Question 1

Which of the following is true of other checkable deposits?

Accepted Answer

A) These are checking account deposits at commercial banks and do not pay any interest. 
B) They are accounts at financial institutions that pay interest and give the depositor check-writing privileges. 
C) They comprise solely of demand deposits at mutual savings banks. 
D) They are not included in the M1 money supply. 
E) They are savings deposits that earn interest at savings and loan associations. 
A) These are checking account deposits at commercial banks and do not pay any interest. 
B) They are accounts at financial institutions that pay interest and give the depositor check-writing privileges. 
C) They comprise solely of demand deposits at mutual savings banks. 
D) They are not included in the M1 money supply. 
E) They are savings deposits that earn interest at savings and loan associations.

Question 2

Identify the correct definition of liquidity.

Accepted Answer

A) The availability of credit in the form of money. 
B) The ability of money to be a store of value. 
C) The difference between real and nominal money values. 
D) The ability of an asset to be easily converted into money. 
E) The ability of a precious metal to be converted into spendable bank notes. 
A) The availability of credit in the form of money. 
B) The ability of money to be a store of value. 
C) The difference between real and nominal money values. 
D) The ability of an asset to be easily converted into money. 
E) The ability of a precious metal to be converted into spendable bank notes.

Question 3

A scalper reselling Super Bowl tickets is an example of money being used as:

Accepted Answer

A) a store of value. 
B) a unit of account. 
C) an illegal asset. 
D) a standard of deferred payment. 
E) a medium of exchange. 
A) a store of value. 
B) a unit of account. 
C) an illegal asset. 
D) a standard of deferred payment. 
E) a medium of exchange.

Question 4

The euro is a composite currency;its value is an average of the changing values of several national currencies.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following properties should be satisfied by a commodity to be considered as money?

Accepted Answer

A) Scarce and rare 
B) Perishable 
C) Indivisible 
D) Unpredictable in value 
E) Homogenous in nature 
A) Scarce and rare 
B) Perishable 
C) Indivisible 
D) Unpredictable in value 
E) Homogenous in nature

Question 6

An asset that can easily be exchanged for goods and services is referred to as:

Accepted Answer

A) an intangible asset. 
B) wealth. 
C) a liquid asset. 
D) a fixed asset. 
E) an immovable asset. 
A) an intangible asset. 
B) wealth. 
C) a liquid asset. 
D) a fixed asset. 
E) an immovable asset.

Question 7

Sales contracts between developed countries are usually written (invoiced)in the national currency of the exporter.

Accepted Answer

A) True 
 B)False

Question 8

U.S.bank notes have no intrinsic value and yet are widely accepted as a medium of exchange.This is a result of:

Accepted Answer

A) Gresham's law. 
B) the use of money as a store of value. 
C) the fiduciary monetary system. 
D) the valuation of currency as commodity money. 
E) the gold and silver reserves of the Federal government that backs the currency. 
A) Gresham's law. 
B) the use of money as a store of value. 
C) the fiduciary monetary system. 
D) the valuation of currency as commodity money. 
E) the gold and silver reserves of the Federal government that backs the currency.

Question 9

The U.S.dollar is the most important reserve currency in the world.

Accepted Answer

A) True 
 B)False

Question 10

A $1, 000 price tag on a stereo system is an example of money as a unit of account.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is a reason why the Japanese yen is considered money?

Accepted Answer

A) It is generally accepted as a medium of exchange in all countries of the world. 
B) Its value over the years has varied significantly. 
C) Goods in Japan are priced in terms of the yen, the most liquid asset of the economy. 
D) It is backed by silver. 
E) It is an asset that lacks liquidity. 
A) It is generally accepted as a medium of exchange in all countries of the world. 
B) Its value over the years has varied significantly. 
C) Goods in Japan are priced in terms of the yen, the most liquid asset of the economy. 
D) It is backed by silver. 
E) It is an asset that lacks liquidity.

Question 12

The Gramm-Leach-Bliley Act (GLBA), passed by the U.S.Congress in the year 1999, allows commercial banks to:

Accepted Answer

A) operate in all foreign countries. 
B) open new branches in Cuba. 
C) expand their business into other areas of finance, including insurance and selling securities. 
D) raise reserve requirements for other financial institutions. 
E) eliminate unit banking. 
A) operate in all foreign countries. 
B) open new branches in Cuba. 
C) expand their business into other areas of finance, including insurance and selling securities. 
D) raise reserve requirements for other financial institutions. 
E) eliminate unit banking.

