Question 1

An important effect of fractional reserve banking is that bankers have

Accepted Answer

A)  little control over total reserves. 
B)  total control over the amount of lending in the economy. 
C)  no control over the amount of reserves in the banking system. 
D)  some discretion over the money supply. 
A)  little control over total reserves. 
B)  total control over the amount of lending in the economy. 
C)  no control over the amount of reserves in the banking system. 
D)  some discretion over the money supply. D

Question 2

One conceptual problem in assigning assets to M1,M2,etc.is

Accepted Answer

A)  distinguishing money from "near monies." 
B)  the problem of measuring asset size. 
C)  the need to agree on a unit of account. 
D)  the different size of financial assets. 
A)  distinguishing money from "near monies." 
B)  the problem of measuring asset size. 
C)  the need to agree on a unit of account. 
D)  the different size of financial assets. A

Question 3

Fiat money is

Accepted Answer

A)  always backed by gold or silver. 
B)  useful in buying Italian cars. 
C)  only backed by government decree. 
D)  not as liquid as precious metals. 
A)  always backed by gold or silver. 
B)  useful in buying Italian cars. 
C)  only backed by government decree. 
D)  not as liquid as precious metals. C

Question 4

The one disadvantage of paper money is that it is easier to

Accepted Answer

A)  duplicate and counterfeit. 
B)  carry. 
C)  divide. 
D)  store and use at a later time. 
A)  duplicate and counterfeit. 
B)  carry. 
C)  divide. 
D)  store and use at a later time.

Question 5

During the 2007-2009 financial crisis,the U.S.government decided that Lehman Brothers was not too big to fail and that AIG was too big to fail.

Accepted Answer

A) True 
 B)False

Question 6

The banking system receives a new cash deposit of $250,000.Total deposits eventually rise by $1 million.The value of the reserve ratio is

Accepted Answer

A)  25. 
B)  4. 
C)  0.50. 
D)  0.25. 
E)  0.20. 
A)  25. 
B)  4. 
C)  0.50. 
D)  0.25. 
E)  0.20.

Question 7

The narrowest definition of the money supply,including cash and checking deposits,is known as

Accepted Answer

A)  M0. 
B)  M1. 
C)  M payments. 
D)  currency. 
E)  real-value money. 
A)  M0. 
B)  M1. 
C)  M payments. 
D)  currency. 
E)  real-value money.

Question 8

As of December 2010+,the largest single component of M2 consists of

Accepted Answer

A)  checkable deposits at banks. 
B)  cash,coins,and other currency. 
C)  savings deposits. 
D)  gold and silver in commodity accounts. 
A)  checkable deposits at banks. 
B)  cash,coins,and other currency. 
C)  savings deposits. 
D)  gold and silver in commodity accounts.

Question 9

Which of the following was a result of the Dodd-Frank Act?

Accepted Answer

A)  restricted bank activities 
B)  established a new consumer protection agency 
C)  tougher regulations for banks 
D)  All of the above 
A)  restricted bank activities 
B)  established a new consumer protection agency 
C)  tougher regulations for banks 
D)  All of the above

Question 10

Fiat money has value because it

Accepted Answer

A)  is backed by gold. 
B)  can be used to buy goods and services. 
C)  can be exchanged for precious metals at a fixed price. 
D)  can be divided into smaller units. 
E)  All of the above are correct. 
A)  is backed by gold. 
B)  can be used to buy goods and services. 
C)  can be exchanged for precious metals at a fixed price. 
D)  can be divided into smaller units. 
E)  All of the above are correct.

Question 11

Liquidity can be defined as the

Accepted Answer

A)  cash value of money. 
B)  value of money adjusted for inflation. 
C)  value of fiat money when used for spending. 
D)  ease with which an asset can be converted to a spendable asset. 
A)  cash value of money. 
B)  value of money adjusted for inflation. 
C)  value of fiat money when used for spending. 
D)  ease with which an asset can be converted to a spendable asset.

Question 12

Excess reserves make a bank less vulnerable to runs,but bankers do not like to hold excess reserves because holding excess reserves

Accepted Answer

A)  are disliked by depositors. 
B)  means lower profits for banks. 
C)  are discouraged by government regulators. 
D)  All of the above are correct. 
A)  are disliked by depositors. 
B)  means lower profits for banks. 
C)  are discouraged by government regulators. 
D)  All of the above are correct.

Question 13

The new $20 bills are being introduced by the U.S.Treasury primarily to diminish

Accepted Answer

A)  inflation. 
B)  poverty. 
C)  counterfeiting. 
D)  bank failures. 
A)  inflation. 
B)  poverty. 
C)  counterfeiting. 
D)  bank failures.

Question 14

The composition of M2 as of December 2010 includes saving deposits at savings banks and credit unions.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following might limit the money creation process to an amount less than the potential amount?

Accepted Answer

A)  bank pursuit of profits 
B)  public holding some cash 
C)  business demand for loan 
D)  increased use of credit cards 
A)  bank pursuit of profits 
B)  public holding some cash 
C)  business demand for loan 
D)  increased use of credit cards

Question 16

The narrowest definition of the money supply (M1)includes

Accepted Answer

A)  cash and travelers' checks. 
B)  cash,travelers' checks,and savings account balances. 
C)  cash,checking account balances,and travelers' checks. 
D)  cash,bank deposits,and money market accounts. 
A)  cash and travelers' checks. 
B)  cash,travelers' checks,and savings account balances. 
C)  cash,checking account balances,and travelers' checks. 
D)  cash,bank deposits,and money market accounts.

Question 17

The value of the deposit multiplier is increased if individuals hold all their money in cash.

Accepted Answer

A) True 
 B)False

Question 18

Are funds available on a credit card included in a definition of the money supply?

Accepted Answer

A)  Yes,because these funds can be used to pay for goods and services. 
B)  Yes,because these funds are included in M2. 
C)  No,because these funds are hard to measure total credit card spending. 
D)  No,because these funds are not a store of value. 
A)  Yes,because these funds can be used to pay for goods and services. 
B)  Yes,because these funds are included in M2. 
C)  No,because these funds are hard to measure total credit card spending. 
D)  No,because these funds are not a store of value.

Question 19

Which of the following is an example of money serving as a medium of exchange?

Accepted Answer

A)  Richard puts money into a piggy bank. 
B)  Ellen deposits cash into a money market account. 
C)  Sean puts a new $20 bill into his currency collection. 
D)  Marian buys a carbo-loaded drink before a marathon. 
A)  Richard puts money into a piggy bank. 
B)  Ellen deposits cash into a money market account. 
C)  Sean puts a new $20 bill into his currency collection. 
D)  Marian buys a carbo-loaded drink before a marathon.

Question 20

In a market system,the most dangerous types of bankruptcies involve

Accepted Answer

A)  industrial monopolies. 
B)  multinational firms. 
C)  employment agencies. 
D)  financial institutions. 
A)  industrial monopolies. 
B)  multinational firms. 
C)  employment agencies. 
D)  financial institutions.

An important effect of fractional reserve banking is that bankers have

One conceptual problem in assigning assets to M1,M2,etc.is

Fiat money is

The one disadvantage of paper money is that it is easier to

During the 2007-2009 financial crisis,the U.S.government decided that Lehman Brothers was not too big to fail and that AIG was too big to fail.

The banking system receives a new cash deposit of $250,000.Total deposits eventually rise by $1 million.The value of the reserve ratio is

The narrowest definition of the money supply,including cash and checking deposits,is known as

As of December 2010+,the largest single component of M2 consists of

Which of the following was a result of the Dodd-Frank Act?

Fiat money has value because it

Liquidity can be defined as the

Excess reserves make a bank less vulnerable to runs,but bankers do not like to hold excess reserves because holding excess reserves

The new $20 bills are being introduced by the U.S.Treasury primarily to diminish

The composition of M2 as of December 2010 includes saving deposits at savings banks and credit unions.

Which of the following might limit the money creation process to an amount less than the potential amount?

The narrowest definition of the money supply (M1)includes

The value of the deposit multiplier is increased if individuals hold all their money in cash.

Are funds available on a credit card included in a definition of the money supply?

Which of the following is an example of money serving as a medium of exchange?

In a market system,the most dangerous types of bankruptcies involve

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters

Exam 12: Money and The Banking System

An important effect of fractional reserve banking is that bankers have

One conceptual problem in assigning assets to M1,M2,etc.is

Fiat money is

The one disadvantage of paper money is that it is easier to

During the 2007-2009 financial crisis,the U.S.government decided that Lehman Brothers was not too big to fail and that AIG was too big to fail.

The banking system receives a new cash deposit of $250,000.Total deposits eventually rise by $1 million.The value of the reserve ratio is

The narrowest definition of the money supply,including cash and checking deposits,is known as

As of December 2010+,the largest single component of M2 consists of

Which of the following was a result of the Dodd-Frank Act?

Fiat money has value because it

Liquidity can be defined as the

Excess reserves make a bank less vulnerable to runs,but bankers do not like to hold excess reserves because holding excess reserves

The new $20 bills are being introduced by the U.S.Treasury primarily to diminish

The composition of M2 as of December 2010 includes saving deposits at savings banks and credit unions.

Which of the following might limit the money creation process to an amount less than the potential amount?

The narrowest definition of the money supply (M1)includes

The value of the deposit multiplier is increased if individuals hold all their money in cash.

Are funds available on a credit card included in a definition of the money supply?

Which of the following is an example of money serving as a medium of exchange?

In a market system,the most dangerous types of bankruptcies involve

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters