Question 1

Suppose you decide to borrow money from an online peer-to-peer lending site.On the T-account for the funder of the loan for this transaction,the funds from the investor would be classified as ________,and the loan made to you would be classified as ________.

Accepted Answer

A) an asset; an asset 
B) an asset; a liability 
C) a liability; an asset 
D) a liability,a liability

Question 2

Among potential stores of value,money

Accepted Answer

A) offers the highest rate of return. 
B) increases in value during periods of inflation. 
C) has the advantage of being the most liquid asset. 
D) provides more services than the other assets.

Question 3

Which of the following is not a function of the Federal Reserve System,or the "Fed"?

Accepted Answer

A) acting as a lender of last resort 
B) acting as a banker's bank 
C) performing check clearing services 
D) insuring deposits in the banking system 
E) taking actions to control the money supply

Question 4

Suppose there is a bank panic.Which of the following would not be a consequence of this bank panic?

Accepted Answer

A) Bank total reserves would decrease. 
B) Required reserves would increase. 
C) Bank checking account balances would decrease. 
D) Individual banks would have to shrink the value of loans they made. 
E) The economy would likely enter into a recession.

Question 5

The Federal Open Market Committee consists of

Accepted Answer

A) the seven member Board of Governors of the Federal Reserve. 
B) the 12 Federal Reserve Bank Presidents. 
C) five of the Federal Reserve Bank Presidents. 
D) the Board of Governors plus five of the Federal Reserve Bank Presidents.

Question 6

Commodity money is a good

Accepted Answer

A) used as money that has no secondary use. 
B) that is designated as money by law. 
C) used as money that also has value independent of its use as money. 
D) used as money that has no intrinsic value.

Question 7

By making exchange ________,money allows for ________ and higher ________.

Accepted Answer

A) harder; specialization; costs 
B) easier; specialization; productivity 
C) harder; generalization; productivity 
D) easier; specialization; costs

Question 8

In 2008,Zimbabwe ran out of locally produced Coca Cola and local Coke bottlers were not able to import the concentrated syrup needed to make Coke from the United States because they could not obtain U.S.dollars.A small amount of Coke was imported from South Africa,but a single bottle sold for around 15 billion Zimbabwean dollars.Zimbabwe was experiencing rapid increases in the price level,which is known as

Accepted Answer

A) stagflation. 
B) deflation. 
C) inflation. 
D) hyperinflation.

Question 9

According to the U.S.Treasury

Accepted Answer

A) the government will not accept cash in payment of taxes. 
B) companies must accept some form of cash payment for goods and services,but not necessarily U.S.dollars. 
C) firms do not have to accept cash as payment for goods and services. 
D) U.S.dollars must be accepted as payment for any good or service sold in the United States.

Question 10

Money is

Accepted Answer

A) an asset that people are willing to accept in exchange for goods and services. 
B) a liability that people are willing to accept in exchange for goods and services. 
C) the income one earns over a period of time. 
D) one's assets net of one's liabilities at any point in time.

Question 11

According to the quantity theory of money,if the money supply grows at 20 percent and real GDP grows at 5 percent,then the inflation rate will be

Accepted Answer

A) 15 percent. 
B) 20 percent. 
C) 25 percent. 
D) 100 percent.

Question 12

Which of the following is an asset for a bank?

Accepted Answer

A) deposits of its customers 
B) short-term borrowing 
C) shareholders' equity 
D) loans

Question 13

If the required reserve ratio is 10 percent,an increase in bank reserves of $1,000 can support an increase in checking account deposits (including the original deposit)in the banking system as a whole of up to

Accepted Answer

A) $100. 
B) $1,000. 
C) $10,000. 
D) $100,000.

Question 14

Your checking account balance is included in your bank's assets.

Accepted Answer

A) True 
 B)False

Question 15

A farm worker gets paid today in money,but plans to spend the money next week.This illustrates which function of money?

Accepted Answer

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

Question 16

If a person withdraws $500 from his/her savings account and puts it in his/her checking account,then M1 will ________ and M2 will ________.

Accepted Answer

A) increase; decrease 
B) increase; not change 
C) not change; increase 
D) not change; decrease 
E) not change; not change

Question 17

When banks gain ________,they can ________ their loans; and the money supply ________.

Accepted Answer

A) reserves; increase; contracts 
B) withdrawals; increase; expands 
C) withdrawals; decrease; expands 
D) reserves; increase; expands

Question 18

Which of the following is not counted in M1?

Accepted Answer

A) checking account balances 
B) credit card balances 
C) coins in circulation 
D) currency in circulation 
E) traveler's check balances

Question 19

Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio is 10 percent.If the Federal Reserve raises the required reserve ratio to 15 percent,then the bank will now have excess reserves of

Accepted Answer

A) $0. 
B) -$5 million. 
C) $5 million. 
D) $15 million.

Question 20

Bank panics have largely disappeared in the United States because

Accepted Answer

A) banks are now required to hold a larger fraction of deposits as reserves. 
B) bank loans are more closely monitored by the Federal Reserve. 
C) of low interest rates. 
D) of deposit insurance.

Exam 14: Money,Banks,and the Federal Reserve System

Suppose you decide to borrow money from an online peer-to-peer lending site.On the T-account for the funder of the loan for this transaction,the funds from the investor would be classified as ,and the loan made to you would be classified as .