Question 1

The _____ account for about 60 percent of deposit and loan activity in the Eurocurrency market.

Accepted Answer

A) ECUs 
B) Europounds 
C) Euroyens 
D) Euros 
E) Eurodollars 
A) ECUs 
B) Europounds 
C) Euroyens 
D) Euros 
E) Eurodollars E

Question 2

The thrift institutions:

Accepted Answer

A) were nonprofit banking institutions. 
B) were owned by the Federal Reserve. 
C) historically offered only savings accounts, not checking accounts. 
D) controlled the U.S.monetary policy prior to the establishment of the Federal Reserve. 
E) were monitored by the Federal Deposit Insurance Corporation. 
A) were nonprofit banking institutions. 
B) were owned by the Federal Reserve. 
C) historically offered only savings accounts, not checking accounts. 
D) controlled the U.S.monetary policy prior to the establishment of the Federal Reserve. 
E) were monitored by the Federal Deposit Insurance Corporation. C

Question 3

The use of foreign money instead of domestic money when the domestic economy has a high rate of inflation is called _____.

Accepted Answer

A) currency depreciation 
B) currency substitution 
C) capital flight 
D) currency devaluation 
E) currency trade 
A) currency depreciation 
B) currency substitution 
C) capital flight 
D) currency devaluation 
E) currency trade B

Question 4

The table given below records the amount of new deposits, the value of required reserves, and total amount loaned out by Banks 1, 2, and 3. Table 12.3
  Refer to Table 12.3.If the reserve requirement changed to 8 percent, then total deposits in the economy would be equal to:

Accepted Answer

A) $125, 000. 
B) $160, 000. 
C) $77, 500. 
D) $80, 000. 
E) $75, 000. 
A) $125, 000. 
B) $160, 000. 
C) $77, 500. 
D) $80, 000. 
E) $75, 000.

Question 5

Commercial banks act as middlemen between savers and borrowers, therefore they are called _____.

Accepted Answer

A) lenders of the last resort 
B) financial intermediaries 
C) banker's banks 
D) thrift institutions 
E) profitable institutions 
A) lenders of the last resort 
B) financial intermediaries 
C) banker's banks 
D) thrift institutions 
E) profitable institutions

Question 6

Total reserve holdings over and above required reserves constitute the minimum amount of loans a depository institution can make.

Accepted Answer

A) True 
 B)False

Question 7

The main source of earning profits for banks is:

Accepted Answer

A) government securities. 
B) savings accounts. 
C) reserves. 
D) loans. 
E) checking account fees. 
A) government securities. 
B) savings accounts. 
C) reserves. 
D) loans. 
E) checking account fees.

Question 8

Which of the following assets would be considered least liquid?

Accepted Answer

A) A silver coin 
B) An antique automobile 
C) A U.S.savings bond 
D) A debit card 
E) A certificate of deposit 
A) A silver coin 
B) An antique automobile 
C) A U.S.savings bond 
D) A debit card 
E) A certificate of deposit

Question 9

In the United States, the reserve requirement is set by the:

Accepted Answer

A) Bank of America. 
B) federal government. 
C) U.S.Treasury. 
D) Federal Reserve Board. 
E) Department of Commerce. 
A) Bank of America. 
B) federal government. 
C) U.S.Treasury. 
D) Federal Reserve Board. 
E) Department of Commerce.

Question 10

The available credit limit we have in a credit card reflects the amount of money we hold in our savings account.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not true about a special drawing right (SDR)?

Accepted Answer

A) The SDR is a composite currency. 
B) The value of the SDR is an average of the values of the currencies of the major industrial countries. 
C) The SDR was created in 1980 by the World Bank. 
D) The SDR is an international reserve asset. 
E) The SDR is used to settle international debts. 
A) The SDR is a composite currency. 
B) The value of the SDR is an average of the values of the currencies of the major industrial countries. 
C) The SDR was created in 1980 by the World Bank. 
D) The SDR is an international reserve asset. 
E) The SDR is used to settle international debts.

Question 12

Suppose that Mr.Chopp withdraws $500 from his checking account.If the reserve requirement is 5 percent, what will be the maximum potential change in the money supply forthcoming from Mr.Chopp's transaction?

Accepted Answer

A) $10, 000 
B) $500 
C) $0 
D) -$500 
E) -$10, 000 
A) $10, 000 
B) $500 
C) $0 
D) -$500 
E) -$10, 000

Question 13

Scarcity and durability characterize the property of money as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 14

Using money as a unit of account lowers information costs compared to barter exchanges.

