent and excess reserves of $2,000, the largest loan it could legally extend would be:

Accepted Answer

A) $200. 
B) $1,800. 
C) $2,000. 
D) $20,000. 
A) $200. 
B) $1,800. 
C) $2,000. 
D) $20,000.

Question 7

The money supply would tend to rise if:

Accepted Answer

A) banks decide to keep more excess reserves and people convert more of their demand deposits to currency. 
B) banks decide to keep more excess reserves and people deposit currency in their demand deposit accounts. 
C) banks decide to keep fewer excess reserves and people deposit currency in their demand deposit accounts. 
D) banks decide to keep fewer excess reserves and people convert more of their demand deposits to currency. 
A) banks decide to keep more excess reserves and people convert more of their demand deposits to currency. 
B) banks decide to keep more excess reserves and people deposit currency in their demand deposit accounts. 
C) banks decide to keep fewer excess reserves and people deposit currency in their demand deposit accounts. 
D) banks decide to keep fewer excess reserves and people convert more of their demand deposits to currency.

Question 8

Suppose you found $3,000 hidden in your closet and deposited it in a demand deposit account at your bank.If the reserve requirement was 40 percent, the deposit would directly create ____ in excess reserves and ultimately lead to a ____ total increase in the money supply, if all banks in the system lend out 100 percent of their excess reserves.

Accepted Answer

A) $1,800; $7,500 
B) $1,800; $5,400 
C) $3,000; $7,500 
D) $3,000; $3,000 
A) $1,800; $7,500 
B) $1,800; $5,400 
C) $3,000; $7,500 
D) $3,000; $3,000

Question 9

Suppose the XYZ bank has excess reserves of $4,000 and demand deposits of $80,000.If the required reserve ratio is 25 percent, the banks total reserves equal:

Accepted Answer

A) $16,000. 
B) $20,000. 
C) $24,000. 
D) $84,000. 
E) $96,000. 
A) $16,000. 
B) $20,000. 
C) $24,000. 
D) $84,000. 
E) $96,000.

Question 10

The size of the effect of a given deposit of cash into a demand deposit account on the money supply is greater:

Accepted Answer

A) the greater the fraction of money people want to hold as currency and the greater the fraction of deposits banks want to hold as excess reserves. 
B) the greater the fraction of money people want to hold as currency and the smaller the fraction of deposits banks want to hold as excess reserves. 
C) the smaller the fraction of money people want to hold as currency and the greater the fraction of deposits banks want to hold as excess reserves. 
D) the smaller the fraction of money people want to hold as currency and the smaller the fraction of deposits banks want to hold as excess reserves. 
A) the greater the fraction of money people want to hold as currency and the greater the fraction of deposits banks want to hold as excess reserves. 
B) the greater the fraction of money people want to hold as currency and the smaller the fraction of deposits banks want to hold as excess reserves. 
C) the smaller the fraction of money people want to hold as currency and the greater the fraction of deposits banks want to hold as excess reserves. 
D) the smaller the fraction of money people want to hold as currency and the smaller the fraction of deposits banks want to hold as excess reserves.

Other things being equal, if you took money out of your savings deposit account and put it in a demand deposit account:

Explain Gresham's Law.

The primary benefit of monetary exchange compared to barter exchange is:

Which of the following did not contribute to the U.S.banking collapse of 1929-1933?

A bank receives a demand deposit of $2,000.The bank loans out $1,200 of this deposit and increases its excess reserves by $600.What is the required reserve ratio?

If a bank had the reserve requirement of 10 percent and excess reserves of $2,000, the largest loan it could legally extend would be:

The money supply would tend to rise if:

Suppose the XYZ bank has excess reserves of $4,000 and demand deposits of $80,000.If the required reserve ratio is 25 percent, the banks total reserves equal:

The size of the effect of a given deposit of cash into a demand deposit account on the money supply is greater:

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

Other things being equal, if you took money out of your savings deposit account and put it in a demand deposit account:

Explain Gresham's Law.

The primary benefit of monetary exchange compared to barter exchange is:

Which of the following did not contribute to the U.S.banking collapse of 1929-1933?

A bank receives a demand deposit of $2,000.The bank loans out $1,200 of this deposit and increases its excess reserves by $600.What is the required reserve ratio?

If a bank had the reserve requirement of 10 percent and excess reserves of $2,000, the largest loan it could legally extend would be:

The money supply would tend to rise if:

Suppose the XYZ bank has excess reserves of $4,000 and demand deposits of $80,000.If the required reserve ratio is 25 percent, the banks total reserves equal:

The size of the effect of a given deposit of cash into a demand deposit account on the money supply is greater:

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