Money and Banking Test
liabilities side of the balance sheet.
A bank that meets deposit withdrawal by borrowing additional funds will alter the
decrease its operating costs and increase its credit risk.
A bank that specializes in granting loans to firms in a specific line of business may
vault cash.
A bank's reserves include
Stability improves welfare.
A central bank's pursuit of policies that control inflation and reduce business cycle fluctuations best illustrates which core principle?
liquidity risk.
A rumor starts that a bank has suffered significant losses and may not be able to honor its promises to depositors. This causes most of the depositors to line up in front of the bank the next morning wanting to withdraw their deposits. This is an example of
would have to rely on barter.
A society without any money
a decrease in the asset of securities and a decrease in the liability of reserves.
An open market sale of U.S. Treasury securities by the Fed will cause the Fed's balance sheet to show
reduce the costs and increase the speed of payments and transfers.
Apps and smartphone infrastructure such as Apple Pay, Google Pay, PayPal, and Venmo
of the opportunity cost of holding cash since cash does not earn interest.
Banks do not hold a lot of their assets in the form of cash mainly because
checkable deposits and nontransaction deposits.
Considering the balance sheet for all commercial banks in the United States, the largest category of liabilities is
11% of total assets.
Considering the balance sheet for all commercial banks in the United States, the net worth of banks is about
currency
Each of the following items would appear as assets on the central bank's balance sheet except which one?
gold
For most of human history, which one of the following has been the most common commodity money?
wheat is perishable.
Gold would be a superior commodity money compared to wheat because
has excess reserves of $3 million.
If a bank has $200 million in deposits, the required reserve rate is 10% and the bank has $23 million in reserves, then the bank
decrease.
If a bank has more interest-rate-sensitive liabilities than interest-rate-sensitive assets, an increase in the interest rate will cause profits to
1/rD.
If required reserves are expressed by RR, the required reserve rate by rDrD , and deposits by D, the simple deposit expansion multiplier is expressed as
be half as large as it was before the increase.
If the Fed were to increase the required reserve rate from 10 percent to 20 percent, the simple deposit expansion multiplier would
(rD)D.
If the required reserve rate is expressed by rDrD and deposits by D, the formula for calculating the amount of required reserves is
Federal Reserve System.
In the United States, control of the quantity of money is given to the
discount loans.
In the United States, loans made by the Federal Reserve to banks are classified as
liquidity risk.
Many people believed that when the calendar changed from December 31, 1999, to January 1, 2000, many bank records were going to be wiped out. If this had caused people to withdraw all of their funds, this would be an example of
decrease reserves and checkable deposits by $500, respectively.
Mary decides to withdraw $500 out of her checking account. The impact of this transaction on the banking system's balance sheet will be to
anything that is generally accepted as payment for goods and services.
Money that is used as a means of payment must be
electronic funds transfers.
Most of the non-cash retail payments made each year in the United States are made by
liabilities show the sources of funds and assets show the uses of funds.
On a bank's balance sheet,
part of the banks' assets.
One thing that is common for all bank loans is that they are
liquidity risk.
Regulators require a bank to hold some of its assets as reserves mainly to address
three branches with overlapping responsibilities.
The Federal Reserve System is composed of
President of the United States.
The Governors of the Federal Reserve System are appointed by the
some of the bank's loans not being repaid.
The credit risk a bank faces is the risk resulting specifically from
excess reserves.
The difference between a bank's reserves and its required reserves is
interest-rate risk.
The fact that a bank's assets tend to be long-term while its liabilities are short-term creates
inter-bank market where excess reserves from one bank can be loaned to another bank.
The federal funds market is the
discount loans.
The main asset held by a central bank in its role as the bank for banks is
twelve.
The number of regional Federal Reserve Banks is
bond market purchases and sales.
The quantity of securities held by the Federal Reserve is controlled through
people can specialize in what they do well.
The use of money makes an economy more efficient because
comes from government decree.
The value of fiat money
usually provide collateral.
To obtain a discount loan from the Fed, a commercial bank must
increase.
When interest rates fall, a bank's capital will usually
an increase in assets and liabilities.
When the Fed makes a discount loan, the impact on the Fed's balance sheet will reflect
Money provides an immediate double coincidence of wants.
Which best describes money as a means of payment?
Total Bank Assets = Total Bank Liabilities + Total Bank Capital
Which one of the following correctly portrays a commercial bank's balance sheet?
demand deposits
Which one of the following is a commercial bank liability?
currency
Which one of the following is a liability on the central bank's balance sheet?
U.S. currency
Which one of the following is an example of fiat money?
It has intrinsic value.
Which one of the following is not a necessary characteristic of money?
the Federal Reserve System
Which one of the following is the central bank of the United States?
The high cost associated with finding someone with whom to exchange
Which one of the following is the primary source of the high transaction costs associated with a barter system?
probably specialize less.
Without the use of money, workers in an economy would