Accepted Answer

A) True 
 B)False

Question 15

Table 12.2   Refer to Table 12.2.Assume a reserve requirement of 10 percent.The maximum amount of new loans the bank could extend is _____.

Accepted Answer

A) $500 
B) $1, 000 
C) $2, 000 
D) $3, 000 
E) $4, 000 
A) $500 
B) $1, 000 
C) $2, 000 
D) $3, 000 
E) $4, 000

Question 16

Suppose a bank has demand deposits of $2, 500, excess reserves of $125, and a reserve requirement of 25 percent.What is the loss in the money expansion process of the whole banking system if the bank decides to lend out only $100?

Accepted Answer

A) $100 
B) $150 
C) $200 
D) $400 
E) $500 
A) $100 
B) $150 
C) $200 
D) $400 
E) $500

Question 17

In fractional reserve banking:

Accepted Answer

A) bank assets are less than bank reserves. 
B) only a fraction of total deposits are bank reserves. 
C) only a fraction of required reserves are investor assets. 
D) bank loans are less than bank reserves. 
E) a fraction of bank reserves needs to be backed by gold. 
A) bank assets are less than bank reserves. 
B) only a fraction of total deposits are bank reserves. 
C) only a fraction of required reserves are investor assets. 
D) bank loans are less than bank reserves. 
E) a fraction of bank reserves needs to be backed by gold.

Question 18

Money fails to act as a store of value when:

Accepted Answer

A) it is no longer backed by gold. 
B) the inflation rate is very high. 
C) the goods produced in an economy are indivisible. 
D) the economy goes into a recession. 
E) coins are replaced by paper money. 
A) it is no longer backed by gold. 
B) the inflation rate is very high. 
C) the goods produced in an economy are indivisible. 
D) the economy goes into a recession. 
E) coins are replaced by paper money.

Question 19

When depository institutions have negative excess reserves, it indicates that the banking system is not "loaned up."

Accepted Answer

A) True 
 B)False

Question 20

If a bank's required reserves equal $270, 000, no excess reserves are held, and the reserve requirement is equal to 18 percent, what is the value of the bank's total deposits?

Accepted Answer

A) $900, 000 
B) $1, 500, 000 
C) $48, 000 
D) $486, 000 
E) $150, 000 
A) $900, 000 
B) $1, 500, 000 
C) $48, 000 
D) $486, 000 
E) $150, 000

Exam 10: Money and Banking

The _____ account for about 60 percent of deposit and loan activity in the Eurocurrency market.

The thrift institutions:

The use of foreign money instead of domestic money when the domestic economy has a high rate of inflation is called _____.

The table given below records the amount of new deposits, the value of required reserves, and total amount loaned out by Banks 1, 2, and 3. Table 12.3 Refer to Table 12.3.If the reserve requirement changed to 8 percent, then total deposits in the economy would be equal to:

Commercial banks act as middlemen between savers and borrowers, therefore they are called _____.

Total reserve holdings over and above required reserves constitute the minimum amount of loans a depository institution can make.

The main source of earning profits for banks is:

Which of the following assets would be considered least liquid?

In the United States, the reserve requirement is set by the:

The available credit limit we have in a credit card reflects the amount of money we hold in our savings account.

Which of the following is not true about a special drawing right (SDR)?

Suppose that Mr.Chopp withdraws $500 from his checking account.If the reserve requirement is 5 percent, what will be the maximum potential change in the money supply forthcoming from Mr.Chopp's transaction?

Scarcity and durability characterize the property of money as a medium of exchange.

Using money as a unit of account lowers information costs compared to barter exchanges.

Table 12.2 Refer to Table 12.2.Assume a reserve requirement of 10 percent.The maximum amount of new loans the bank could extend is _____.

Suppose a bank has demand deposits of $2, 500, excess reserves of $125, and a reserve requirement of 25 percent.What is the loss in the money expansion process of the whole banking system if the bank decides to lend out only $100?

In fractional reserve banking:

Money fails to act as a store of value when:

When depository institutions have negative excess reserves, it indicates that the banking system is not "loaned up."

If a bank's required reserves equal $270, 000, no excess reserves are held, and the reserve requirement is equal to 18 percent, what is the value of the bank's total deposits?

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters