Econ Week 12

02. Which of the following illustrates a barter transaction? Select one: a. A bushel of oranges is traded for a bushel of apples. b. Someone buys a pizza for the special price of $4. c. Someone buys a house for $100,000. d. b and c e. a, b, and c

A

19. In the history of banking, warehouse receipts refer to receipts Select one: a. that goldsmiths once issued acknowledging that they held a customer's gold. b. for storing furniture in a warehouse. c. goldsmiths issued to each other when they borrowed gold. d. for storing food and other perishables in a warehouse.

A

22. Required reserves are the amount of Select one: a. reserves a bank must hold against its deposits as mandated by the Federal Reserve. b. cash a bank must hold against its deposits as mandated by the Federal Reserve. c. checkable deposits a bank must hold against all other deposits as mandated by the U.S. Treasury. d. reserves a bank must hold against all its assets as mandated by the Federal Reserve.

A

25. The amount of required reserves a bank holds depends on the Select one: a. required reserve ratio. b. demand-deposit ratio. c. excess-reserve ratio. d. currency ratio.

A

32. "Barter" implies that Select one: a. to get one good or service, an individual offers another. b. to get one good or service, an individual offers money. c. to get a check, an individual offers a good or service. d. different kinds of money are exchanged for each other. e. none of the above

A

35. Consider the following data: currency (held outside banks) = $354 billion, checkable deposits = $250 billion, traveler's checks = $4 billion, small-denomination time deposits = $200 billion, savings deposits = $100 billion, retail money market mutual funds = $160 billion. M1 equals __________ billion and M2 equals __________ billion. Select one: a. $608; $1,068 b. $708; $1,038 c. $708; $948 d. $694; $1,038 e. none of the above

A

14. In a barter economy, people are _________ to specialize in the production of one good or service, compared to in a money economy. Select one: a. more likely b. less likely c. equally likely d. almost always going

B

16. A savings account functions as Select one: a. a unit of account. b. a store of value. c. a medium of exchange. d. none of the above

B

17. The first bankers were Select one: a. sheriffs. b. goldsmiths. c. clergy. d. innkeepers. e. economists.

B

18. Because money __________________, people are _________________ likely to specialize in their work in a money economy. Select one: a. is a store of value; less b. eliminates the double coincidence of wants; more c. is a unit of account; more d. eliminates the need for holdings of precious metals; more

B

23. If checkable deposits in Bank A total $300 million and the required reserve ratio is 10 percent, then required reserves at Bank A equal Select one: a. $3.0 million. b. $30.0 million. c. $3.3 million. d. $300,000

B

28. Bank A holds $1 million in required reserves and the required reserve ratio is 9 percent. It follows that Bank A holds checkable deposit liabilities that total approximately Select one: a. $111 million. b. $11.11 million. c. $90 million. d. $900 million.

B

33. Saying that it takes twice as many dollars to buy one ticket for a concert than two tickets for a movie refers to the use of money as a Select one: a. medium of exchange. b. unit of account. c. store of value. d. means of achieving the double coincidence of wants.

B

37.A bank's assets are $400 million and its liabilities are $300 million, which means that the bank's net worth (bank capital) is ____________________. If the bank's assets rise by 8% at the same time that its liabilities rise by 5%, the bank's new net worth will then be _______________. Select one: a. $700 million; $713 million b. $100 million; $117 million c. $100 million; $102 million d. $350 million; $360.5 million

B

01. Barter is Select one: a. the exchange of money for goods and then the exchange of those goods for money. b. the exchange of money for money, or the exchange of money for stocks and bonds. c. the exchange of goods and services for goods and services without the use of money. d. any exchange, with or without the use of money, in which the participants negotiate (or barter) the price of the goods to be exchanged.

C

06. If a person uses money to buy a pair of shoes, money is functioning as Select one: a. a unit of account. b. a store of value. c. a medium of exchange. d. none of the above

C

07. According to the text, the good that emerged as money in World War II POW camps was Select one: a. tinned beef. b. toilet paper. c. cigarettes. d. cheese.

C

09. The requirement of a "double coincidence of wants" is the chief __________ of the __________ exchange system. Select one: a. advantage; barter b. advantage; monetary c. disadvantage; barter d. disadvantage; monetary

C

15. M2 is comprised of Select one: a. small-denomination time deposits + savings deposits + money market accounts. b. small-denomination time deposits + credit cards + money market accounts + gold deposits. c. M1 + small-denomination time deposits + savings deposits + retail money market mutual funds. d. M1 + small denomination time deposits + credit cards + money market accounts.

