Question 1

Which of the following statements is false?

Accepted Answer

A)  Asymmetric information can exist both before and after a transaction. 
B)  Moral hazard occurs when one party to a transaction changes his or her behavior in a way that is hidden from and costly to the other party. 
C)  Adverse selection has the potential to eliminate some markets. 
D)  none of the above 
A)  Asymmetric information can exist both before and after a transaction. 
B)  Moral hazard occurs when one party to a transaction changes his or her behavior in a way that is hidden from and costly to the other party. 
C)  Adverse selection has the potential to eliminate some markets. 
D)  none of the above D

Question 2

A bank has $10,000 in excess reserves and the required reserve ratio is 20 percent.This means the bank could have __________ in checkable deposit liabilities and __________ in total reserves.

Accepted Answer

A)  $80,000,$10,000 
B)  $100,000,$20,000 
C)  $50,000,$25,000 
D)  $100,000,$30,000 
A)  $80,000,$10,000 
B)  $100,000,$20,000 
C)  $50,000,$25,000 
D)  $100,000,$30,000 D

Question 3

Refer to Exhibit 12-4.How much bank capital does Bank XYZ have (i.e.what dollar amount belongs in blank (A))?

Accepted Answer

A)  $150 
B)  $625 
C)  $245 
D)  $355 
E)  There is not enough information provided to answer this question. 
A)  $150 
B)  $625 
C)  $245 
D)  $355 
E)  There is not enough information provided to answer this question. C

Question 4

A "money market deposit account" is a(n)

Accepted Answer

A)  checking account that pays no interest. 
B)  bank account with a specified maturity date. 
C)  store of Federal Reserve Notes held in bank vaults to cash checkable deposits on demand. 
D)  checking account created from an automatic transfer from a savings account. 
E)  interest-earning account at a bank or thrift institution that usually has a minimum balance requirement. 
A)  checking account that pays no interest. 
B)  bank account with a specified maturity date. 
C)  store of Federal Reserve Notes held in bank vaults to cash checkable deposits on demand. 
D)  checking account created from an automatic transfer from a savings account. 
E)  interest-earning account at a bank or thrift institution that usually has a minimum balance requirement.

Question 5

To an economist,credit cards ___________ money.When a credit card is used to make a purchase,_____________ is incurred,which ________ the case when money is used to make a purchase.

Accepted Answer

A)  are; an asset; is not 
B)  are not; an asset; is also 
C)  are; a liability; is also 
D)  are not; a liability; is not 
A)  are; an asset; is not 
B)  are not; an asset; is also 
C)  are; a liability; is also 
D)  are not; a liability; is not

Question 6

Bank A has checkable deposits of $800,000 and total reserves of $200,000.If the required reserve ratio is 0.11,the bank has required reserves of

Accepted Answer

A)  $600,000. 
B)  $88,000. 
C)  $112,000. 
D)  $22,000. 
A)  $600,000. 
B)  $88,000. 
C)  $112,000. 
D)  $22,000.

Question 7

To a bank,a loan the bank has made to its borrowers is classified as

Accepted Answer

A)  an asset. 
B)  a liability. 
C)  vault cash. 
D)  excess reserves. 
E)  bank capital. 
A)  an asset. 
B)  a liability. 
C)  vault cash. 
D)  excess reserves. 
E)  bank capital.

Question 8

A medium of exchange is

Accepted Answer

A)  anything that is generally accepted in exchange for goods and services. 
B)  a common measurement in which relative values are expressed. 
C)  an item's ability to hold value over time. 
D)  the exchange of goods and services for other goods and services. 
E)  both a and d 
A)  anything that is generally accepted in exchange for goods and services. 
B)  a common measurement in which relative values are expressed. 
C)  an item's ability to hold value over time. 
D)  the exchange of goods and services for other goods and services. 
E)  both a and d

Question 9

According to the textbook,L.Frank Baum,the author of The Wonderful Wizard of Oz,blamed ____________________ for the economic depression of 1893 and the related hardships faced by farmers and workers.

Accepted Answer

A)  the gold standard 
B)  the silver standard 
C)  a massive tornado 
D)  high taxes 
A)  the gold standard 
B)  the silver standard 
C)  a massive tornado 
D)  high taxes

Question 10

A moral hazard problem occurs before a loan is made,and the adverse selection problem occurs after a loan is made.

Accepted Answer

A) True 
 B)False

Question 11

Barter is

Accepted Answer

A)  the exchange of money for goods and then the exchange of those goods for money. 
B)  the exchange of money for money,or the exchange of money for stocks and bonds. 
C)  the exchange of goods and services for goods and services without the use of money. 
D)  any exchange,with or without the use of money,in which the participants negotiate (or barter)the price of the goods to be exchanged. 
A)  the exchange of money for goods and then the exchange of those goods for money. 
B)  the exchange of money for money,or the exchange of money for stocks and bonds. 
C)  the exchange of goods and services for goods and services without the use of money. 
D)  any exchange,with or without the use of money,in which the participants negotiate (or barter)the price of the goods to be exchanged.

Question 12

Total reserves are

Accepted Answer

A)  equal to required reserves plus excess reserves. 
B)  equal to vault cash plus bank deposits at the Federal Reserve. 
C)  an asset to banks. 
D)  both b and c 
E)  all of the above 
A)  equal to required reserves plus excess reserves. 
B)  equal to vault cash plus bank deposits at the Federal Reserve. 
C)  an asset to banks. 
D)  both b and c 
E)  all of the above

Question 13

To a bank,checkable deposits are classified as a liability.