Question 13

According to Gresham's Law:

Accepted Answer

A) money with relatively high intrinsic value will be used for transactions. 
B) money with relatively low intrinsic value will be used for transactions. 
C) money with relatively high intrinsic value will cause inflation. 
D) money with relatively low intrinsic value will cause inflation. 
E) inflation increases the intrinsic value of money. 
A) money with relatively high intrinsic value will be used for transactions. 
B) money with relatively low intrinsic value will be used for transactions. 
C) money with relatively high intrinsic value will cause inflation. 
D) money with relatively low intrinsic value will cause inflation. 
E) inflation increases the intrinsic value of money.

Question 14

The main advantage of the Eurocurrency market is that investment funds cannot be subject to foreign government controls.

Accepted Answer

A) True 
 B)False

Question 15

The maximum money that can be created by the entire banking system is equal to a multiple of its excess reserves.

Accepted Answer

A) True 
 B)False

Question 16

The measure of the money supply that includes the fewest types of assets:

Accepted Answer

A) is M4. 
B) is M2. 
C) is M3. 
D) is M1. 
E) are both M1 and M3. 
A) is M4. 
B) is M2. 
C) is M3. 
D) is M1. 
E) are both M1 and M3.

Question 17

The reciprocal of the reserve requirement is called the:

Accepted Answer

A) spending multiplier. 
B) tax multiplier. 
C) lending multiplier. 
D) deposit expansion multiplier. 
E) excess reserve multiplier. 
A) spending multiplier. 
B) tax multiplier. 
C) lending multiplier. 
D) deposit expansion multiplier. 
E) excess reserve multiplier.

Question 18

Assume that an American investor decides to buy one-year Swiss bonds that are denominated in Swiss francs and pay 2 percent annual interest.For this purpose, $10, 000 is exchanged into Swiss francs at an exchange rate of $1 = 2Fr to buy the bonds.How many dollars will the investor have after one year if the exchange rate is then $1 = 1.5Fr?

Accepted Answer

A) $10, 000 
B) $10, 200 
C) $15, 300 
D) $13, 600 
E) $7, 650 
A) $10, 000 
B) $10, 200 
C) $15, 300 
D) $13, 600 
E) $7, 650

Question 19

Using money as a medium of exchange:

Accepted Answer

A) requires people to match goods wanted with goods available. 
B) inhibits economic transactions. 
C) reduces the need for barter in the economy. 
D) reduces the need for a banking system. 
E) reduces the range of feasible exchanges in the economy. 
A) requires people to match goods wanted with goods available. 
B) inhibits economic transactions. 
C) reduces the need for barter in the economy. 
D) reduces the need for a banking system. 
E) reduces the range of feasible exchanges in the economy.

Question 20

In high-inflation countries, workers prefer to spend their income faster compared to low-inflation countries.

Accepted Answer

A) True 
 B)False

Exam 10: Money and Banking

Which of the following is true of other checkable deposits?

Identify the correct definition of liquidity.

A scalper reselling Super Bowl tickets is an example of money being used as:

The euro is a composite currency;its value is an average of the changing values of several national currencies.

Which of the following properties should be satisfied by a commodity to be considered as money?

An asset that can easily be exchanged for goods and services is referred to as:

Sales contracts between developed countries are usually written (invoiced)in the national currency of the exporter.

U.S.bank notes have no intrinsic value and yet are widely accepted as a medium of exchange.This is a result of:

The U.S.dollar is the most important reserve currency in the world.

A $1, 000 price tag on a stereo system is an example of money as a unit of account.

Which of the following is a reason why the Japanese yen is considered money?

The Gramm-Leach-Bliley Act (GLBA), passed by the U.S.Congress in the year 1999, allows commercial banks to:

According to Gresham's Law:

The main advantage of the Eurocurrency market is that investment funds cannot be subject to foreign government controls.

The maximum money that can be created by the entire banking system is equal to a multiple of its excess reserves.

The measure of the money supply that includes the fewest types of assets:

The reciprocal of the reserve requirement is called the:

Using money as a medium of exchange:

In high-inflation countries, workers prefer to spend their income faster compared to low-inflation countries.

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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