C

20. Fractional reserve banking is a term used to describe a banking system whereby Select one: a. individual banks share a fraction of the total funds deposited in the whole banking system. b. banks are required to quote interest rates in fractions. c. banks hold reserves equal to only a fraction of their deposit liabilities. d. banks hold reserves equal to a multiple of their deposit liabilities; that is, fractional in this case really means multiple. e. banks are required to maintain a certain fraction of their deposits in the form of checkable deposits, a certain fraction of their deposits in the form of savings deposits, etc.

C

26. Reserves held beyond the required amount are called __________ reserves. Select one: a. redundant b. precautionary c. excess d. surplus

C

34. Inflation does the greatest harm to money's function as a Select one: a. medium of exchange. b. unit of account. c. store of value. d. liquid asset.

C

03. Transaction costs are best defined as the Select one: a. various costs of different goods and services. b. cost of one good in terms of another; that is, the price of apples in terms of oranges. c. costs involved in borrowing money from someone, that is, the interest that must be paid for the use of someone else's money. d. costs associated with the time and effort necessary to make an exchange.

D

05. If peanuts were widely accepted for purposes of exchange, then Select one: a. peanuts would be money. b. peanuts would be less valuable than they are currently. c. we would observe people using peanuts to purchase cars. d. a and c e. a and b

D

08. Compared to barter, money __________ transaction costs, making transactions __________ time-consuming. Select one: a. increases; more b. increases; less c. reduces; more d. reduces; less

D

10. M1 is comprised of currency held outside banks + traveler's checks + __________. Select one: a. credit cards b. savings deposits c. gold d. checkable deposits e. money market mutual funds

D

13. A savings deposit is a type of Select one: a. time deposit that is payable on demand. b. time deposit that earns interest and allows the depositor to write checks payable to other persons. c. time deposit that does not earn interest but does offer limited check-writing services. d. interest-earning account at a bank or thrift institution in which funds can be withdrawn at any time without a penalty payment. e. checkable deposit that also pays interest.

D

21. Total bank reserves equal Select one: a. checkable deposits + vault cash + traveler's checks. b. vault cash + currency in the hands of the nonbanking public. c. bank deposits at the Federal Reserve. d. bank deposits at the Federal Reserve + vault cash.

D

29. A bank has $10,000 in excess reserves and the required reserve ratio is 20 percent. This means the bank could have __________ in checkable deposit liabilities and __________ in total reserves. Select one: a. $80,000, $10,000 b. $100,000, $20,000 c. $50,000, $25,000 d. $100,000, $30,000

D

30. Which of the following is true? Select one: a. Reserves = required reserves - excess reserves. b. Reserves - required reserves = excess reserves. c. Reserves = required reserves + excess reserves. d. b and c e. a and b

D

31. In a barter economy, Select one: a. money is a medium of exchange. b. coins are used to facilitate trade. c. money is a store of value. d. goods and services are traded directly for each other. e. the money supply consists entirely of coins and currency.

D

04. Which of the following is a correct listing of money's functions? Select one: a. source of credit, value of transaction costs, unit of barter b. medium of barter, medium of exchange, medium of transactions c. unit of barter, unit of account, a unit of income d. store of value, store of exchange, measure of account e. store of value, medium of exchange, unit of account

E

11. Historically, which of the following goods have evolved into money? Select one: a. gold b. salt c. cattle d. cocoa beans e. all of the above

E

12. A "money market deposit account" is a(n) Select one: a. checking account that pays no interest. b. bank account with a specified maturity date. c. store of Federal Reserve Notes held in bank vaults to cash checkable deposits on demand. d. checking account created from an automatic transfer from a savings account. e. interest-earning account at a bank or thrift institution that usually has a minimum balance requirement.

E

24. Ninth National Bank holds $200 million in checkable deposits and $18,000,000 in total reserves. With a required reserve ratio of 8 percent, how much in excess reserves is Ninth National holding? Select one: a. $1,440,000 b. $218,000,000 c. $17,440,000 d. $16,000,000 e. $2,000,000

E

27. A bank has $7 million in checkable deposits and $1.2 million in total reserves. If the required reserve ratio is 10 percent, then the bank has Select one: a. required reserves of $700,000. b. excess reserves of $500,000. c. excess reserves of $1,080,000. d. required reserves of $120,000. e. a and b

E

36. Which of the following statements is true? Select one: a. A savings deposit is not counted in the most basic, or narrow, definition of the money supply. b. M1 is sometimes referred to as transactions money. c. Money reduces the transaction costs of making exchanges. d. b and c e. a, b, and c

E