Question 1

Checkable and debitable accounts in commercial banks and other financial institutions are classified as money because

Accepted Answer

A)  they are not liabilities of the banks. 
B)  they sometimes earn an interest income for the depositor. 
C)  they are generally acceptable in the payment of debt. 
D)  banks hold currency in their vaults equal to the value of demand deposits. 
A)  they are not liabilities of the banks. 
B)  they sometimes earn an interest income for the depositor. 
C)  they are generally acceptable in the payment of debt. 
D)  banks hold currency in their vaults equal to the value of demand deposits.

Question 2

If a check was written on Bank A for $100 and Bank B presented the check to Bank A for payment, what will happen to the required reserves for each respective bank after payment is made?

Accepted Answer

A)  Bank A's required reserves increase; Bank B's decrease. 
B)  Bank B's required reserves increase; Bank A's decrease. 
C)  Both banks will see an increase in their required reserves. 
D)  Both banks will see a decrease in their required reserves. 
A)  Bank A's required reserves increase; Bank B's decrease. 
B)  Bank B's required reserves increase; Bank A's decrease. 
C)  Both banks will see an increase in their required reserves. 
D)  Both banks will see a decrease in their required reserves.

Question 3

Which term below fits closest to money functioning as a unit of accounting?

Accepted Answer

A)  medium of exchange 
B)  adverse selection 
C)  standard of value 
D)  liquidity 
A)  medium of exchange 
B)  adverse selection 
C)  standard of value 
D)  liquidity

Question 4

The primary purpose of the FDIC is to reduce the potential for

Accepted Answer

A)  government regulations. 
B)  reserve cheating. 
C)  bank runs. 
D)  excessive interest rates. 
A)  government regulations. 
B)  reserve cheating. 
C)  bank runs. 
D)  excessive interest rates.

Question 5

Which of the following institutions has the responsibility for producing the coins that are distributed in the United States?

Accepted Answer

A)  the Office of the Comptroller of the Currency 
B)  the Federal Reserve System 
C)  the U.S. Treasury Department 
D)  the U.S. Mint 
A)  the Office of the Comptroller of the Currency 
B)  the Federal Reserve System 
C)  the U.S. Treasury Department 
D)  the U.S. Mint

Question 6

Which of the following is NOT a correct statement about the Federal Reserve banks?

Accepted Answer

A)  They supervise member banks within the Federal Reserve System. 
B)  They provide a system of check collection and clearing. 
C)  They provide the economy with gold backed currency. 
D)  They act as banker and fiscal agent for the U.S. government. 
A)  They supervise member banks within the Federal Reserve System. 
B)  They provide a system of check collection and clearing. 
C)  They provide the economy with gold backed currency. 
D)  They act as banker and fiscal agent for the U.S. government.

Question 7

Which of the following is a liability to a bank?

Accepted Answer

A)  total reserves 
B)  transaction deposits 
C)  government securities 
D)  loans 
A)  total reserves 
B)  transaction deposits 
C)  government securities 
D)  loans

Question 8

After the financial crisis of the late 2000s, President Obama and Congress considered adding to the Federal Reserve's functions by making it the nation's primary regulator of

Accepted Answer

A)  systemic risk. 
B)  default risk. 
C)  credit risk. 
D)  investment risk. 
A)  systemic risk. 
B)  default risk. 
C)  credit risk. 
D)  investment risk.

Question 9

Which of the following assets are counted in M1?

Accepted Answer

A)  transaction deposits 
B)  mutual funds accounts 
C)  bonds 
D)  line of credit 
A)  transaction deposits 
B)  mutual funds accounts 
C)  bonds 
D)  line of credit

Question 10

Explain the role of financial intermediation.

Accepted Answer

Financial intermediation is the process

Question 11

In a barter system, there are

Accepted Answer

A)  many different units of money. 
B)  money and goods exchanged for each other. 
C)  financial institutions to facilitate all exchanges. 
D)  goods traded directly for other goods and services. 
A)  many different units of money. 
B)  money and goods exchanged for each other. 
C)  financial institutions to facilitate all exchanges. 
D)  goods traded directly for other goods and services.