Accepted Answer

A) True 
 B)False

Question 14

Required reserves are the amount of

Accepted Answer

A)  reserves a bank must hold against its deposits as mandated by the Federal Reserve. 
B)  cash a bank must hold against its deposits as mandated by the Federal Reserve. 
C)  checkable deposits a bank must hold against all other deposits as mandated by the U.S.Treasury. 
D)  reserves a bank must hold against all its assets as mandated by the Federal Reserve. 
A)  reserves a bank must hold against its deposits as mandated by the Federal Reserve. 
B)  cash a bank must hold against its deposits as mandated by the Federal Reserve. 
C)  checkable deposits a bank must hold against all other deposits as mandated by the U.S.Treasury. 
D)  reserves a bank must hold against all its assets as mandated by the Federal Reserve.

Question 15

Money is an invention of government.

Accepted Answer

A) True 
 B)False

Question 16

If excess reserves are $10 million,(total)reserves are $14 million,and the required reserve ratio is 10%,then required reserves equal ________________ and checkable deposits equal ____________________.

Accepted Answer

A)  $4 million; $40 million 
B)  $40 million; $4 million 
C)  $24 million; $240 million 
D)  $7 million; $70 million 
A)  $4 million; $40 million 
B)  $40 million; $4 million 
C)  $24 million; $240 million 
D)  $7 million; $70 million

Question 17

Which of the following is a correct listing of money's functions?

Accepted Answer

A)  source of credit,value of transaction costs,unit of barter 
B)  medium of barter,medium of exchange,medium of transactions 
C)  unit of barter,unit of account,a unit of income 
D)  store of value,store of exchange,measure of account 
E)  store of value,medium of exchange,unit of account 
A)  source of credit,value of transaction costs,unit of barter 
B)  medium of barter,medium of exchange,medium of transactions 
C)  unit of barter,unit of account,a unit of income 
D)  store of value,store of exchange,measure of account 
E)  store of value,medium of exchange,unit of account

Question 18

Discuss some of the economic symbolism thought by many to be contained in L.Frank Baum's book The Wonderful Wizard of Oz.

Accepted Answer

Many people believe that Baum's well-kno

Question 19

According to the textbook,in the book version of The Wonderful Wizard of Oz,Dorothy's slippers are

Accepted Answer

A)  gold. 
B)  silver. 
C)  ruby. 
D)  paper. 
A)  gold. 
B)  silver. 
C)  ruby. 
D)  paper.

Question 20

Which of the following statements is true?

Accepted Answer

A)  A savings deposit is not counted in the most basic,or narrow,definition of the money supply. 
B)  M1 is sometimes referred to as transactions money. 
C)  Money reduces the transaction costs of making exchanges. 
D)  b and c 
E)  a,b,and c 
A)  A savings deposit is not counted in the most basic,or narrow,definition of the money supply. 
B)  M1 is sometimes referred to as transactions money. 
C)  Money reduces the transaction costs of making exchanges. 
D)  b and c 
E)  a,b,and c

Exam 12: Government and Product Markets: Antitrust and Regulation

Which of the following statements is false?

A bank has $10,000 in excess reserves and the required reserve ratio is 20 percent.This means the bank could have __________ in checkable deposit liabilities and __________ in total reserves.

Refer to Exhibit 12-4.How much bank capital does Bank XYZ have (i.e.what dollar amount belongs in blank (A))?

A "money market deposit account" is a(n)

To an economist,credit cards ___________ money.When a credit card is used to make a purchase,_____________ is incurred,which ________ the case when money is used to make a purchase.

Bank A has checkable deposits of $800,000 and total reserves of $200,000.If the required reserve ratio is 0.11,the bank has required reserves of

To a bank,a loan the bank has made to its borrowers is classified as

A medium of exchange is

According to the textbook,L.Frank Baum,the author of The Wonderful Wizard of Oz,blamed ____________________ for the economic depression of 1893 and the related hardships faced by farmers and workers.

A moral hazard problem occurs before a loan is made,and the adverse selection problem occurs after a loan is made.

Barter is

Total reserves are

To a bank,checkable deposits are classified as a liability.

Required reserves are the amount of

Money is an invention of government.

If excess reserves are $10 million,(total)reserves are $14 million,and the required reserve ratio is 10%,then required reserves equal ________________ and checkable deposits equal ____________________.

Which of the following is a correct listing of money's functions?

Discuss some of the economic symbolism thought by many to be contained in L.Frank Baum's book The Wonderful Wizard of Oz.

According to the textbook,in the book version of The Wonderful Wizard of Oz,Dorothy's slippers are

Which of the following statements is true?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free,controlled,and Relative

Supply,demand,and Price: Applications

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, oligopoly, and Game Theory

Factor Markets: With Emphasis on the Labor Market

Wages,union,and Labor

The Distribution of Income and Poverty

Interest,rent,and Profit

Market Failure: Externalities, public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government: Five Topics Considered

Stocks,bonds,futures,and Options

Stocks,bonds,futures,and Options

Filters

A bank has $10,000 in excess reserves and the required reserve ratio is 20 percent.This means the bank could have in checkable deposit liabilities and in total reserves.

To an economist,credit cards _____ money.When a credit card is used to make a purchase,_ is incurred,which __ the case when money is used to make a purchase.

If excess reserves are $10 million,(total)reserves are $14 million,and the required reserve ratio is 10%,then required reserves equal and checkable deposits equal ____.