Question 1

The U.S. dollar will always be the world's most important reserve currency.

Accepted Answer

A) True 
 B)False

Question 2

If the reserve requirement is 12 percent, then the value of the deposit expansion multiplier is 8.33.

Accepted Answer

A) True 
 B)False

Question 3

Given a reserve requirement of 10 percent, a new bank loan of $500 can result in a maximum money supply increase in the whole banking system of

Accepted Answer

A)   $500.
B)   $1,000.
C)   $1,500.
D)   $2,500.
E)   $5,000.

Question 4

The balance sheet of a depository institution lists

Accepted Answer

A)   loans to the institution as assets.
B)   excess reserves as liabilities.
C)   checkable deposits as liabilities.
D)   required reserves as liabilities.
E)   loans from the institution as liabilities.

Question 5

The $25 you deposit into your savings account when you receive a paycheck is an example of money being used as a

Accepted Answer

A)   medium of exchange.
B)   store of value.
C)   unit of account.
D)   standard of deferred payment.
E)   currency substitution.

Question 6

If you use your credit card to buy a shirt, you are buying the shirt with money.

Accepted Answer

A) True 
 B)False

Question 7

An International banking facility (IBF) is a division of a U.S. bank that is allowed to receive deposits from and make loans to nonresidents of the United States without the restrictions that apply to domestic U.S. banks.

Accepted Answer

A) True 
 B)False

Question 8

Because they are not hampered by regulations, international banks typically can offer depositors and borrowers better terms than could be negotiated at a domestic bank.

Accepted Answer

A) True 
 B)False

Question 9

A $2 payment for a bus ticket is an example of money being used as a

Accepted Answer

A)   medium of exchange.
B)   store of value.
C)   unit of account.
D)   standard of deferred payment.
E)   barter transaction.

Question 10

Money is

Accepted Answer

A)   an indicator of the scarcity of wants.
B)   anything that the government classifies as a trade commodity.
C)   anything that sellers accept in exchange for goods and services.
D)   a form of credit.
E)   a form of barter.

Question 11

Scarcity and durability characterize the medium-of-exchange property of money.

Accepted Answer

A) True 
 B)False

Question 12

Required reserves are equal to total reserves minus excess reserves.

Accepted Answer

A) True 
 B)False

Question 13

Sales contracts between developed countries usually are written (invoiced)  in

Accepted Answer

A)   the national currency of the exporter.
B)   the national currency of the importer.
C)   international reserve currency.
D)   U.S. dollars
E)   Euro.

Question 14

The FDIC discourages bank failure by insuring commercial bank deposits.

Accepted Answer

A) True 
 B)False

Question 15

Excess reserves are equal to

Accepted Answer

A)   total reserves plus required reserves.
B)   cash plus required reserves.
C)   total reserves minus cash.
D)   total reserves minus required reserves.
E)   required reserves minus total reserves.

Question 16

Chronic inflation undermines the store of value function of money.

Accepted Answer

A) True 
 B)False

Question 17

The main source of interest profits for banks is

Accepted Answer

A)   government securities.
B)   savings accounts.
C)   reserves.
D)   loans.
E)   checking account fees.

Question 18

Exchanging one good for another without the use of money constitutes

Accepted Answer

A)   liquidity.
B)   token exchange.
C)   deferred payment.
D)   barter.
E)   illegal activity.

Question 19

The FDIC was established in 1933 to

Accepted Answer

A)   force banks to be more cautious in their lending practices.
B)   discourage bank runs by insuring deposits in commercial banks.
C)   guarantee that a minimum rate of interest is paid on every deposit.
D)   outlaw bank failures.
E)   increase reserve requirements for commercial banks to 100 percent of deposits.

Question 20

Which of the following is not part of the other checkable deposits component of M1?

Accepted Answer

A)   Credit union share draft accounts
B)   Demand deposits at mutual savings banks
C)   Negotiable orders of withdrawal accounts
D)   Stock negotiating accounts
E)   Automatic transfer system accounts

Exam 14: Money and Banking

Given a reserve requirement of 10 percent, a new bank loan of $500 can result in a maximum money supply increase in the whole banking system of

Correct AnswerverifiedShow Answer

The FDIC discourages bank failure by insuring commercial bank deposits.

Correct AnswerverifiedShow Answer

Chronic inflation undermines the store of value function of money.

Correct AnswerverifiedShow Answer

A $2 payment for a bus ticket is an example of money being used as a

Correct AnswerverifiedShow Answer

Required reserves are equal to total reserves minus excess reserves.

Correct AnswerverifiedShow Answer

If you use your credit card to buy a shirt, you are buying the shirt with money.

Correct AnswerverifiedShow Answer

Exchanging one good for another without the use of money constitutes

Correct AnswerverifiedShow Answer

The $25 you deposit into your savings account when you receive a paycheck is an example of money being used as a

Correct AnswerverifiedShow Answer

The main source of interest profits for banks is

Correct AnswerverifiedShow Answer

Excess reserves are equal to

Correct AnswerverifiedShow Answer

If the reserve requirement is 12 percent, then the value of the deposit expansion multiplier is 8.33.

Correct AnswerverifiedShow Answer

The U.S. dollar will always be the world's most important reserve currency.

Correct AnswerverifiedShow Answer

The FDIC was established in 1933 to

Correct AnswerverifiedShow Answer

Sales contracts between developed countries usually are written (invoiced) in

Correct AnswerverifiedShow Answer

Money is

Correct AnswerverifiedShow Answer

An International banking facility (IBF) is a division of a U.S. bank that is allowed to receive deposits from and make loans to nonresidents of the United States without the restrictions that apply to domestic U.S. banks.

Correct AnswerverifiedShow Answer

The balance sheet of a depository institution lists

Correct AnswerverifiedShow Answer

Because they are not hampered by regulations, international banks typically can offer depositors and borrowers better terms than could be negotiated at a domestic bank.

Correct AnswerverifiedShow Answer

Which of the following is not part of the other checkable deposits component of M1?

Correct AnswerverifiedShow Answer

Scarcity and durability characterize the medium-of-exchange property of money.

Correct AnswerverifiedShow Answer

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