Question 1

A "banker's bank" is another name for

Accepted Answer

A)  a financial intermediary. 
B)  a government bank. 
C)  a central bank. 
D)  the Federal Depository Insurance Agency. 
A)  a financial intermediary. 
B)  a government bank. 
C)  a central bank. 
D)  the Federal Depository Insurance Agency.

Question 2

When a consumer compared the price of a tablet with the price of a laptop, she discovered the laptop was more expensive. This is an example of using money as

Accepted Answer

A)  a store of value. 
B)  a medium of exchange. 
C)  a unit of accounting. 
D)  a standard of deferred payment. 
A)  a store of value. 
B)  a medium of exchange. 
C)  a unit of accounting. 
D)  a standard of deferred payment.

Question 3

A medium of exchange is

Accepted Answer

A)  any asset that sellers will accept as payment. 
B)  a measure by which prices are expressed. 
C)  an asset that is used to settle future debts. 
D)  the thing traded when barter takes place. 
A)  any asset that sellers will accept as payment. 
B)  a measure by which prices are expressed. 
C)  an asset that is used to settle future debts. 
D)  the thing traded when barter takes place.

Question 4

Suppose you pay $450.00 for a new tablet device. This is an example of

Accepted Answer

A)  money as a medium of exchange. 
B)  money as a store of value. 
C)  barter. 
D)  money as a standard of deferred payment. 
A)  money as a medium of exchange. 
B)  money as a store of value. 
C)  barter. 
D)  money as a standard of deferred payment.

Question 5

Suppose you and your friend are in a shopping mall and you borrow $100 from your friend to pay for a handbag that you purchase in a shop. This is an example of

Accepted Answer

A)  direct financing. 
B)  indirect financing. 
C)  moral hazard. 
D)  money laundering. 
A)  direct financing. 
B)  indirect financing. 
C)  moral hazard. 
D)  money laundering.

Question 6

If the FOMC decides that the Fed should buy bonds it

Accepted Answer

A)  instructs the New York Federal Reserve Bank's trading desk to buy them. 
B)  asks the Congress for permission to buy them. 
C)  requires the President's signature on the buy order. 
D)  requires the permission of the Financial Oversight Committee. 
A)  instructs the New York Federal Reserve Bank's trading desk to buy them. 
B)  asks the Congress for permission to buy them. 
C)  requires the President's signature on the buy order. 
D)  requires the permission of the Financial Oversight Committee.

Question 7

Goldsmiths were able to practice an early form of fractional reserve banking because they knew that

Accepted Answer

A)  people were relatively unsophisticated in their financial transactions. 
B)  gold was the major form of money. 
C)  not all depositors would claim their gold at the same time. 
D)  gold did not serve as a unit of account. 
A)  people were relatively unsophisticated in their financial transactions. 
B)  gold was the major form of money. 
C)  not all depositors would claim their gold at the same time. 
D)  gold did not serve as a unit of account.

Question 8

Bank runs are a possibility because

Accepted Answer

A)  the FDIC is inefficient. 
B)  bankers are often poor businesspeople. 
C)  in difficult times people want currency instead of demand deposits. 
D)  banks do not keep enough reserves to cover all their depository liabilities. 
A)  the FDIC is inefficient. 
B)  bankers are often poor businesspeople. 
C)  in difficult times people want currency instead of demand deposits. 
D)  banks do not keep enough reserves to cover all their depository liabilities.

Question 9

Which of the following will limit the expansion of the money supply following a new deposit?

Accepted Answer

A)  failure of banks to voluntarily hold excess reserves 
B)  a strong demand for new loans 
C)  a re-depositing of all loan proceeds 
D)  a strong demand for holding currency outside of commercial banks 
A)  failure of banks to voluntarily hold excess reserves 
B)  a strong demand for new loans 
C)  a re-depositing of all loan proceeds 
D)  a strong demand for holding currency outside of commercial banks

Question 10

What would cause a bank run?

Accepted Answer

A)  Depositors feel that the bank does not have sufficient assets to cover their deposits. 
B)  Depositors feel that they are earning too low of a return on their deposits. 
C)  Borrowers feel that they are being charged too high of an interest rate on their loans. 
D)  Bank managers choose to hold more excess reserves. 
A)  Depositors feel that the bank does not have sufficient assets to cover their deposits. 
B)  Depositors feel that they are earning too low of a return on their deposits. 
C)  Borrowers feel that they are being charged too high of an interest rate on their loans. 
D)  Bank managers choose to hold more excess reserves.

Question 11

Open market operations are

Accepted Answer

A)  the buying and selling of existing U.S. government securities in open private markets by the Fed in order to change the money supply. 
B)  the buying and selling of existing U.S. government securities in open private markets by citizens. 
C)  the selling of new government securities by banks in order to increase the money supply. 
D)  the selling of new government securities in open private markets by banks in order to finance the deficit. 
A)  the buying and selling of existing U.S. government securities in open private markets by the Fed in order to change the money supply. 
B)  the buying and selling of existing U.S. government securities in open private markets by citizens. 
C)  the selling of new government securities by banks in order to increase the money supply. 
D)  the selling of new government securities in open private markets by banks in order to finance the deficit.

