Question 1

M1 includes

Accepted Answer

A)  currency only. 
B)  currency plus checkable deposits. 
C)  currency in circulation plus checkable deposits. 
D)  currency in circulation plus checkable deposits plus traveler's checks. 
A)  currency only. 
B)  currency plus checkable deposits. 
C)  currency in circulation plus checkable deposits. 
D)  currency in circulation plus checkable deposits plus traveler's checks.

Question 2

Currency in the United States today is

Accepted Answer

A)  fiat money. 
B)  intrinsic money. 
C)  backed by gold. 
D)  quasi- intrinsic. 
A)  fiat money. 
B)  intrinsic money. 
C)  backed by gold. 
D)  quasi- intrinsic.

Question 3

Fiat money is money that has a value apart from its use as money.

Accepted Answer

A) True 
 B)False

Question 4

Discuss the three functions of money and give several examples in your own life when money performs these functions.

Accepted Answer

The three functions of money are as a me

Question 5

The M1 money supply includes all currency in circulation, checkable deposits, and traveler's checks.

Accepted Answer

A) True 
 B)False

Question 6

Because commodity money is not uniform in quality, there is a tendency

Accepted Answer

A)  for higher quality commodity money to drive lower quality commodity money out of circulation. 
B)  for lower quality commodity money to drive higher quality commodity money out of circulation. 
C)  for stable commodity money to drive unstable commodity money out of circulation. 
D)  for unstable commodity money to drive stable commodity money out of circulation. 
A)  for higher quality commodity money to drive lower quality commodity money out of circulation. 
B)  for lower quality commodity money to drive higher quality commodity money out of circulation. 
C)  for stable commodity money to drive unstable commodity money out of circulation. 
D)  for unstable commodity money to drive stable commodity money out of circulation.

Question 7

Table 9-5
Bolton Bank: Partial Balance Sheet
(All figures in $ million)
  
-Refer to Table 9-5. The required reserve ratio is 10%. What is the amount of Bolton Bank's required reserves?

Accepted Answer

A)  $30 million 
B)  $70 million 
C)  $100 million 
D)  $300 million 
A)  $30 million 
B)  $70 million 
C)  $100 million 
D)  $300 million

Question 8

If you need cash you can go to the bank and withdraw some of your savings. If you have some U.S. treasury bonds, you can also "cash" them in. Why, then, does the definition of money include savings accounts but not government bonds as part of the M2 money supply?

Accepted Answer

The reason government bonds are not incl

Question 9

A bank's reserves are

Accepted Answer

A)  the minimum value of assets it must have. 
B)  the amount of gold it is required to have as reserves against loans. 
C)  the value of federal securities it is required to have as reserves against loans. 
D)  deposits that banks have accepted from customers but have not loaned out. 
A)  the minimum value of assets it must have. 
B)  the amount of gold it is required to have as reserves against loans. 
C)  the value of federal securities it is required to have as reserves against loans. 
D)  deposits that banks have accepted from customers but have not loaned out.

Question 10

Linda sells her Economics textbook to Ejere for $40. Ejere pays Linda with a check, which she deposits in her checking account in West Bank. Which statement below describes the check-clearing process?

Accepted Answer

A)  Linda's bank gains $40 in checkable deposits and loses $40 in reserves. Ejere's bank gains $40 in reserves and loses $40 in deposits. 
B)  Linda's bank loses $40 in checkable deposits and gains $40 in reserves. Ejere's bank gains $40 in checkable deposits and loses $10,000 in reserves. 
C)  Ejere's bank loses $40 in both reserves and checkable deposits. Linda's bank gains $40 in both checkable deposits and reserves. 
D)  Ejere's bank loses $40 in reserves and gains $10,000 in checkable deposits. Linda's bank loses $40 in both reserves and checkable deposits. 
A)  Linda's bank gains $40 in checkable deposits and loses $40 in reserves. Ejere's bank gains $40 in reserves and loses $40 in deposits. 
B)  Linda's bank loses $40 in checkable deposits and gains $40 in reserves. Ejere's bank gains $40 in checkable deposits and loses $10,000 in reserves. 
C)  Ejere's bank loses $40 in both reserves and checkable deposits. Linda's bank gains $40 in both checkable deposits and reserves. 
D)  Ejere's bank loses $40 in reserves and gains $10,000 in checkable deposits. Linda's bank loses $40 in both reserves and checkable deposits.

Question 11

Table 9-3
Balance Sheet of the Alpha-Beta Bank
(All figures in $ million)
  
-Refer to Table 9-3. If the required reserve ratio is 10%, what is the amount of excess reserves held by Alpha-Beta Bank?

