Question 1

Describe the three purposes that money must perform.

Accepted Answer

Money must function as a medium of excha...

Question 2

When the reserve requirement changes,which of the following will change for an individual bank?

Accepted Answer

A)  Transactions account balances and lending capacity.
B)  Transactions account balances,total reserves,and excess reserves.
C)  Total reserves,required reserves,and excess reserves.
D)  Required reserves,excess reserves,and lending capacity.E) B) and D)
F) A) and B)

Question 3

Suppose a bank has $500,000 in deposits and a required reserve ratio of 10 percent.Then required reserves are

Accepted Answer

A)  $5,000,000.
B)  $500,000.
C)  $50,000.
D)  $10,000.E) B) and C)
F) B) and D)

Question 4

The various money supply measures (M1 and M2) are used to distinguish the

Accepted Answer

A)  Rate at which money flows through the economy.
B)  Liquidity and accessibility of assets.
C)  Speed with which banks transfer funds between savings and checking accounts.
D)  Speed with which banks transfer funds between themselves.E) A) and B)
F) A) and C)

Question 5

Which of the following is included in M2?

Accepted Answer

A)  Treasury bills.
B)  Commercial paper.
C)  Savings accounts.
D)  Overnight Eurodollars.E) A) and B)
F) B) and D)

Question 6

Which of the following is not true about barter?

Accepted Answer

A)  It involves the direct exchange of one good or service for another.
B)  It is more likely to occur if people lose faith in a nation's currency.
C)  It is considered to be less efficient than the use of money.
D)  It allows people to obtain more goods than they would under a money payment system.E) B) and C)
F) All of the above

Question 7

Transactions accounts allow for direct payment to a third party.
A checking account or other transactions account allows a buyer to pay the seller from the account.

Accepted Answer

A) True 
 B)False

Question 8

The banking system can lend the sum of its excess reserves because

Accepted Answer

A)  Banks are required to keep only a fraction of deposits on reserve.
B)  Bank assets are greater than bank liabilities.
C)  Required reserves are a leakage from the banking system.
D)  The money multiplier is less than 1.E) None of the above
F) C) and D)

Question 9

What are the two essential functions banks perform for the economy,and why are they important?

Accepted Answer

Banks transfer money from savers to borr...

Question 10

If the banking system has a required reserve ratio of 20 percent,the money multiplier is

Accepted Answer

A)  0.2.
B)  0.8.
C)  1.25.
D)  5.0.E) C) and D)
F) A) and B)

Question 11

Suppose a banking system has $120 million in deposits,a required reserve ratio of 20 percent,and total bank reserves for the whole system of $100 million.Then the potential increase in deposit creation for the whole system is equal to

Accepted Answer

A)  $120 million.
B)  $76 million.
C)  $0.
D)  $380 million.E) All of the above
F) A) and C)

Question 12

Assets  Liabilities  Total reserves $80,000 Transactions accounts $200,000 Loans 120,000\begin{array}{l|l}	ext { Assets }&	ext { Liabilities }\\hline 	ext { Total reserves }\quad\$80,000&	ext { Transactions accounts }\quad\$200,000\	ext { Loans }\quad120,000\end{array} Assets  Total reserves $80,000 Loans 120,000​ Liabilities  Transactions accounts $200,000​​

Table 13.2
ABC Bank Balance Sheet Refer to Table 13.2.If ABC Bank has a required reserve ratio of 15 percent,it can legally make a onetime maximum loan of

Accepted Answer

A)  $30,000.
B)  $40,000.
C)  $50,000.
D)  $80,000. E) A) and B)
F) All of the above

Question 13

Which of the following is not considered to be a private depository institution?

Accepted Answer

A)  The Federal Reserve.
B)  Mutual savings banks.
C)  Savings and loan associations.
D)  Commercial banks.E) All of the above
F) B) and D)

Question 14

Which of the following sets the legal minimum reserve ratio?

Accepted Answer

A)  The commercial banks.
B)  The U.S.Treasury.
C)  The Federal Reserve.
D)  Congress.E) B) and C)
F) A) and B)

Question 15

If total reserves for a bank are $12,000,excess reserves are $2,000,and demand deposits are $100,000,the money multiplier must be

Accepted Answer

A)  20.
B)  15.
C)  10.
D)  5.E) C) and D)
F) All of the above

Question 16

A bank may lend an amount equal to its

Accepted Answer

A)  Required reserves.
B)  Total reserves.
C)  Total assets.
D)  Excess reserves.E) B) and D)
F) B) and C)

Question 17

Initially a bank has a required reserve ratio of 20 percent and no excess reserves.If $5,000 is deposited into the bank,then initially,ceteris paribus,

Accepted Answer

A)  This bank can increase its loans by $5,000.
B)  This bank can increase its loans by $4,000.
C)  Total reserves will increase by $4,000.
D)  Required reserves will increase by $5,000.E) A) and B)
F) B) and C)

Question 18

Which of the following is not true about M1?

