Question 1

Liquidity is the ease with which an asset can be converted into the economy's medium of exchange.

Accepted Answer

A) True 
 B)False

Question 2

The moral hazard problem refers to

Accepted Answer

A)  difficulty banks have in satisfying the government's reserve requirement.
B)  depositors making a run on the bank, even though the bank is insured.
C)  banks taking on more risk in their lending because they know their depositors are insured.
D)  banks issuing bank notes that compete with the government's currency.E) None of the above
F) A) and B)

Question 3

If you have a checking account at Citibank, the account is a liability of the bank.

Accepted Answer

A) True 
 B)False

Question 4

The required reserve ratio is 10 percent, but banks actually keep 20 percent on reserve.The actual money multiplier will be

Accepted Answer

A)  10
B)  9
C)  5
D)  2
E)  1F) A) and C)
G) B) and C)

Question 5

Paper money in the United States is

Accepted Answer

A)  backed by gold in Fort Knox.
B)  partially backed by gold and silver.
C)  entirely fiat money.
D)  fully convertible into gold at fixed prices.E) A) and B)
F) All of the above

Question 6

Which of the following types of money has intrinsic value?

Accepted Answer

A)  Commodity money
B)  Fiat money
C)  Both commodity and fiat money
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 7

If people begin to hold more cash, the money-multiplier process will

Accepted Answer

A)  increase in intensity.
B)  remain the same.
C)  decrease in actual size.
D)  cause larger amounts of excess reserves.E) A) and C)
F) A) and B)

Question 8

Which of the following observations is not true?

Accepted Answer

A)  Money is divisible.
B)  The value of money never remains the same.
C)  Money has an intrinsic value.
D)  Money is the most liquid form of asset.E) All of the above
F) None of the above

Question 9

One aspect of bank accounting is that many liabilities of banks are

Accepted Answer

A)  assets of other persons and businesses in the economy.
B)  also liabilities of other persons and businesses in the economy.
C)  not matched by liabilities of most other banks.
D)  not actually owed to any other person or business in the economy.E) A) and C)
F) B) and C)

Question 10

Do bankers create money?

Accepted Answer

A)  No, they cannot do this as private businesses.
B)  No, they are prevented by federal law.
C)  Yes, they create money through multiple deposit creation.
D)  Yes, they create money by opening checking accounts for customers.E) B) and C)
F) A) and D)

Question 11

On which of the following assets are you most likely to earn interest income?

Accepted Answer

A)  Cash and currency
B)  Checkable deposits
C)  Money market deposit accounts
D)  Gold and other precious metals
E)  All of these responses are correct.F) B) and D)
G) A) and B) C

Question 12

Milly Miser removes $250,000 from her mattress and opens a checking account.This single transaction immediately increases the money supply by

Accepted Answer

A)  $250,000.
B)  $50,000.
C)  $0.
D)  −$250,000.E) A) and B)
F) A) and C)

Question 13

Due to the private nature of bank ownership, there is often a difference between bankers' goals and macroeconomic objectives.

Accepted Answer

A) True 
 B)False

Question 14

The primary feature of money is that it serves as

Accepted Answer

A)  barter value.
B)  a medium of exchange.
C)  intrinsic value.
D)  commodity value.E) All of the above
F) None of the above

Question 15

An asset of a bank is

Accepted Answer

A)  the value of money that is on deposit.
B)  the amount a depositor may legally borrow.
C)  something of value that the bank owes to a depositor.
D)  something of value that a bank owns.E) A) and D)
F) All of the above D

Question 16

A "near money" is an asset that can be

Accepted Answer

A)  indistinguishable from commodity money.
B)  spent easily.
C)  a close substitute for money.
D)  only issued by a bank.E) A) and B)
F) B) and C)

Question 17

If R is the reserve ratio, then the money multiplier is given by 1 / (1+R).

Accepted Answer

A) True 
 B)False

Question 18

Bankers have a reputation for conservatism in politics, dress, and business affairs.Is there an economic rationale for this conservatism? Explain.

Accepted Answer

There is an economic rationale for this ...

Question 19

Agraria uses bushels of wheat to quote prices.In this case, bushels of wheat act as a

Accepted Answer

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

Question 20

Required reserves of banks are a fixed percentage of their

Accepted Answer

A)  loans.
B)  assets.
C)  deposits.
D)  All of these responses are correct.E) A) and C)
F) C) and D)

Exam 28: Money and the Banking System

Liquidity is the ease with which an asset can be converted into the economy's medium of exchange.

Correct AnswerverifiedShow Answer

The moral hazard problem refers to

Correct AnswerverifiedShow Answer

If you have a checking account at Citibank, the account is a liability of the bank.

Correct AnswerverifiedShow Answer

The required reserve ratio is 10 percent, but banks actually keep 20 percent on reserve.The actual money multiplier will be

Correct AnswerverifiedShow Answer

Paper money in the United States is

Correct AnswerverifiedShow Answer

Which of the following types of money has intrinsic value?

Correct AnswerverifiedShow Answer

If people begin to hold more cash, the money-multiplier process will

Correct AnswerverifiedShow Answer

Which of the following observations is not true?

Correct AnswerverifiedShow Answer

One aspect of bank accounting is that many liabilities of banks are

Correct AnswerverifiedShow Answer

Do bankers create money?

Correct AnswerverifiedShow Answer

On which of the following assets are you most likely to earn interest income?

Correct AnswerverifiedC

Milly Miser removes $250,000 from her mattress and opens a checking account.This single transaction immediately increases the money supply by

Correct AnswerverifiedShow Answer

Due to the private nature of bank ownership, there is often a difference between bankers' goals and macroeconomic objectives.

Correct AnswerverifiedShow Answer

The primary feature of money is that it serves as

Correct AnswerverifiedShow Answer

An asset of a bank is

Correct AnswerverifiedD

A "near money" is an asset that can be

Correct AnswerverifiedShow Answer

If R is the reserve ratio, then the money multiplier is given by 1 / (1+R).

Correct AnswerverifiedShow Answer

Bankers have a reputation for conservatism in politics, dress, and business affairs.Is there an economic rationale for this conservatism? Explain.

Correct AnswerverifiedThere is an economic rationale for this ...View AnswerShow Answer

Agraria uses bushels of wheat to quote prices.In this case, bushels of wheat act as a

Correct AnswerverifiedD

Required reserves of banks are a fixed percentage of their

Correct AnswerverifiedShow Answer

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C

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D

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There is an economic rationale for this ...
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D

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