Question 1

Commodity money

Accepted Answer

A)   has value independent of its use as money.
B)   has little to no value independent of its use as money.
C)   is backed by a valuable commodity such as gold.
D)   can be used to purchase commodities, but not services.E) B) and C)
F) All of the above

Question 2

Suppose there is a bank panic.Which of the following would not be a consequence of this bank panic?

Accepted Answer

A)   Bank total reserves would decrease.
B)   Required reserves would increase.
C)   Bank checking account balances would decrease.
D)   Individual banks would have to shrink the value of loans they made.
E)   The economy would likely enter into a recession.F) A) and C)
G) None of the above

Question 3

If a person withdraws $500 from his/her checking account and holds it as currency,then M1 will ________ and M2 will ________.

Accepted Answer

A)   increase; decrease
B)   not change; not change
C)   not change; increase
D)   decrease; increase
E)   decrease: decreaseF) A) and E)
G) C) and D)

Question 4

The quantity theory of money was derived from the quantity equation by asserting that

Accepted Answer

A)   real output was fixed.
B)   the money supply was fixed.
C)   the velocity of money was fixed.
D)   the velocity of money was zero.E) All of the above
F) None of the above

Question 5

According to the U.S.Treasury,

Accepted Answer

A)   the government will not accept cash in payment of taxes.
B)   creditors do not have to accept cash in payment of debts.
C)   firms do not have to accept cash as payment for goods and services.
D)   U.S. dollars must be accepted as payment for any good or service sold in the United States.E) C) and D)
F) A) and B)

Question 6

There is a strong link between changes in the money supply and inflation

Accepted Answer

A)   in both the short run and the long run.
B)   in neither the short run nor the long run.
C)   in the short run, but not in the long run.
D)   in the long run, but not in the short run.E) B) and C)
F) A) and D) D

Question 7

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) A) and B)
G) A) and C)

Question 8

Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio is 20 percent.If the Federal Reserve reduces the required reserve ratio to 15 percent,then the bank will now have excess reserves of

Accepted Answer

A)   $0.
B)   $5 million.
C)   $15 million.
D)   $20 million.E) A) and B)
F) None of the above B

Question 9

The quantity equation states that the

Accepted Answer

A)   money supply divided by the velocity of money equals the price level divided by real output.
B)   money supply times the velocity of money equals the price level times real output.
C)   money supply times the price level equals real output divided by the velocity of money.
D)   money supply times the price level equals real output times the velocity of money.E) A) and C)
F) A) and B)

Question 10

Table 25-1
 
-Refer to Table 25-1.Suppose a transaction changes a bank's balance sheet as indicated in the T-account,and the required reserve ratio is 10 percent.As a result of the transaction,the bank has excess reserves of

Accepted Answer

A)   $0.
B)   $400.
C)   $3,600.
D)   $4,000.E) None of the above
F) A) and D)

Question 11

If people speculate that a run on one bank will cause a run on all banks in the financial system,and this speculation proves accurate,then the financial system would experience what is known as a

Accepted Answer

A)   commodity crisis.
B)   securitization meltdown.
C)   bank panic.
D)   institutional death spiral.E) A) and B)
F) A) and C)

Question 12

Scenario 25-2
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 25-2.As a result of Kristy's deposit,checking account deposits in the banking system as a whole (including the original deposit) could eventually increase up to a maximum of

Accepted Answer

A)   $8,000.
B)   $10,000.
C)   $50,000.
D)   $100,000.E) B) and C)
F) All of the above

Question 13

The amount of national income in an economy equals the money supply in an economy.

Accepted Answer

A) True 
 B)False

Question 14

The German Hyperinflation of the early 1920s was caused by

Accepted Answer

A)   the German government raising funds for expenditures by selling bonds to the central bank.
B)   an overly aggressive monetary policy implemented to combat a severe recession.
C)   rising oil prices after World War I caused a severe stagflation and hyperinflation.
D)   large deficits resulting from the high levels of war spending and falling taxes.E) A) and B)
F) A) and C)

Question 15

Suppose a bank has $100,000 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 12 percent,then the bank will now have excess reserves of

Accepted Answer

A)   $12,000.
B)   $0.
C)   -$2,000.
D)   -$12,000.E) B) and C)
F) A) and D)

Question 16

Which of the following assets is most liquid?

Accepted Answer

A)   money
B)   bond
C)   savings account
D)   stockE) All of the above
F) A) and B)

Question 17

According to the quantity theory of money,deflation will occur if the

Accepted Answer

A)   money supply is less than real GDP.
B)   money supply is more than real GDP.
C)   money supply grows at a slower rate than real GDP.
D)   money supply grows at a faster rate than real GDP.E) B) and C)
F) A) and B)

Question 18

If a person withdraws $500 from his/her savings account and puts it in his/her checking account,then M1 will ________ and M2 will ________.

