Question 1

Barter works best

Accepted Answer

A) in the absence of a double coincidence of wants 
B) when many different products are available in the economy 
C) when money is readily available to establish relative prices 
D) when each trader has what the other wants and wants what the other has 
E) in highly developed economies with extensive specialization of labor 
A) in the absence of a double coincidence of wants 
B) when many different products are available in the economy 
C) when money is readily available to establish relative prices 
D) when each trader has what the other wants and wants what the other has 
E) in highly developed economies with extensive specialization of labor

Question 2

Fractional reserve banking occurs when

Accepted Answer

A) a bank has reserves that exceed its deposits 
B) a bank has reserves that are equal to its deposits 
C) a bank has reserves that are less than its deposits 
D) some depositors lose their deposits through poor bank management 
E) some lenders fail to repay their loans 
A) a bank has reserves that exceed its deposits 
B) a bank has reserves that are equal to its deposits 
C) a bank has reserves that are less than its deposits 
D) some depositors lose their deposits through poor bank management 
E) some lenders fail to repay their loans

Question 3

The greater the number of different goods available in an economy,

Accepted Answer

A) the less likely it is that a double coincidence of wants will exist,and the less likely it is that monetary exchange will develop 
B) the less likely it is that a double coincidence of wants will exist,and the more likely it is that monetary exchange will develop 
C) the more likely it is that a double coincidence of wants will exist,and the less likely it is that monetary exchange will develop 
D) the more likely it is that a double coincidence of wants will exist,and the more likely it is that monetary exchange will develop 
E) the more likely it is that individuals are producing only goods they want to consume 
A) the less likely it is that a double coincidence of wants will exist,and the less likely it is that monetary exchange will develop 
B) the less likely it is that a double coincidence of wants will exist,and the more likely it is that monetary exchange will develop 
C) the more likely it is that a double coincidence of wants will exist,and the less likely it is that monetary exchange will develop 
D) the more likely it is that a double coincidence of wants will exist,and the more likely it is that monetary exchange will develop 
E) the more likely it is that individuals are producing only goods they want to consume

Question 4

The chairman of the Fed must resign when a new president is elected.

Accepted Answer

A) True 
 B)False

Question 5

While deposit insurance was designed to make the banking industry more stable,it contributed to the banking crisis of the 1980s because

Accepted Answer

A) the FDIC only insured commercial banks 
B) the ceiling on insured deposits was too low 
C) too many banks were not sufficiently insured 
D) depositors became too complacent about the risks that banks were taking 
E) unsafe banks were "kicked out" of the deposit insurance system 
A) the FDIC only insured commercial banks 
B) the ceiling on insured deposits was too low 
C) too many banks were not sufficiently insured 
D) depositors became too complacent about the risks that banks were taking 
E) unsafe banks were "kicked out" of the deposit insurance system

Question 6

Which of the following best illustrates the double coincidence of wants?

Accepted Answer

A) Both Tom and Jerry would like to purchase the same good. 
B) Tom has something he's willing to trade to Jerry; Jerry has something he's willing to trade to Tom. 
C) Tom and Jerry have very similar tastes; hence,Tom's wants coincide with Jerry's. 
D) Tom has something he's willing to trade to Jerry,who wants it; Jerry has something he's willing to trade to Tom,who wants it. 
E) Tom has something Jerry wants; Jerry has something Tom wants. 
A) Both Tom and Jerry would like to purchase the same good. 
B) Tom has something he's willing to trade to Jerry; Jerry has something he's willing to trade to Tom. 
C) Tom and Jerry have very similar tastes; hence,Tom's wants coincide with Jerry's. 
D) Tom has something he's willing to trade to Jerry,who wants it; Jerry has something he's willing to trade to Tom,who wants it. 
E) Tom has something Jerry wants; Jerry has something Tom wants.

Question 7

In Germany after World War II,prices were set well below what people thought they should be.As a result,

Accepted Answer

A) sellers stopped accepting money,and this forced people to barter 
B) the German mark no longer served as a unit of account 
C) Gresham's Law took effect when people switched to fiat money 
D) the German price level rose 
E) nominal GDP fell while real GDP increased 
A) sellers stopped accepting money,and this forced people to barter 
B) the German mark no longer served as a unit of account 
C) Gresham's Law took effect when people switched to fiat money 
D) the German price level rose 
E) nominal GDP fell while real GDP increased

Question 8

Which of the following is a depository institution?