Accepted Answer

A)  $25 million 
B)  $40 million 
C)  $60 million 
D)  $75 million 
A)  $25 million 
B)  $40 million 
C)  $60 million 
D)  $75 million

Question 12

The Fed's narrowest measure of money supply is

Accepted Answer

A)  M1. 
B)  M2. 
C)  credit card balances. 
D)  balances held in money market funds. 
A)  M1. 
B)  M2. 
C)  credit card balances. 
D)  balances held in money market funds.

Question 13

The deposit multiplier is the inverse of

Accepted Answer

A)  legal reserves. 
B)  excess reserves. 
C)  checkable deposits. 
D)  the required reserve ratio. 
A)  legal reserves. 
B)  excess reserves. 
C)  checkable deposits. 
D)  the required reserve ratio.

Question 14

Which of the following statements is true?

Accepted Answer

A)  The higher the required reserve ratio, the higher the deposit multiplier. 
B)  The higher the excess reserves, the higher the deposit multiplier. 
C)  The value of the deposit multiplier falls if economic agents withdraw cash from the banking system. 
D)  The deposit multiplier only works to increase money supply, not to decrease money supply. 
A)  The higher the required reserve ratio, the higher the deposit multiplier. 
B)  The higher the excess reserves, the higher the deposit multiplier. 
C)  The value of the deposit multiplier falls if economic agents withdraw cash from the banking system. 
D)  The deposit multiplier only works to increase money supply, not to decrease money supply.

Question 15

The money supply is the total amount of checkable deposits in the economy.

Accepted Answer

A) True 
 B)False

Question 16

Table 9-3
Balance Sheet of the Alpha-Beta Bank
(All figures in $ million)
  
-Refer to Table 9-3. If the required reserve ratio is 10%, what is the value of the bank's required reserves?

Accepted Answer

A)  $25 million 
B)  $40 million 
C)  $60 million 
D)  $75 million 
A)  $25 million 
B)  $40 million 
C)  $60 million 
D)  $75 million

Question 17

The deposit multiplier is given by the formula

Accepted Answer

A)  change in checkable deposits ÷ change in required reserves. 
B)  change in checkable deposits ÷ change in reserves. 
C)  change in excess reserves ÷ change in checkable deposits. 
D)  change in legal reserves ÷ change in excess reserves. 
A)  change in checkable deposits ÷ change in required reserves. 
B)  change in checkable deposits ÷ change in reserves. 
C)  change in excess reserves ÷ change in checkable deposits. 
D)  change in legal reserves ÷ change in excess reserves.

Question 18

The higher the discount rate, the greater the incentive for banks to hold excess reserves.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is an example of a bank's assets?

Accepted Answer

A)  reserves borrowed from the Fed 
B)  checkable deposits 
C)  vault cash 
D)  savings deposits 
A)  reserves borrowed from the Fed 
B)  checkable deposits 
C)  vault cash 
D)  savings deposits

Question 20

The quantity of reserves that banks must hold against deposits is called

Accepted Answer

A)  the reserve ratio. 
B)  excess reserves. 
C)  total reserves. 
D)  required reserves. 
A)  the reserve ratio. 
B)  excess reserves. 
C)  total reserves. 
D)  required reserves.

Exam 24: The Aggregate Demandaggregate Supply Model

M1 includes

Currency in the United States today is

Fiat money is money that has a value apart from its use as money.

Discuss the three functions of money and give several examples in your own life when money performs these functions.

The M1 money supply includes all currency in circulation, checkable deposits, and traveler's checks.

Because commodity money is not uniform in quality, there is a tendency

Table 9-5 Bolton Bank: Partial Balance Sheet (All figures in $ million) -Refer to Table 9-5. The required reserve ratio is 10%. What is the amount of Bolton Bank's required reserves?

If you need cash you can go to the bank and withdraw some of your savings. If you have some U.S. treasury bonds, you can also "cash" them in. Why, then, does the definition of money include savings accounts but not government bonds as part of the M2 money supply?

A bank's reserves are

Linda sells her Economics textbook to Ejere for $40. Ejere pays Linda with a check, which she deposits in her checking account in West Bank. Which statement below describes the check-clearing process?

Table 9-3 Balance Sheet of the Alpha-Beta Bank (All figures in $ million) -Refer to Table 9-3. If the required reserve ratio is 10%, what is the amount of excess reserves held by Alpha-Beta Bank?

The Fed's narrowest measure of money supply is

The deposit multiplier is the inverse of

Which of the following statements is true?

The money supply is the total amount of checkable deposits in the economy.

Table 9-3 Balance Sheet of the Alpha-Beta Bank (All figures in $ million) -Refer to Table 9-3. If the required reserve ratio is 10%, what is the value of the bank's required reserves?

The deposit multiplier is given by the formula

The higher the discount rate, the greater the incentive for banks to hold excess reserves.

Which of the following is an example of a bank's assets?

The quantity of reserves that banks must hold against deposits is called

Welcome to Economics

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