Question 1

The largest liability on the balance sheet of most banks is its

Accepted Answer

A)  loans.
B)  holdings of securities.
C)  deposits with the Federal Reserve.
D)  checking account and savings account deposits of its customers.
E)  vault cash.F) B) and C)
G) D) and E)

Question 2

Which of the following is one of the most important benefits of money in an economy?

Accepted Answer

A)  Money allows for the exchange of goods and services.
B)  Money allows for the accumulation of wealth.
C)  Money makes exchange easier,leading to more specialization and higher productivity.
D)  Money encourages people to produce all of their own goods (self-sufficiency) and therefore increases economic stability.E) A) and B)
F) All of the above

Question 3

If,during a deposit expansion,not all money gets redeposited into the banking system and some leaks out as currency,then the real world multiplier is

Accepted Answer

A)  smaller than 1/RR.
B)  larger than 1/RR.
C)  equal to 1/RR.
D)  not related to 1/RR.E) A) and B)
F) A) and C)

Question 4

Scenario 14-2

Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%.

-Refer to Scenario 14-2.As a result of Kristy's deposit,Bank A's reserves immediately increase by

Accepted Answer

A)  $2,000.
B)  $8,000.
C)  $10,000.
D)  $50,000.E) B) and D)
F) All of the above

Question 5

Using the five criteria in the book,explain how U.S.currency is suitable to use as a medium of exchange.

Accepted Answer

1.Dollars are acceptable to most traders...

Question 6

Fiat money has

Accepted Answer

A)  little to no intrinsic value but is backed by the quantity of gold held by the central bank.
B)  little to no intrinsic value and is authorized by the central bank or governmental body.
C)  value,because it can be redeemed for gold by the central bank.
D)  a great intrinsic value that is independent of its use as money.E) None of the above
F) C) and D)

Question 7

The purchase of Treasury securities by the Federal Reserve will,in general,

Accepted Answer

A)  not change the money supply.
B)  not change the quantity of reserves held by banks.
C)  increase the quantity of reserves held by banks.
D)  decrease the quantity of reserves held by banks.E) A) and C)
F) C) and D)

Question 8

Which of the following information about fiat money is false? Fiat money

Accepted Answer

A)  is backed by gold.
B)  serves as a medium of exchange.
C)  has little to no value except as money.
D)  is authorized by a central bank or governmental body.E) A) and D)
F) All of the above

Question 9

A person's wealth is the same as his income.

Accepted Answer

A) True 
 B)False

Question 10

A bank is legally required to hold a fraction of its ________ as ________.

Accepted Answer

A)  deposits; required reserves
B)  deposits; excess reserves
C)  loans; excess reserves
D)  loans; required reservesE) None of the above
F) B) and C)

Question 11

In 1913,Congress established the Federal Reserve system with the intention of putting an end to

Accepted Answer

A)  high interest rates.
B)  high unemployment rates.
C)  inflation.
D)  bank panics.E) A) and C)
F) A) and D)

Question 12

By making exchange ________,money allows for ________ and higher ________.

Accepted Answer

A)  harder; specialization; costs
B)  easier; specialization; productivity
C)  harder; generalization; productivity
D)  easier; specialization; costsE) A) and B)
F) None of the above

Question 13

Suppose the required reserve ratio is 20 percent.If banks are conservative and choose not to loan all of their excess reserves,the real-world deposit multiplier is

Accepted Answer

A)  less than 5.
B)  equal to 5.
C)  greater than 5.
D)  equal to 20.E) None of the above
F) B) and D)

Question 14

Which of the following best describes how banks create money?

Accepted Answer

A)  Banks charge higher interest rates on loans than they pay on deposits.
B)  Banks charge fees for providing financial advice.
C)  Banks create checking account deposits when making loans from excess reserves.
D)  Banks make loans from reserves.E) All of the above
F) B) and D)

Question 15

To decrease the money supply,the Federal Reserve could

Accepted Answer

A)  lower the discount rate.
B)  raise income taxes.
C)  lower the required reserve ratio.
D)  conduct an open market sale of Treasury securities.
E)  raise transfer payments.F) All of the above
G) A) and C)

Question 16

Scenario 14-2

Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%.

-Refer to Scenario 14-2.As a result of Kristy's deposit,Bank A's excess reserves increase by

Accepted Answer

A)  $2,000.
B)  $8,000.
C)  $10,000.
D)  $50,000.E) C) and D)
F) B) and C)

Question 17

Article Summary
In what is being called a "bail-in," the finance ministers of the 17-nation Eurozone agreed to step in to assist the banking system in the nation of Cyprus. With this arrangement, the banks receive an infusion of capital, but depositors are being changed a special bank levy of up to 10% on deposit accounts. Like in the United States, Cyprus does have deposit insurance which guarantees deposits up to a certain level, but the size of the debt owed by the Cypriot banks was so large that agreeing to the special bank levy and ignoring the deposit insurance seemed necessary to get support from the European Union. Some analysts have also stated that the levy may have been needed to prevent bank runs on foreign-owned accounts, which have been estimated to make up one-third of the total deposits in Cypriot banks.
Source: Megan McArdle, "After Cyprus Bank Bailout, Depositors Race to Withdraw Their Cash. Is the Rest of Europe Next?" Daily Beast, March 17, 2013.