Question 12

The ability of an asset to hold its value over time is a(n)

Accepted Answer

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

Question 13

How does the liquidity approach to measuring the money supply differ from the transaction approach?

Accepted Answer

The liquidity approach focuses on assets

Question 14

The opportunity cost of holding a dollar is

Accepted Answer

A)  a dollar. 
B)  the price of a government bond. 
C)  less than a dollar. 
D)  the interest yield that could have been earned by holding some other asset. 
A)  a dollar. 
B)  the price of a government bond. 
C)  less than a dollar. 
D)  the interest yield that could have been earned by holding some other asset.

Question 15

To function as money, something must hold its purchasing power over time. That is, it must be a

Accepted Answer

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

Question 16

A bank currently has $50 million in deposits, $6 million in cash in the vault, $4 million on deposit with the Fed, and $5 million in government securities. The reserve ratio is 20 percent. A new deposit is made of $1 million. What is the maximum size loan the bank can make once the check clears?

Accepted Answer

A)  0 
B)  $800,000 
C)  $1 million 
D)  $5.8 million 
A)  0 
B)  $800,000 
C)  $1 million 
D)  $5.8 million

Question 17

Financial institutions participate in which of the following activities?

Accepted Answer

A)  financial intermediation 
B)  indirect finance 
C)  the issuance of loans 
D)  all of the above 
A)  financial intermediation 
B)  indirect finance 
C)  the issuance of loans 
D)  all of the above

Question 18

If Maria buys a latte at Starbucks, her money serves as a

Accepted Answer

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

Question 19

The money supply is

Accepted Answer

A)  the rate at which the Federal Reserve Board prints currency. 
B)  limited to currency and coins. 
C)  the amount of money in circulation. 
D)  the rate at which the Federal Reserve Board creates money. 
A)  the rate at which the Federal Reserve Board prints currency. 
B)  limited to currency and coins. 
C)  the amount of money in circulation. 
D)  the rate at which the Federal Reserve Board creates money.

Question 20

Open market operations involve

Accepted Answer

A)  the buying and selling of existing corporate bonds. 
B)  the buying and selling of existing corporate stocks. 
C)  the buying and selling of existing federal government bonds. 
D)  the buying and selling of Federal Reserve bonds. 
A)  the buying and selling of existing corporate bonds. 
B)  the buying and selling of existing corporate stocks. 
C)  the buying and selling of existing federal government bonds. 
D)  the buying and selling of Federal Reserve bonds.

Exam 15: Money, Banking, and Central Banking

Checkable and debitable accounts in commercial banks and other financial institutions are classified as money because

If a check was written on Bank A for $100 and Bank B presented the check to Bank A for payment, what will happen to the required reserves for each respective bank after payment is made?

Which term below fits closest to money functioning as a unit of accounting?

The primary purpose of the FDIC is to reduce the potential for

Which of the following institutions has the responsibility for producing the coins that are distributed in the United States?

Which of the following is NOT a correct statement about the Federal Reserve banks?

Which of the following is a liability to a bank?

After the financial crisis of the late 2000s, President Obama and Congress considered adding to the Federal Reserve's functions by making it the nation's primary regulator of

Which of the following assets are counted in M1?

Explain the role of financial intermediation.

In a barter system, there are

The ability of an asset to hold its value over time is a(n)

How does the liquidity approach to measuring the money supply differ from the transaction approach?

The opportunity cost of holding a dollar is

To function as money, something must hold its purchasing power over time. That is, it must be a

A bank currently has $50 million in deposits, $6 million in cash in the vault, $4 million on deposit with the Fed, and $5 million in government securities. The reserve ratio is 20 percent. A new deposit is made of $1 million. What is the maximum size loan the bank can make once the check clears?

Financial institutions participate in which of the following activities?

If Maria buys a latte at Starbucks, her money serves as a

The money supply is

Open market operations involve

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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