Accepted Answer

A)  It includes the most liquid forms of money.
B)  It is the narrowest definition of the money supply.
C)  Savings accounts makes up approximately one-third of it.
D)  Currency in circulation makes up approximately half of it.E) A) and B)
F) A) and C)

Question 19

Ceteris paribus,the money supply becomes smaller when

Accepted Answer

A)  A loan is repaid to the banking system by a bank customer.
B)  An individual deposits currency into her transactions account.
C)  The Federal Reserve reduces the reserve requirement.
D)  A bank uses its excess reserves to make a loan.E) A) and C)
F) B) and D)

Question 20

Bradley digs out $50 from his cookie jar and deposits it in his checking account.The immediate result of this transaction is that M1 has

Accepted Answer

A)  Not changed.
B)  Increased by more than $50.
C)  Increased by less than $50.
D)  Increased by $50.E) B) and C)
F) C) and D)

Exam 13: Money and Banks

Suppose a banking system has $120 million in deposits,a required reserve ratio of 20 percent,and total bank reserves for the whole system of $100 million.Then the potential increase in deposit creation for the whole system is equal to

Correct Answer
verified

Which of the following is included in M2?

Correct Answer
verified

The various money supply measures (M1 and M2) are used to distinguish the

Correct Answer
verified

Correct Answer
verified

Ceteris paribus,the money supply becomes smaller when

Correct Answer
verified

Bradley digs out $50 from his cookie jar and deposits it in his checking account.The immediate result of this transaction is that M1 has

Correct Answer
verified

Transactions accounts allow for direct payment to a third party. A checking account or other transactions account allows a buyer to pay the seller from the account.

Correct Answer
verified

When the reserve requirement changes,which of the following will change for an individual bank?

Correct Answer
verified

If the banking system has a required reserve ratio of 20 percent,the money multiplier is

Correct Answer
verified

Suppose a bank has $500,000 in deposits and a required reserve ratio of 10 percent.Then required reserves are

Correct Answer
verified

The banking system can lend the sum of its excess reserves because

Correct Answer
verified

Which of the following is not true about M1?

Correct Answer
verified

Describe the three purposes that money must perform.

Correct Answer
verified
Money must function as a medium of excha...
View Answer

If total reserves for a bank are $12,000,excess reserves are $2,000,and demand deposits are $100,000,the money multiplier must be

Correct Answer
verified

Which of the following is not true about barter?

Correct Answer
verified

Which of the following sets the legal minimum reserve ratio?

Correct Answer
verified

A bank may lend an amount equal to its

Correct Answer
verified

What are the two essential functions banks perform for the economy,and why are they important?

Correct Answer
verified
Banks transfer money from savers to borr...
View Answer

Which of the following is not considered to be a private depository institution?

Correct Answer
verified

Initially a bank has a required reserve ratio of 20 percent and no excess reserves.If $5,000 is deposited into the bank,then initially,ceteris paribus,

Correct Answer
verified

Exam 13: Money and Banks

Suppose a banking system has $120 million in deposits,a required reserve ratio of 20 percent,and total bank reserves for the whole system of $100 million.Then the potential increase in deposit creation for the whole system is equal to

Correct AnswerverifiedShow Answer

Which of the following is included in M2?

Correct AnswerverifiedShow Answer

The various money supply measures (M1 and M2) are used to distinguish the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Ceteris paribus,the money supply becomes smaller when

Correct AnswerverifiedShow Answer

Bradley digs out $50 from his cookie jar and deposits it in his checking account.The immediate result of this transaction is that M1 has

Correct AnswerverifiedShow Answer

Transactions accounts allow for direct payment to a third party. A checking account or other transactions account allows a buyer to pay the seller from the account.

Correct AnswerverifiedShow Answer

When the reserve requirement changes,which of the following will change for an individual bank?

Correct AnswerverifiedShow Answer

If the banking system has a required reserve ratio of 20 percent,the money multiplier is

Correct AnswerverifiedShow Answer

Suppose a bank has $500,000 in deposits and a required reserve ratio of 10 percent.Then required reserves are

Correct AnswerverifiedShow Answer

The banking system can lend the sum of its excess reserves because

Correct AnswerverifiedShow Answer

Which of the following is not true about M1?

Correct AnswerverifiedShow Answer

Describe the three purposes that money must perform.

Correct AnswerverifiedMoney must function as a medium of excha...View AnswerShow Answer

If total reserves for a bank are $12,000,excess reserves are $2,000,and demand deposits are $100,000,the money multiplier must be

Correct AnswerverifiedShow Answer

Which of the following is not true about barter?

Correct AnswerverifiedShow Answer

Which of the following sets the legal minimum reserve ratio?

Correct AnswerverifiedShow Answer

A bank may lend an amount equal to its

Correct AnswerverifiedShow Answer

What are the two essential functions banks perform for the economy,and why are they important?

Correct AnswerverifiedBanks transfer money from savers to borr...View AnswerShow Answer

Which of the following is not considered to be a private depository institution?

Correct AnswerverifiedShow Answer

Initially a bank has a required reserve ratio of 20 percent and no excess reserves.If $5,000 is deposited into the bank,then initially,ceteris paribus,

Correct AnswerverifiedShow Answer

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Correct Answer
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Money must function as a medium of excha...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified
Banks transfer money from savers to borr...
View Answer

Correct Answer
verified

Correct Answer
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