-Refer to the Article Summary.In 2013,the European Union agreed to essentially bail out the banks in the nation of Cyprus.In doing this,the EU was,in effect,acting as a

Accepted Answer

A)  shadow bank.
B)  conductor of open market operations.
C)  private equity firm.
D)  lender of last resort.E) A) and B)
F) A) and C)

Question 18

Why does the holding of excess reserves by banks and the holding of currency by households and firms cause the real-world deposit multiplier to be less than the simple deposit multiplier?

Accepted Answer

If banks hold excess reserves,these rese...

Question 19

Which of the following is a function that money serves?

Accepted Answer

A)  medium of exchange
B)  unit of account
C)  store of value
D)  All of the above are correct.E) C) and D)
F) A) and D)

Question 20

Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio is 10 percent.If the Federal Reserve raises the required reserve ratio to 15 percent,then the bank will now have excess reserves of

Accepted Answer

A)  $0.
B)  -$5 million.
C)  $5 million.
D)  $15 million.E) B) and D)
F) A) and D)

Exam 14: Money, banks, and the Federal Reserve System

Scenario 14-2 Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. -Refer to Scenario 14-2.As a result of Kristy's deposit,Bank A's excess reserves increase by

Correct Answer
verified

A person's wealth is the same as his income.

Correct Answer
verified

To decrease the money supply,the Federal Reserve could

Correct Answer
verified

The largest liability on the balance sheet of most banks is its

Correct Answer
verified

Which of the following is a function that money serves?

Correct Answer
verified

Scenario 14-2 Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. -Refer to Scenario 14-2.As a result of Kristy's deposit,Bank A's reserves immediately increase by

Correct Answer
verified

Using the five criteria in the book,explain how U.S.currency is suitable to use as a medium of exchange.

Correct Answer
verified
1.Dollars are acceptable to most traders...
View Answer

Correct Answer
verified

Why does the holding of excess reserves by banks and the holding of currency by households and firms cause the real-world deposit multiplier to be less than the simple deposit multiplier?

Correct Answer
verified
If banks hold excess reserves,these rese...
View Answer

Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio is 10 percent.If the Federal Reserve raises the required reserve ratio to 15 percent,then the bank will now have excess reserves of

Correct Answer
verified

In 1913,Congress established the Federal Reserve system with the intention of putting an end to

Correct Answer
verified

Suppose the required reserve ratio is 20 percent.If banks are conservative and choose not to loan all of their excess reserves,the real-world deposit multiplier is

Correct Answer
verified

A bank is legally required to hold a fraction of its as .

Correct Answer
verified

Which of the following is one of the most important benefits of money in an economy?

Correct Answer
verified

The purchase of Treasury securities by the Federal Reserve will,in general,

Correct Answer
verified

If,during a deposit expansion,not all money gets redeposited into the banking system and some leaks out as currency,then the real world multiplier is

Correct Answer
verified

Which of the following information about fiat money is false? Fiat money

Correct Answer
verified

Fiat money has

Correct Answer
verified

By making exchange ,money allows for and higher .

Correct Answer
verified

Which of the following best describes how banks create money?

Correct Answer
verified

Exam 14: Money, banks, and the Federal Reserve System

Scenario 14-2 Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. -Refer to Scenario 14-2.As a result of Kristy's deposit,Bank A's excess reserves increase by

Correct AnswerverifiedShow Answer

A person's wealth is the same as his income.

Correct AnswerverifiedShow Answer

To decrease the money supply,the Federal Reserve could

Correct AnswerverifiedShow Answer

The largest liability on the balance sheet of most banks is its

Correct AnswerverifiedShow Answer

Which of the following is a function that money serves?

Correct AnswerverifiedShow Answer

Scenario 14-2 Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. -Refer to Scenario 14-2.As a result of Kristy's deposit,Bank A's reserves immediately increase by

Correct AnswerverifiedShow Answer

Using the five criteria in the book,explain how U.S.currency is suitable to use as a medium of exchange.

Correct Answerverified1.Dollars are acceptable to most traders...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Why does the holding of excess reserves by banks and the holding of currency by households and firms cause the real-world deposit multiplier to be less than the simple deposit multiplier?

Correct AnswerverifiedIf banks hold excess reserves,these rese...View AnswerShow Answer

Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio is 10 percent.If the Federal Reserve raises the required reserve ratio to 15 percent,then the bank will now have excess reserves of

Correct AnswerverifiedShow Answer

In 1913,Congress established the Federal Reserve system with the intention of putting an end to

Correct AnswerverifiedShow Answer

Suppose the required reserve ratio is 20 percent.If banks are conservative and choose not to loan all of their excess reserves,the real-world deposit multiplier is

Correct AnswerverifiedShow Answer

A bank is legally required to hold a fraction of its ________ as ________.

Correct AnswerverifiedShow Answer

Which of the following is one of the most important benefits of money in an economy?

Correct AnswerverifiedShow Answer

The purchase of Treasury securities by the Federal Reserve will,in general,

Correct AnswerverifiedShow Answer

If,during a deposit expansion,not all money gets redeposited into the banking system and some leaks out as currency,then the real world multiplier is

Correct AnswerverifiedShow Answer

Which of the following information about fiat money is false? Fiat money

Correct AnswerverifiedShow Answer

Fiat money has

Correct AnswerverifiedShow Answer

By making exchange ________,money allows for ________ and higher ________.

Correct AnswerverifiedShow Answer

Which of the following best describes how banks create money?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
1.Dollars are acceptable to most traders...
View Answer

Correct Answer
verified

Correct Answer
verified
If banks hold excess reserves,these rese...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

A bank is legally required to hold a fraction of its as .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

By making exchange ,money allows for and higher .

Correct Answer
verified

Correct Answer
verified