Question 1

Explain the pros and cons of using paper money as opposed to specie,and the different techniques used by banks and governments to ensure paper money was accepted for use.

Accepted Answer

Paper money and specie (coins made of precious metals) each have their own advantages and disadvantages. Paper money is more convenient and lighter to carry, making it easier to handle in large transactions. It also allows for easier storage and transportation. However, it is more susceptible to counterfeiting and can lose its value due to inflation.

Specie, on the other hand, holds its value more consistently and is less vulnerable to counterfeiting. However, it is heavier and more cumbersome to handle, making it less convenient for everyday transactions.

Banks and governments have employed various techniques to ensure that paper money is accepted for use. One common method is through the backing of paper money with a reserve of specie or other valuable assets, such as gold or silver. This backing gives the paper money a tangible value and helps maintain public confidence in its worth. Additionally, governments and central banks regulate the supply of paper money to help control inflation and ensure its stability.

Another technique used by banks and governments is the establishment of legal tender laws, which require businesses and individuals to accept paper money as a form of payment for debts. This helps ensure that paper money remains widely accepted and facilitates its use in transactions.

Overall, both paper money and specie have their own advantages and disadvantages, and the techniques used by banks and governments to ensure the acceptance of paper money have been essential in maintaining the stability and credibility of fiat currency.

Question 2

Money serves the following function(s):

Accepted Answer

A)   Medium of exchange
B)   Store of value
C)   Unit of account
D)   All of the above D

Question 3

A trade deficit can produce inflation when a country and its trading partners are on the gold standard or a bi-metallic system.

Accepted Answer

A) True 
 B)False  True

Question 4

During the antebellum period,the U.S.used more economic output and resources than were domestically available during expansions and less during contractions.International trade ?assisted during these cyclical times.

Accepted Answer

A) True 
 B)False

Question 5

All of the following are true of the gold standard except

Accepted Answer

A)   It requires international trading partners to strictly accept gold payments for imports and exports
B)   It supported stable and fixed exchange rates throughout most of the 19th century
C)   It encouraged international trade
D)   It integrated the U.S. monetary system into the world market.

Question 6

During the antebellum period,the South exported more to England than it imported.This Southern trade surplus with England benefited whom?

Accepted Answer

A)   The South
B)   The North
C)   England
D)   All of the above

Question 7

Discuss the risks of using paper money to provide an adequate supply of money for the economy.Describe how a central bank,government regulation or coordinated action by banks can help reduce these risks.Describe the concerns of private citizens about paper money.How did local governments,state governments,federally-chartered banks,state-chartered banks and the Bank of England attempt to maintain the stability of paper money at different times from 1700 to 1860?

Accepted Answer

The answer of Discuss the risks of using paper money...

Question 8

The 1819 panic was caused by the Second Bank of the United States,which called on the state banks to redeem their notes in order to acquire $4 million in specie to pay the borrowing that had been undertaken in Europe in 1803 to finance the Louisiana Purchase.

Accepted Answer

A) True 
 B)False

Question 9

Explain why the fractional reserve banking can be considered economic leveraging.

Accepted Answer

The answer of Explain why the fractional reserve banking can...

Question 10

The number of private state banks decreased after the First Bank of the United States lost its charter.

Accepted Answer

A) True 
 B)False

Question 11

International trade in the U.S.during the antebellum period

Accepted Answer

A)   benefited the Northern economy more than the Southern economy.
B)   benefited England significantly more than the U.S.
C)   played an important part in the growth and expansion of the Southern economy.
D)   occurred as described in all of the above.

Question 12

Which of the following was NOT a reason given for opposing the renewal of the charters of the Banks of the United States?

Accepted Answer

A)   The Banks of the United States made too many bad loans.
B)   The Banks of the United States were unconstitutional.
C)   The Banks of the United States hindered the development of private banks.
D)   The Banks of the United States were owned, in part, by foreign investors.

Question 13

From 1789 to 1838,state banks

Accepted Answer

A)   served as financial intermediations and paid out paper money to borrowers.
B)   were corporations.
C)   engaged in agricultural activities.
D)   established demand deposits against which checks could be written by the borrower.

Question 14

Discuss the links among money,specialization and capital accumulation.

Accepted Answer

The answer of Discuss the links among money,specialization and capital...

Question 15

The Second Bank of the United States was deemed unconstitutional and,therefore,its charter was not renewed.

Accepted Answer

A) True 
 B)False

Question 16

The Mint Act of 1792,following the ideas of Thomas Jefferson and Robert Morris,set the U.S.up as

Accepted Answer

A)   a silver standard country.
B)   a paper-money country.
C)   a gold-standard country.
D)   a bimetallic country.

Question 17

Fractional reserve banking

Accepted Answer

A)   destroys money.
B)   requires banks to engage in 100 percent of total banking activities.
C)   allows banks to create money while requiring them only to hold a fraction of money.
D)   all of the above.

Question 18

On the gold standard,a trade deficit in the U.S.impacted the economy by producing

Accepted Answer

A)   a gain of specie.
B)   a tight supply of money.
C)   low interest rates.
D)   deflation.

Question 19

What determined the supply of money and the deposit multi?plier in the pre-Civil War years?

Accepted Answer

The answer of What determined the supply of money and...

Question 20

Under the Articles of Confederation,the Continental Congress permitted each state to issue paper money and borrow on their own to finance expenses related to the American Revolution.

Accepted Answer

A) True 
 B)False

Exam 12: The Financial System and the International Economy

Explain the pros and cons of using paper money as opposed to specie,and the different techniques used by banks and governments to ensure paper money was accepted for use.

Money serves the following function(s) :

A trade deficit can produce inflation when a country and its trading partners are on the gold standard or a bi-metallic system.

During the antebellum period,the U.S.used more economic output and resources than were domestically available during expansions and less during contractions.International trade ?assisted during these cyclical times.

All of the following are true of the gold standard except

During the antebellum period,the South exported more to England than it imported.This Southern trade surplus with England benefited whom?

The 1819 panic was caused by the Second Bank of the United States,which called on the state banks to redeem their notes in order to acquire $4 million in specie to pay the borrowing that had been undertaken in Europe in 1803 to finance the Louisiana Purchase.

Explain why the fractional reserve banking can be considered economic leveraging.

The number of private state banks decreased after the First Bank of the United States lost its charter.

International trade in the U.S.during the antebellum period

Which of the following was NOT a reason given for opposing the renewal of the charters of the Banks of the United States?

From 1789 to 1838,state banks

Discuss the links among money,specialization and capital accumulation.

The Second Bank of the United States was deemed unconstitutional and,therefore,its charter was not renewed.

The Mint Act of 1792,following the ideas of Thomas Jefferson and Robert Morris,set the U.S.up as

Fractional reserve banking

On the gold standard,a trade deficit in the U.S.impacted the economy by producing

What determined the supply of money and the deposit multi?plier in the pre-Civil War years?

Under the Articles of Confederation,the Continental Congress permitted each state to issue paper money and borrow on their own to finance expenses related to the American Revolution.