Question 1

The interest rate charged on a Eurodollar loan will be:

Accepted Answer

A) higher than the interest rate charged on a U.S.loan. 
B) lower than the interest rate charged on a U.S.deposit. 
C) essentially equal to the interest rate charged on a Eurodollar deposit. 
D) lower than the London interbank offer rate. 
E) lower than the interest rate charged on a U.S.loan. 
A) higher than the interest rate charged on a U.S.loan. 
B) lower than the interest rate charged on a U.S.deposit. 
C) essentially equal to the interest rate charged on a Eurodollar deposit. 
D) lower than the London interbank offer rate. 
E) lower than the interest rate charged on a U.S.loan.

Question 2

If the deposit expansion multiplier is 20, what is the reserve requirement in the banking system?

Accepted Answer

A) 20 percent 
B) 50 percent 
C) 2 percent 
D) 5 percent 
E) 10 percent 
A) 20 percent 
B) 50 percent 
C) 2 percent 
D) 5 percent 
E) 10 percent

Question 3

The use of money as a unit of account:

Accepted Answer

A) discourages specialization and division of labor. 
B) inhibits the exchange of goods and services. 
C) makes it difficult to compare the relative values of goods and services. 
D) lowers information costs relative to barter. 
E) relies on the existence of a double coincidence of wants. 
A) discourages specialization and division of labor. 
B) inhibits the exchange of goods and services. 
C) makes it difficult to compare the relative values of goods and services. 
D) lowers information costs relative to barter. 
E) relies on the existence of a double coincidence of wants.

Question 4

Outstanding U.S.dollar-denominated travelers' checks issued by non-bank institutions are not counted as part of the M1 money supply.

Accepted Answer

A) True 
 B)False

Question 5

The concept of double coincidence of wants refers to the fact that:

Accepted Answer

A) for a financial asset to be exchanged, it needs to be priced correctly. 
B) for barter to take place, both parties have to want what the other party has. 
C) people can never exactly agree on an equilibrium price. 
D) different people value goods differently. 
E) for barter to take place, both parties must have equal quantities of the same good. 
A) for a financial asset to be exchanged, it needs to be priced correctly. 
B) for barter to take place, both parties have to want what the other party has. 
C) people can never exactly agree on an equilibrium price. 
D) different people value goods differently. 
E) for barter to take place, both parties must have equal quantities of the same good.

Question 6

Which of the following is a transactions account?

Accepted Answer

A) Currency 
B) Travelers' checks 
C) A savings account 
D) A credit card balance 
E) A demand deposit 
A) Currency 
B) Travelers' checks 
C) A savings account 
D) A credit card balance 
E) A demand deposit

Question 7

Which of the following is true of unit banking?

Accepted Answer

A) It is the dominant form of banking in the United Sates. 
B) It occurs when national banks open interstate branch offices. 
C) It implies that every financial institution should maintain its account with the Federal Reserve. 
D) It occurs when a bank is not allowed to operate in more than one location. 
E) It refers to the monopolization of the banking industry. 
A) It is the dominant form of banking in the United Sates. 
B) It occurs when national banks open interstate branch offices. 
C) It implies that every financial institution should maintain its account with the Federal Reserve. 
D) It occurs when a bank is not allowed to operate in more than one location. 
E) It refers to the monopolization of the banking industry.

Question 8

The U.S.banks have been facing greater competition from the Eurocurrency market because of the establishment of international banking facilities.

Accepted Answer

A) True 
 B)False

Question 9

In the 1980s, the number of bank failures increased dramatically in the United States, most of which were uninsured.

Accepted Answer

A) True 
 B)False

Question 10

For a depository institution, reserves are:

Accepted Answer

A) assets on the balance sheet. 
B) loans to individuals and businesses. 
C) borrowings from the central bank. 
D) liabilities it owes to customers. 
E) checkable deposits. 
A) assets on the balance sheet. 
B) loans to individuals and businesses. 
C) borrowings from the central bank. 
D) liabilities it owes to customers. 
E) checkable deposits.

Question 11

Which of the following is true of international reserve currencies?

Accepted Answer

A) They are used for international exchange of goods and services. 
B) They are used to settle international debt. 
C) They are used for international bookkeeping. 
D) They are held for government investment abroad. 
E) They are created for international stock market trading. 
A) They are used for international exchange of goods and services. 
B) They are used to settle international debt. 
C) They are used for international bookkeeping. 
D) They are held for government investment abroad. 
E) They are created for international stock market trading.

Question 12

Which of the following is true of the FDIC?

Accepted Answer

A) It controls the operations of all commercial banks in the U.S. 
B) It exists only in the countries of North America and Europe. 
C) It covers depositors against losses up to $500, 000 in a bank account. 
D) It is a federal agency that insures bank deposits in commercial banks. 
E) It is a financial institution that uses cost-plus pricing. 
A) It controls the operations of all commercial banks in the U.S. 
B) It exists only in the countries of North America and Europe. 
C) It covers depositors against losses up to $500, 000 in a bank account. 
D) It is a federal agency that insures bank deposits in commercial banks. 
E) It is a financial institution that uses cost-plus pricing.

