Question 1

Dena won $1,000 at a bingo game. She deposits her $1,000 winnings into a money market fund so that she can use the money next year to pay for her tuition. This is an example of money serving as a (an) :

Accepted Answer

A)   unit of account.
B)   investment good.
C)   store of value.
D)   medium of exchange.E) A) and B)
F) None of the above

Question 2

Recall Application 1, "City-Issued Money in the Great Depression," to answer the following questions:
-According to the application, all scrip money ended as a result of the start World War II.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is considered a liability to a bank?

Accepted Answer

A)   the bank's loans
B)   customer deposits
C)   the bank's buildings and equipment
D)   reservesE) A) and B)
F) A) and C)

Question 4

What is the difference between the medium of exchange and unit of account functions of money?

Accepted Answer

A medium of exchange is an ass...

Question 5

The fraction of its reposits that banks keep in the form of reserves as required by law is/are called:

Accepted Answer

A)   federal funds.
B)   excess reserves.
C)   required reserves.
D)   owner's equity.E) A) and D)
F) B) and C)

Question 6

-Refer to Table 13.2. The required reserve ratio is 20%. If the First Charter Bank is meeting its reserve requirement and has no excess reserves, its loans equal:

Accepted Answer

A)   $460.
B)   $550.
C)   $760.
D)   $710.E) None of the above
F) A) and B)

Question 7

When you pay $12 for the pizza that you ordered for dinner, you are using money as a (an) :

Accepted Answer

A)   store of value.
B)   medium of exchange.
C)   investment good.
D)   unit of account.E) B) and C)
F) A) and C)

Question 8

How many individuals are included in the Federal Open Market Committee (FOMC) ?

Accepted Answer

A)   8
B)   10
C)   12
D)   16E) A) and B)
F) A) and C)

Question 9

The Bank of Texas has $1 million in deposits and $200,000 in reserves. If excess reserves are equal to $150,000, the required reserve ratio is:

Accepted Answer

A)   10%.
B)   15%.
C)   5%.
D)   8%.E) B) and C)
F) All of the above

Question 10

Credit cards are part of the money supply.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following assets is easiest to make transactions with?

Accepted Answer

A)   checking deposits
B)   time deposits
C)   individual retirement accounts
D)   money market mutual fundsE) B) and C)
F) A) and C)

Question 12

Recall Application 1, "City-Issued Money in the Great Depression," to answer the following questions:
-According to the application, why were the cities forced to issue their own currency during the Great Depression?

Accepted Answer

A)   There was a shortage of currency as a result of bank failures.
B)   Most of the US currency and banknotes were used by the government in anticipation of World War II.
C)   Congress did not allow the Federal Reserve to print any more money.
D)   US dollar notes were burned by angry Americans.E) C) and D)
F) A) and B)

Question 13

Suppose the required reserve ratio is 20%. A $5 million deposit allows commercial banks to create a maximum total of _______ in deposits.

Accepted Answer

A)   $25 million
B)   $10 million
C)   $20 million
D)   $50 millionE) None of the above
F) A) and D)

Question 14

Discuss the monetary multiplier. Assume that the banking system's total excess reserves total $20 million and that the required reserve ratio is 25%. Calculate the money multiplier and the total potential expansion of the nation's money supply.

Accepted Answer

The money multiplier represents the mult...

Question 15

Recall Application 3, "The Financial System Under Stress: September 11, 2001," to answer the following questions:
-The potentially catastrophic financial impact of the September 11, 2001, terrorist attacks against the United States was due to:

Accepted Answer

A)   the large volume of direct borrowing from the Fed.
B)   the forced closing of the New York Stock Exchange.
C)   the temporary freezing of the "Federal Reserve float."
D)   the risk of massive default, resulting from the forced closing of financial institutions.E) A) and D)
F) B) and C)

Question 16

Owners' equity is:

Accepted Answer

A)   assets + liabilities.
B)   assets - capital.
C)   assets + capital.
D)   assets - liabilities.E) A) and B)
F) A) and C)

Question 17

The Federal Open Market Committee consists of the:

Accepted Answer

A)   7 members selected by the President and a chairperson selected by the Board of Governors of the Federal Reserve System.
B)   12 district Federal Reserve Bank presidents, the 7 governors from the Board of Governors, and the Treasury secretary.
C)   9 directors each elected by a district Federal Reserve Bank and 3 members selected by the Treasury secretary.
D)   none of the aboveE) None of the above
F) All of the above

Question 18

The gold standard is an example of which type of a monetary system?

