Chapter 13

Which of the following statements about money is correct? a) Money is neither income nor wealth. b) Money is not income but wealth. c) Money is both income and wealth. d) Money is sometimes income and other times wealth.

a) Money is neither income nor wealth.

First national bank has assets of $900,000 and liabilities of $600,000. First National Trust's owner's equity is: a) $0. b) $300,000. c) $600,000. d) $900,000.

b) $300,000.

Republic Bank has $2 million in deposits and $250,000 in reserves. If the required reserve ratio is 10%, excess reserves are equal to: a) $200,000. b) $50,000. c) zero. d) $450,000.

b) $50,000.

Money is: a) the same as income. b) anything that is commonly accepted as medium of exchange. c) the value of all coins and currency in circulation at any time. d) all of the above.

b) anything that is commonly accepted as medium of exchange.

Mike makes excellent cheesecake and Sue is very good at charging the oil in a car. Sue agrees to change the oil in Mike's car if he makes her a cheesecake. This is an example of: a) legal tender. b) barter. c) commodity money. d) fiat money.

b) barter.

John transfers $150 from his money market fund to his checking account. This transaction will: a) decrease M2 and increase M1. b) increase M1, but leave M2 unchanged. c) decrease M1 and increase M2. d) decrease both M1 and M2.

b) increase M1, but leave M2 unchanged.

When you pay $12 for the pizza you ordered for dinner, you are using money as a (an): a) unit of account. b) medium of exchange. c) store of value. d) investment good.

b) medium of exchange.

20. Bank of New City has $750 million in deposits. The required reserve ratio is 15%. Bank of New City must keep_______ in reserves. a) $150.5 million b) $60.5 million c) $112.5 million d) $160.5 million

c) $112.5 million

19. Bank of New City has $250 million in deposits. Bank of New City is meeting its reserve requirement and has no excess reserves. It has $50 million in reserves. Bank of New city faces a required reserve ratio of: a) 1.25%. b) 4%. c) 20%. d) 37.5%.

c) 20%.

If the money multiplier is 4, the required reserve ratio is: a) 2%. b) 20%. c) 25%. d) 50%.

c) 25%.

Commercial banks: a) implement monetary policy. b) are nonprofit organizations that lend and borrow funds. c) are financial intermediaries that lend funds and accept deposits. d) all of the above.

c) are financial intermediaries that lend funds and accept deposits.

Which of the following would not be counted as part of M1? a) demand deposits b) traveler's check c) money market accounts d) currency

c) money market accounts

Which of the following is included in M2 but not included in M1? a) demand deposits b) currency held outside banks c) savings accounts d) other checkable deposits

c) savings accounts

Dena won $1,000 at a bingo game. She deposits her $1,000 winning into a money market fund so that she can use the money next year to pay her tuition. This is an example of money serving as a (an): a) unit of account. b) medium of exchange. c) store of value. d) investment good.

c) store of value.

First national bank has liabilities of $1 million and owner's equity of $300,000. First National Bank's assets are: a) $100,000. b) $700,000. c) $900,000. d) $1.3 million.

d) $1.3 million.

Suppose the required reserve ratio is 10%. A $10 million deposit allows commercial banks to create at most: a) $10 million. b) $1 million. c) $11 million. d) $100 million.

d) $100 million.

A bank has reserves of $40, loans of $110, deposits of $90, and owners' equity of $60. Which of the following represents the bank's total assets? a) $180 b) $110 c) $130 d) $150

d) $150

The Bank of Ohio has $1 million in deposits and $200,000 in reserves. If excess reserves are equal to $150,000, the required reserve ratio is: a) 15%. b) 10%. c) 8%. d) 5%.

d) 5%.

The required reserve ratio is 15%. The money multiplier is: a) 5.67. b) 8.12. c) 5.54. d) 6.67.

d) 6.67.

Mary wants to trade piano lessons for ice-skating lessons. Sarah wants to trade ice-skating lessons for piano lessons. Mary and Sarah have: a) the basis for a liquidity exchange. b) a double incidence of demand. c) the basis for a double fiat exchange. d) a double coincidence of wants.

d) a double coincidence of wants.

Which of the following would not be included as part of M2? a) demand deposits b) money market accounts c) checking accounts d) none of the above

d) none of the above