Question 13

Stocks and bonds are considered to be highly illiquid assets while real estate is considered to be a liquid asset.

Accepted Answer

A) True 
 B)False

Question 14

As a standard of deferred payment, money can be used to:

Accepted Answer

A) express debt obligations in the form of purchasing power. 
B) foster barter activity. 
C) facilitate exchanges of goods and services. 
D) achieve a common denominator for measuring the value of goods and services. 
E) ascertain the liquidity of financial assets. 
A) express debt obligations in the form of purchasing power. 
B) foster barter activity. 
C) facilitate exchanges of goods and services. 
D) achieve a common denominator for measuring the value of goods and services. 
E) ascertain the liquidity of financial assets.

Question 15

Which of the following is true of the European Currency Unit?

Accepted Answer

A) It was used by the European nations as a medium of exchanging goods and services. 
B) It was an accounting entry that was transferred between two European nations. 
C) It was replaced by the euro in the early 1980s. 
D) It was denominated in the British pound. 
E) It was a primary international reserve asset of most of the nations across the world. 
A) It was used by the European nations as a medium of exchanging goods and services. 
B) It was an accounting entry that was transferred between two European nations. 
C) It was replaced by the euro in the early 1980s. 
D) It was denominated in the British pound. 
E) It was a primary international reserve asset of most of the nations across the world.

Question 16

Assume that the reserve requirement is 25 percent and that the amount of checkable deposits in Federal Bank is $200.If the bank has loaned out $120, then the bank's excess reserves must equal:

Accepted Answer

A) $0. 
B) $25. 
C) $30. 
D) $80. 
E) $225. 
A) $0. 
B) $25. 
C) $30. 
D) $80. 
E) $225.

Question 17

Excess reserves are equal to:

Accepted Answer

A) total reserves plus required reserves. 
B) cash plus required reserves. 
C) total reserves minus cash. 
D) total reserves minus required reserves. 
E) required reserves minus total reserves. 
A) total reserves plus required reserves. 
B) cash plus required reserves. 
C) total reserves minus cash. 
D) total reserves minus required reserves. 
E) required reserves minus total reserves.

Question 18

Table 12.2   Refer to Table 12.2.If excess reserves equal $2, 000, what must the reserve requirement be equal to?

Accepted Answer

A) 3 percent 
B) 10 percent 
C) 15 percent 
D) 20 percent 
E) 25 percent 
A) 3 percent 
B) 10 percent 
C) 15 percent 
D) 20 percent 
E) 25 percent

Question 19

Which of the following is true of the banks that operate under Islamic law?

Accepted Answer

A) Islamic banks are not allowed to lend out to private firms. 
B) Islamic banks do not function as intermediaries between borrowers and lenders. 
C) Islamic Banks are not allowed to offer checking accounts or traveler's checks. 
D) Islamic banks are required to offer trade-related services free of cost. 
E) Islamic banks do not charge interest on loans or pay interest on deposits. 
A) Islamic banks are not allowed to lend out to private firms. 
B) Islamic banks do not function as intermediaries between borrowers and lenders. 
C) Islamic Banks are not allowed to offer checking accounts or traveler's checks. 
D) Islamic banks are required to offer trade-related services free of cost. 
E) Islamic banks do not charge interest on loans or pay interest on deposits.

Question 20

Assume that the reserve requirement is 10 percent.If a bank has total deposits of $80 million, then the required reserves must equal:

Accepted Answer

A) $80 million. 
B) $12 million. 
C) $50 million. 
D) $8 million. 
E) $10 million. 
A) $80 million. 
B) $12 million. 
C) $50 million. 
D) $8 million. 
E) $10 million.

Exam 10: Money and Banking

The interest rate charged on a Eurodollar loan will be:

If the deposit expansion multiplier is 20, what is the reserve requirement in the banking system?

The use of money as a unit of account:

Outstanding U.S.dollar-denominated travelers' checks issued by non-bank institutions are not counted as part of the M1 money supply.

The concept of double coincidence of wants refers to the fact that:

Which of the following is a transactions account?

Which of the following is true of unit banking?

The U.S.banks have been facing greater competition from the Eurocurrency market because of the establishment of international banking facilities.

In the 1980s, the number of bank failures increased dramatically in the United States, most of which were uninsured.

For a depository institution, reserves are:

Which of the following is true of international reserve currencies?

Which of the following is true of the FDIC?

Stocks and bonds are considered to be highly illiquid assets while real estate is considered to be a liquid asset.

As a standard of deferred payment, money can be used to:

Which of the following is true of the European Currency Unit?

Assume that the reserve requirement is 25 percent and that the amount of checkable deposits in Federal Bank is $200.If the bank has loaned out $120, then the bank's excess reserves must equal:

Excess reserves are equal to:

Table 12.2 Refer to Table 12.2.If excess reserves equal $2, 000, what must the reserve requirement be equal to?

Which of the following is true of the banks that operate under Islamic law?

Assume that the reserve requirement is 10 percent.If a bank has total deposits of $80 million, then the required reserves must equal:

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

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