Question 1

Which of the following is included in M1?

Accepted Answer

A)  Balances in savings accounts.
B)  Certificates of deposit.
C)  Balances in transactions accounts.
D)  Treasury bills.E) All of the above
F) A) and C)

Question 2

A single bank with $20,000 of reserves and a reserve ratio of 5 percent could support total transactions account balances of at most

Accepted Answer

A)  $400,000.
B)  $1,000.
C)  $100,000.
D)  $20,000.E) All of the above
F) A) and B)

Question 3

When you pay off a loan at a bank,the money supply becomes smaller.
The money supply becomes smaller because the amount in transactions accounts will decrease.

Accepted Answer

A) True 
 B)False

Question 4

Students Bank and Trust has zero excess reserves.Ceteris paribus,if the required reserve ratio decreases.

Accepted Answer

A)  Required reserves will increase.
B)  Bank assets will decrease.
C)  The bank will be able to make additional loans.
D)  The money multiplier will decrease.E) A) and D)
F) None of the above

Question 5

Suppose a bank has $200,000 in deposits,a required reserve ratio of 25 percent,and bank reserves of $100,000.Then this bank can make new loans in the amount of

Accepted Answer

A)  $100,000.
B)  $50,000.
C)  $25,000.
D)  $20,000.E) A) and B)
F) B) and C)

Question 6

Trusted money does all of the following except

Accepted Answer

A)  Reduce the efficiency with which market exchanges take place.
B)  Serve as a mechanism for transforming current income into future purchases.
C)  Promote efficient division of labor.
D)  Facilitate the continuous series of exchanges that characterizes a market economy.E) A) and D)
F) A) and C)

Question 7

For a small bank in a large banking system,excess reserves are equal to the

Accepted Answer

A)  Amount of money that the U.S.Treasury makes available for loans.
B)  The amount of reserves that a bank must hold equal to the loans that it makes.
C)  The amount of loans a bank can make after meeting the reserve requirement.
D)  The difference between transactions account balances and loans.E) A) and B)
F) A) and C)

Question 8

Suppose a bank has $2 million in deposits,a required reserve ratio of 10 percent,and total reserves of $500,000.Then it has excess reserves of

Accepted Answer

A)  $50,000.
B)  $200,000.
C)  $500,000.
D)  $300,000.E) B) and D)
F) A) and C)

Question 9

How does the banking system create money?

Accepted Answer

Banks are required to keep only a fracti...

Question 10

Given a required reserve ratio of 0.25,what is the maximum amount by which the money supply can increase in response to a $200 million increase in excess reserves for the whole banking system?

Accepted Answer

A)  $200 million.
B)  $250 million.
C)  $500 million.
D)  $800 million.E) All of the above
F) A) and D)

Question 11

Farmer Brown wants some bacon for breakfast.He gets the bacon from Farmer Hernandez by giving her a dozen eggs.This type of transaction is referred to as

Accepted Answer

A)  A farm transaction.
B)  A money exchange.
C)  Barter.
D)  An efficient exchange of resources.E) A) and B)
F) B) and C)

Question 12

Which of the following gave the U.S.federal government permanent authority to issue money?

Accepted Answer

A)  The Constitution of the United States in 1779.
B)  The National Banking Act of 1863.
C)  The creation of the FDIC and FSLIC in 1933.
D)  The Monetary Control Act of 1980.E) B) and C)
F) A) and D)

Question 13

One In the News article titled "CD Yields Stay Unchanged" suggests that

Accepted Answer

A)  Two-year CDs earn less than five-year CDs.
B)  Two-year CDs earn more than five-year CDs.
C)  The length of the contracted time of a CD does not affect the interest rate.
D)  None of the choices are correct.E) All of the above
F) A) and B)

Question 14

Checking accounts perform the same market functions as cash.
The essence of money isn't its taste,color,or feel,but rather its ability to purchase goods and services.

Accepted Answer

A) True 
 B)False

Question 15

Traveler's checks are included in which of the following?