Accepted Answer

A)   fiat money system
B)   barter system
C)   commodity money system
D)   All of the above are correct.E) None of the above
F) A) and C)

Question 19

The problem that can arise in a barter system where one person may not have what the other person desires is called:

Accepted Answer

A)   medium of exchange.
B)   double coincidence of wants.
C)   market failure.
D)   bank run.E) None of the above
F) A) and B)

Question 20

The Federal Reserve System consists of _______ Federal Reserve Banks.

Accepted Answer

A)   8
B)   14
C)   10
D)   12E) B) and C)
F) B) and D)

Exam 13: Money and the Banking System

When you pay $12 for the pizza that you ordered for dinner, you are using money as a (an) :

Correct AnswerverifiedShow Answer

What is the difference between the medium of exchange and unit of account functions of money?

Correct AnswerverifiedA medium of exchange is an ass...View AnswerShow Answer

Which of the following assets is easiest to make transactions with?

Correct AnswerverifiedShow Answer

Dena won $1,000 at a bingo game. She deposits her $1,000 winnings into a money market fund so that she can use the money next year to pay for her tuition. This is an example of money serving as a (an) :

Correct AnswerverifiedShow Answer

The problem that can arise in a barter system where one person may not have what the other person desires is called:

Correct AnswerverifiedShow Answer

The gold standard is an example of which type of a monetary system?

Correct AnswerverifiedShow Answer

Recall Application 1, "City-Issued Money in the Great Depression," to answer the following questions: -According to the application, all scrip money ended as a result of the start World War II.

Correct AnswerverifiedShow Answer

Credit cards are part of the money supply.

Correct AnswerverifiedShow Answer

Suppose the required reserve ratio is 20%. A $5 million deposit allows commercial banks to create a maximum total of _______ in deposits.

Correct AnswerverifiedShow Answer

The Federal Reserve System consists of _______ Federal Reserve Banks.

Correct AnswerverifiedShow Answer

Discuss the monetary multiplier. Assume that the banking system's total excess reserves total $20 million and that the required reserve ratio is 25%. Calculate the money multiplier and the total potential expansion of the nation's money supply.

Correct AnswerverifiedThe money multiplier represents the mult...View AnswerShow Answer

The fraction of its reposits that banks keep in the form of reserves as required by law is/are called:

Correct AnswerverifiedShow Answer

Recall Application 3, "The Financial System Under Stress: September 11, 2001," to answer the following questions: -The potentially catastrophic financial impact of the September 11, 2001, terrorist attacks against the United States was due to:

Correct AnswerverifiedShow Answer

Recall Application 1, "City-Issued Money in the Great Depression," to answer the following questions: -According to the application, why were the cities forced to issue their own currency during the Great Depression?

Correct AnswerverifiedShow Answer

-Refer to Table 13.2. The required reserve ratio is 20%. If the First Charter Bank is meeting its reserve requirement and has no excess reserves, its loans equal:

Correct AnswerverifiedShow Answer

The Federal Open Market Committee consists of the:

Correct AnswerverifiedShow Answer

Owners' equity is:

Correct AnswerverifiedShow Answer

The Bank of Texas has $1 million in deposits and $200,000 in reserves. If excess reserves are equal to $150,000, the required reserve ratio is:

Correct AnswerverifiedShow Answer

Which of the following is considered a liability to a bank?

Correct AnswerverifiedShow Answer

How many individuals are included in the Federal Open Market Committee (FOMC) ?

Correct AnswerverifiedShow Answer

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A medium of exchange is an ass...
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The money multiplier represents the mult...
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