Accepted Answer

A) an insurance company 
B) a credit union 
C) a finance company 
D) a pension fund 
E) a stock market 
A) an insurance company 
B) a credit union 
C) a finance company 
D) a pension fund 
E) a stock market

Question 9

Barter is the direct exchange of goods and services for

Accepted Answer

A) any kind of money 
B) other goods and services 
C) either goods or money 
D) commodity money 
E) foreign currency 
A) any kind of money 
B) other goods and services 
C) either goods or money 
D) commodity money 
E) foreign currency

Question 10

Commitments to make or receive payments in the future are made easier by money's function as a

Accepted Answer

A) unit of account 
B) store of value 
C) medium of exchange 
D) form of barter 
E) commodity 
A) unit of account 
B) store of value 
C) medium of exchange 
D) form of barter 
E) commodity

Question 11

In the 1970s,as they lost deposits to money market mutual funds,U.S.banks and thrifts

Accepted Answer

A) had to borrow at high interest rates to support outstanding loans 
B) were able to borrow at low interest rates to support outstanding loans 
C) were forced to increase interest rates on outstanding loans 
D) were forced to call in outstanding loans 
E) were bailed out by the FDIC 
A) had to borrow at high interest rates to support outstanding loans 
B) were able to borrow at low interest rates to support outstanding loans 
C) were forced to increase interest rates on outstanding loans 
D) were forced to call in outstanding loans 
E) were bailed out by the FDIC

Question 12

Which of the following have,at one time or another,been part of the U.S.money supply?

Accepted Answer

A) seashells 
B) platinum coins 
C) token money 
D) legal tender 
E) private bank notes 
A) seashells 
B) platinum coins 
C) token money 
D) legal tender 
E) private bank notes

Question 13

Under a fractional reserve banking system,banks may lend out only a fraction of their reserves.

Accepted Answer

A) True 
 B)False

Question 14

If people use quartz as a medium of exchange,then they

Accepted Answer

A) have a barter economy 
B) are using commodity money 
C) are using token money 
D) are using legal tender 
E) are using fiat money 
A) have a barter economy 
B) are using commodity money 
C) are using token money 
D) are using legal tender 
E) are using fiat money

Question 15

The Federal Deposit Insurance Corporation (FDIC)insures the total value of all deposits in banks that are members of the Fed.

Accepted Answer

A) True 
 B)False

Question 16

Barter is the exchange of goods and services without the use of money.

Accepted Answer

A) True 
 B)False

Question 17

The first step in the evolution of money was

Accepted Answer

A) physical commodities 
B) barter 
C) pieces of paper representing claims on physical commodities 
D) pieces of paper with no intrinsic value 
E) electronic entries representing claims on pieces of paper of no intrinsic value 
A) physical commodities 
B) barter 
C) pieces of paper representing claims on physical commodities 
D) pieces of paper with no intrinsic value 
E) electronic entries representing claims on pieces of paper of no intrinsic value

Question 18

Some financial institutions are classified as depository institutions based on

Accepted Answer

A) the way they acquire funds 
B) the number of customers they have 
C) the number of loans they make 
D) the size of the loans they make 
E) the amount of reserves they hold 
A) the way they acquire funds 
B) the number of customers they have 
C) the number of loans they make 
D) the size of the loans they make 
E) the amount of reserves they hold

Question 19

Which of the following has come to serve as money in many Federal prisons in the United States?

Accepted Answer

A) postage stamps 
B) power bars 
C) cans of mackerel 
D) cans of tuna 
E) cigarettes 
A) postage stamps 
B) power bars 
C) cans of mackerel 
D) cans of tuna 
E) cigarettes

Question 20

Insurance that protects individuals from the loss of their bank deposits

Accepted Answer

A) makes bank officials especially careful about the loans and investments they make 
B) makes it virtually impossible for a bank to fail 
C) is so costly that few banks can afford it 
D) makes depositors less concerned about the safety of their money than the interest rate it is earning 
E) was introduced as a direct result of the financial problems of the 1970s and 1980s 
A) makes bank officials especially careful about the loans and investments they make 
B) makes it virtually impossible for a bank to fail 
C) is so costly that few banks can afford it 
D) makes depositors less concerned about the safety of their money than the interest rate it is earning 
E) was introduced as a direct result of the financial problems of the 1970s and 1980s

Exam 14: Money and the Financial System

Barter works best

Fractional reserve banking occurs when

The greater the number of different goods available in an economy,

The chairman of the Fed must resign when a new president is elected.

While deposit insurance was designed to make the banking industry more stable,it contributed to the banking crisis of the 1980s because

Which of the following best illustrates the double coincidence of wants?

In Germany after World War II,prices were set well below what people thought they should be.As a result,

Which of the following is a depository institution?

Barter is the direct exchange of goods and services for

Commitments to make or receive payments in the future are made easier by money's function as a

In the 1970s,as they lost deposits to money market mutual funds,U.S.banks and thrifts

Which of the following have,at one time or another,been part of the U.S.money supply?

Under a fractional reserve banking system,banks may lend out only a fraction of their reserves.

If people use quartz as a medium of exchange,then they

The Federal Deposit Insurance Corporation (FDIC)insures the total value of all deposits in banks that are members of the Fed.

Barter is the exchange of goods and services without the use of money.

The first step in the evolution of money was

Some financial institutions are classified as depository institutions based on

Which of the following has come to serve as money in many Federal prisons in the United States?

Insurance that protects individuals from the loss of their bank deposits

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand, supply, and Markets

Introduction to Macroeconomics

Tracking the Useconomy

Unemployment and Inflation

Productivity and Growth

Aaggregate Expenditure and Aggregate Demand

Baggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Banking and the Money Supply

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

International Trade

Externalities and the Environment

International Finance

Economic Development

understanding Graphs

National Income Accounts

The Algebra of Demand-Side Equilibrium

Filters