Accepted Answer

A)  Both M1 and M2.
B)  M1 only.
C)  M2 only.
D)  None of the choices are correct.E) B) and C)
F) A) and D)

Question 16

The minimum amount of reserves a bank is required to hold is known as

Accepted Answer

A)  The money multiplier.
B)  Total reserves.
C)  Excess reserves.
D)  Required reserves.E) A) and D)
F) B) and C)

Question 17

Which of the following is an example of barter?

Accepted Answer

A)  Jordan buys eggs with Canadian dollars from Ryan's Grocery,and Ryan buys gas from Jordan's Gas Station with Japanese yen.
B)  Nicki uses her mom's credit card to purchase her textbooks online.
C)  Keisha takes care of the neighbor's children,and the neighbor mows Keisha's yard as repayment.
D)  Natalie buys gum at a convenience store and tells the cashier to keep the dollar change.E) All of the above
F) B) and C)

Question 18

If total reserves for a bank are $25,000,excess reserves are $5,000,and demand deposits are $100,000,the money multiplier must be

Accepted Answer

A)  20.
B)  25.
C)  10.
D)  5E) B) and D)
F) B) and C)

Question 19

Only the federal government can create money.
Money can also be created through the banking system with the money multiplier.

Accepted Answer

A) True 
 B)False

Question 20

When cash or coins are deposited in a transactions account at a bank,the size of M1 changes.
M1 includes currency in circulation and deposits in transactions accounts.So making the deposit does not actually change the amount of money in M1.

Accepted Answer

A) True 
 B)False

Exam 13: Money and Banks

Which of the following is included in M1?

Correct AnswerverifiedShow Answer

Suppose a bank has $200,000 in deposits,a required reserve ratio of 25 percent,and bank reserves of $100,000.Then this bank can make new loans in the amount of

Correct AnswerverifiedShow Answer

If total reserves for a bank are $25,000,excess reserves are $5,000,and demand deposits are $100,000,the money multiplier must be

Correct AnswerverifiedShow Answer

The minimum amount of reserves a bank is required to hold is known as

Correct AnswerverifiedShow Answer

Suppose a bank has $2 million in deposits,a required reserve ratio of 10 percent,and total reserves of $500,000.Then it has excess reserves of

Correct AnswerverifiedShow Answer

Given a required reserve ratio of 0.25,what is the maximum amount by which the money supply can increase in response to a $200 million increase in excess reserves for the whole banking system?

Correct AnswerverifiedShow Answer

Which of the following gave the U.S.federal government permanent authority to issue money?

Correct AnswerverifiedShow Answer

A single bank with $20,000 of reserves and a reserve ratio of 5 percent could support total transactions account balances of at most

Correct AnswerverifiedShow Answer

For a small bank in a large banking system,excess reserves are equal to the

Correct AnswerverifiedShow Answer

Traveler's checks are included in which of the following?

Correct AnswerverifiedShow Answer

Trusted money does all of the following except

Correct AnswerverifiedShow Answer

Farmer Brown wants some bacon for breakfast.He gets the bacon from Farmer Hernandez by giving her a dozen eggs.This type of transaction is referred to as

Correct AnswerverifiedShow Answer

When cash or coins are deposited in a transactions account at a bank,the size of M1 changes. M1 includes currency in circulation and deposits in transactions accounts.So making the deposit does not actually change the amount of money in M1.

Correct AnswerverifiedShow Answer

Only the federal government can create money. Money can also be created through the banking system with the money multiplier.

Correct AnswerverifiedShow Answer

Students Bank and Trust has zero excess reserves.Ceteris paribus,if the required reserve ratio decreases.

Correct AnswerverifiedShow Answer

Which of the following is an example of barter?

Correct AnswerverifiedShow Answer

One In the News article titled "CD Yields Stay Unchanged" suggests that

Correct AnswerverifiedShow Answer

When you pay off a loan at a bank,the money supply becomes smaller. The money supply becomes smaller because the amount in transactions accounts will decrease.

Correct AnswerverifiedShow Answer

Checking accounts perform the same market functions as cash. The essence of money isn't its taste,color,or feel,but rather its ability to purchase goods and services.

Correct AnswerverifiedShow Answer

How does the banking system create money?

Correct AnswerverifiedBanks are required to keep only a fracti...View AnswerShow Answer

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Banks are required to keep only a fracti...
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