Accepted Answer

A)   increase; decrease
B)   increase; not change
C)   not change; increase
D)   not change; decrease
E)   not change; not changeF) A) and B)
G) B) and D)

Question 19

According to the quantity theory of money,if the money supply grows at 20 percent and real GDP grows at 5 percent,then the inflation rate will be

Accepted Answer

A)   15 percent.
B)   20 percent.
C)   25 percent.
D)   100 percent.E) B) and C)
F) All of the above

Question 20

The major shortcoming of a barter economy is

Accepted Answer

A)   the requirement of a double coincidence of wants.
B)   the requirement of specialization and exchange.
C)   that goods and services are not traded.
D)   that money loses value from inflation.E) C) and D)
F) None of the above A

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

Commodity money

Correct Answer
verified

Suppose there is a bank panic.Which of the following would not be a consequence of this bank panic?

Correct Answer
verified

If a person withdraws $500 from his/her checking account and holds it as currency,then M1 will and M2 will .

Correct Answer
verified

The quantity theory of money was derived from the quantity equation by asserting that

Correct Answer
verified

According to the U.S.Treasury,

Correct Answer
verified

There is a strong link between changes in the money supply and inflation

Correct Answer
verified
D

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

Correct Answer
verified

Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio is 20 percent.If the Federal Reserve reduces the required reserve ratio to 15 percent,then the bank will now have excess reserves of

Correct Answer
verified
B

The quantity equation states that the

Correct Answer
verified

Table 25-1 -Refer to Table 25-1.Suppose a transaction changes a bank's balance sheet as indicated in the T-account,and the required reserve ratio is 10 percent.As a result of the transaction,the bank has excess reserves of

Correct Answer
verified

If people speculate that a run on one bank will cause a run on all banks in the financial system,and this speculation proves accurate,then the financial system would experience what is known as a

Correct Answer
verified

Correct Answer
verified

The amount of national income in an economy equals the money supply in an economy.

Correct Answer
verified

The German Hyperinflation of the early 1920s was caused by

Correct Answer
verified

Suppose a bank has $100,000 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 12 percent,then the bank will now have excess reserves of

Correct Answer
verified

Which of the following assets is most liquid?

Correct Answer
verified

According to the quantity theory of money,deflation will occur if the

Correct Answer
verified

If a person withdraws $500 from his/her savings account and puts it in his/her checking account,then M1 will and M2 will .

Correct Answer
verified

According to the quantity theory of money,if the money supply grows at 20 percent and real GDP grows at 5 percent,then the inflation rate will be

Correct Answer
verified

The major shortcoming of a barter economy is

Correct Answer
verified
A

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

Commodity money

Correct AnswerverifiedShow Answer

Suppose there is a bank panic.Which of the following would not be a consequence of this bank panic?

Correct AnswerverifiedShow Answer

If a person withdraws $500 from his/her checking account and holds it as currency,then M1 will ________ and M2 will ________.

Correct AnswerverifiedShow Answer

The quantity theory of money was derived from the quantity equation by asserting that

Correct AnswerverifiedShow Answer

According to the U.S.Treasury,

Correct AnswerverifiedShow Answer

There is a strong link between changes in the money supply and inflation

Correct AnswerverifiedD

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

Correct AnswerverifiedShow Answer

Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio is 20 percent.If the Federal Reserve reduces the required reserve ratio to 15 percent,then the bank will now have excess reserves of

Correct AnswerverifiedB

The quantity equation states that the

Correct AnswerverifiedShow Answer

Table 25-1 -Refer to Table 25-1.Suppose a transaction changes a bank's balance sheet as indicated in the T-account,and the required reserve ratio is 10 percent.As a result of the transaction,the bank has excess reserves of

Correct AnswerverifiedShow Answer

If people speculate that a run on one bank will cause a run on all banks in the financial system,and this speculation proves accurate,then the financial system would experience what is known as a

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The amount of national income in an economy equals the money supply in an economy.

Correct AnswerverifiedShow Answer

The German Hyperinflation of the early 1920s was caused by

Correct AnswerverifiedShow Answer

Suppose a bank has $100,000 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 12 percent,then the bank will now have excess reserves of

Correct AnswerverifiedShow Answer

Which of the following assets is most liquid?

Correct AnswerverifiedShow Answer

According to the quantity theory of money,deflation will occur if the

Correct AnswerverifiedShow Answer

If a person withdraws $500 from his/her savings account and puts it in his/her checking account,then M1 will ________ and M2 will ________.

Correct AnswerverifiedShow Answer

According to the quantity theory of money,if the money supply grows at 20 percent and real GDP grows at 5 percent,then the inflation rate will be

Correct AnswerverifiedShow Answer

The major shortcoming of a barter economy is

Correct AnswerverifiedA

Correct Answer
verified

Correct Answer
verified

If a person withdraws $500 from his/her checking account and holds it as currency,then M1 will and M2 will .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
D

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If a person withdraws $500 from his/her savings account and puts it in his/her checking account,then M1 will and M2 will .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A