Question 1

If you have a checking account at a local bank, your bank account there is a(n)

Accepted Answer

A)  asset to the bank and an asset to you.
B)  liability of the bank and a liability of yours.
C)  liability of the bank and an asset to you.
D)  asset to the bank and a liability of yours.E) A) and B)
F) A) and C)

Question 2

Money market mutual funds are accounts that are

Accepted Answer

A)  usually offered by banks.
B)  do not pay interest income.
C)  insured by the federal government.
D)  usually offered by brokerage and insurance firms.E) A) and B)
F) C) and D)

Question 3

In what sense can it be said that money is a social invention?
 How does a barter system of trade compare to the invention of money?

Accepted Answer

Money is a social invention in the sense...

Question 4

One difference between the assets included in M1 and those added to calculate M2 is that items in M1 are

Accepted Answer

A)  better stores of value than those added to compute M2.
B)  more liquid than those added to compute M2.
C)  less liquid than those added to compute M2.
D)  larger than those added to compute M2.E) None of the above
F) All of the above

Question 5

Bank regulation exists because public authorities are convinced that

Accepted Answer

A)  the balance between public interest and safety does not affect profitability, and should be removed from the hands of managers.
B)  the balance between bank profitability and public interest cannot be handled with legislation, but can be handled with regulation.
C)  the balance between bank profitability and safety cannot be left to profit-maximizing managers.
D)  the balance between bank safety and public interest can best be obtained by reliance on the market.E) A) and B)
F) B) and C)

Question 6

The early goldsmiths issued money in the form of

Accepted Answer

A)  coins made from gold in their safes.
B)  receipts for the acceptance of gold deposits.
C)  gold fragments left over from the production of jewelry.
D)  fully backed gold certificates.E) B) and C)
F) B) and D)

Question 7

Any reserves held by a bank above the amount of minimum legal reserves are called

Accepted Answer

A)  total reserves.
B)  required reserves.
C)  fiat money.
D)  excess reserves.E) A) and B)
F) A) and C)

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

In an economic system with privately owned, profit-maximizing banks, there will always be a difference between

Accepted Answer

A)  private profits and social profits.
B)  bank profits and other corporate profits.
C)  bank profits and macroeconomic objectives.
D)  bank profits and government profits.E) B) and C)
F) None of the above

Question 10

Currently in the United States, money is backed by

Accepted Answer

A)  silver in the IMF vaults.
B)  Federal Reserve notes in banks.
C)  gold in Fort Knox.
D)  everyone's willingness to accept it.E) C) and D)
F) A) and B)

Question 11

Which of the following definitions of the money supply includes only the most liquid forms of money?

Accepted Answer

A)  M1 
B)  M2 
C)  savings deposits.
D)  money market mutual deposits.E) None of the above
F) C) and D)

Question 12

If the required reserve ratio, m, is 20 percent, then the oversimplified money multiplier is

Accepted Answer

A)  10.
B)  5.
C)  4.
D)  2.E) All of the above
F) A) and B)

Question 13

Most observers nowadays see monetary policy as much less important than fiscal policy.

Accepted Answer

A) True 
 B)False

Question 14

The Ponderosa Bank receives a new deposit of $2,500.The reserves requirement is 20 percent.How much can this bank loan out as a result of this deposit?

Accepted Answer

A)  $25,000 
B)  $12,500 
C)  $3,125 
D)  $2,000 
E)  $500F) A) and E)
G) C) and E)

Question 15

When you pay for some purchase with a check, cash must be transferred to another account to pay for the check.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following assets is most liquid?

Accepted Answer

A)  short-term government bonds 
B)  savings accounts 
C)  checking accounts 
D)  currency and coinsE) A) and D)
F) B) and C)

Question 17

The concept of money as a "unit of account" involves the use of money to

Accepted Answer

A)  speed transactions.
B)  reduce shopping time.
C)  protect against inflation.
D)  quote prices.E) B) and C)
F) A) and B)

Question 18

The net worth of a bank is

Accepted Answer

A)  equal to the value of assets.
B)  equal to the value of deposits.
C)  equal to the value of liabilities.
D)  the value of assets less liabilities.
E)  the value of loans and securities.F) None of the above
G) B) and D)

Question 19

Unlike recent events in England, the United States has no recent history of bank failures.

Accepted Answer

A) True 
 B)False

Question 20

If a bank has $1,000,000 in reserves and checking deposits of $3,000,000, what is the bank's reserve position if the required reserve ratio is 20 percent?

Accepted Answer

A)  The bank has $500,000 of required reserves and $500,000 of excess reserves.
B)  The bank has $600,000 of required reserves and $400,000 of excess reserves.
C)  The bank has $400,000 of required reserves and $600,000 of excess reserves.
D)  The bank has $200,000 of required reserves and $800,000 of excess reserves.E) A) and D)
F) B) and C)

Exam 29: Money and the Banking System

Unlike recent events in England, the United States has no recent history of bank failures.

Correct AnswerverifiedShow Answer

Money market mutual funds are accounts that are

Correct AnswerverifiedShow Answer

The net worth of a bank is

Correct AnswerverifiedShow Answer

The early goldsmiths issued money in the form of

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In what sense can it be said that money is a social invention? How does a barter system of trade compare to the invention of money?

Correct AnswerverifiedMoney is a social invention in the sense...View AnswerShow Answer

If a bank has $1,000,000 in reserves and checking deposits of $3,000,000, what is the bank's reserve position if the required reserve ratio is 20 percent?

Correct AnswerverifiedShow Answer

Currently in the United States, money is backed by

Correct AnswerverifiedShow Answer

Which of the following definitions of the money supply includes only the most liquid forms of money?

Correct AnswerverifiedShow Answer

The concept of money as a "unit of account" involves the use of money to

Correct AnswerverifiedShow Answer

When you pay for some purchase with a check, cash must be transferred to another account to pay for the check.

Correct AnswerverifiedShow Answer

If you have a checking account at a local bank, your bank account there is a(n)

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Any reserves held by a bank above the amount of minimum legal reserves are called

Correct AnswerverifiedShow Answer

Bank regulation exists because public authorities are convinced that

Correct AnswerverifiedShow Answer

The Ponderosa Bank receives a new deposit of $2,500.The reserves requirement is 20 percent.How much can this bank loan out as a result of this deposit?

Correct AnswerverifiedShow Answer

One difference between the assets included in M1 and those added to calculate M2 is that items in M1 are

Correct AnswerverifiedShow Answer

Most observers nowadays see monetary policy as much less important than fiscal policy.

Correct AnswerverifiedShow Answer

In an economic system with privately owned, profit-maximizing banks, there will always be a difference between

Correct AnswerverifiedShow Answer

Which of the following assets is most liquid?

Correct AnswerverifiedShow Answer

If the required reserve ratio, m, is 20 percent, then the oversimplified money multiplier is

Correct AnswerverifiedShow Answer

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Money is a social invention in the sense...
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