Question 12

The reserve ratio is 2 percent. If the Fed buys $1 million of U.S. government securities and the check is deposited in Bank A, but Bank A increases its vault cash by the entire amount, then the money supply

Accepted Answer

A)  does not increase. 
B)  increases by $980,000. 
C)  increases by $1 million. 
D)  increases by more than $1 million. 
A)  does not increase. 
B)  increases by $980,000. 
C)  increases by $1 million. 
D)  increases by more than $1 million.

Question 13

With fractional reserve banking

Accepted Answer

A)  banks can not generate profits. 
B)  monetary policy will be ineffective. 
C)  banks retain only a portion of their deposits in their vaults or at Federal Reserve banks. 
D)  banks can act as securities brokers. 
A)  banks can not generate profits. 
B)  monetary policy will be ineffective. 
C)  banks retain only a portion of their deposits in their vaults or at Federal Reserve banks. 
D)  banks can act as securities brokers.

Question 14

The process in which financial institutions accept savings from businesses, households, and governments and lend the funds to other businesses, households, and governments is called

Accepted Answer

A)  central banking system. 
B)  financial intermediation. 
C)  moral hazard. 
D)  adverse selection. 
A)  central banking system. 
B)  financial intermediation. 
C)  moral hazard. 
D)  adverse selection.

Question 15

Assets that can be easily converted into money without significant loss of value are

Accepted Answer

A)  transactions balances. 
B)  near monies. 
C)  currencies. 
D)  liabilities. 
A)  transactions balances. 
B)  near monies. 
C)  currencies. 
D)  liabilities.

Question 16

Without an accepted medium of exchange, people

Accepted Answer

A)  have to specialize in one area of production. 
B)  have to rely on gold or silver in order to exchange goods and services. 
C)  have to rely on barter in order to exchange goods and services. 
D)  have to use credit to obtain goods and services. 
A)  have to specialize in one area of production. 
B)  have to rely on gold or silver in order to exchange goods and services. 
C)  have to rely on barter in order to exchange goods and services. 
D)  have to use credit to obtain goods and services.

Question 17

If the Fed purchases $50,000 in government bonds from a bank, then the

Accepted Answer

A)  liabilities of the bank rise by $50,000. 
B)  reserves of the bank fall by $50,000. 
C)  assets of the bank rise by $50,000. 
D)  reserves of the bank rise by $50,000. 
A)  liabilities of the bank rise by $50,000. 
B)  reserves of the bank fall by $50,000. 
C)  assets of the bank rise by $50,000. 
D)  reserves of the bank rise by $50,000.

Question 18

Which of the following is TRUE of M2?

Accepted Answer

A)  It is larger than M1. 
B)  It excludes savings deposits. 
C)  It does not include highly liquid components of the money supply. 
D)  It includes credit limits for credit card transactions. 
A)  It is larger than M1. 
B)  It excludes savings deposits. 
C)  It does not include highly liquid components of the money supply. 
D)  It includes credit limits for credit card transactions.

Question 19

When people decide to increase the amount of currency they are currently holding

Accepted Answer

A)  the potential money multiplier will increase. 
B)  the potential money multiplier will decrease. 
C)  the actual money multiplier will increase. 
D)  the actual money multiplier will decrease. 
A)  the potential money multiplier will increase. 
B)  the potential money multiplier will decrease. 
C)  the actual money multiplier will increase. 
D)  the actual money multiplier will decrease.

Question 20

As far as reserves and deposits are concerned, describe the assets and liabilities of a bank.

Accepted Answer

The major liabilities of a bank are the

Exam 15: Money, Banking, and Central Banking

A "banker's bank" is another name for

When a consumer compared the price of a tablet with the price of a laptop, she discovered the laptop was more expensive. This is an example of using money as

A medium of exchange is

Suppose you pay $450.00 for a new tablet device. This is an example of

Suppose you and your friend are in a shopping mall and you borrow $100 from your friend to pay for a handbag that you purchase in a shop. This is an example of

If the FOMC decides that the Fed should buy bonds it

Goldsmiths were able to practice an early form of fractional reserve banking because they knew that

Bank runs are a possibility because

Which of the following will limit the expansion of the money supply following a new deposit?

What would cause a bank run?

Open market operations are

The reserve ratio is 2 percent. If the Fed buys $1 million of U.S. government securities and the check is deposited in Bank A, but Bank A increases its vault cash by the entire amount, then the money supply

With fractional reserve banking

The process in which financial institutions accept savings from businesses, households, and governments and lend the funds to other businesses, households, and governments is called

Assets that can be easily converted into money without significant loss of value are

Without an accepted medium of exchange, people

If the Fed purchases $50,000 in government bonds from a bank, then the

Which of the following is TRUE of M2?

When people decide to increase the amount of currency they are currently holding

As far as reserves and deposits are concerned, describe the assets and liabilities of a bank.

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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