Econ 13

Ceteris paribus, the money supply becomes smaller when A. A loan is repaid to the banking system by a bank customer. B. An individual deposits currency into her transactions account. C. The Federal Reserve reduces the reserve requirement. D. A bank uses its excess reserves to make a loan.

A

money is functioning as a standard of value when you A. use it to compare two houses that are different prices B. buy jeans at the mall C. buy a rare baseball card that you expect will increase in value D. trade a cup of sugar for two eggs

A

The primary purpose of both the FDIC and the Savings Association Insurance Fund (SAIF) is to A. Increase depositor confidence in the banking system B. Control the nation's money supply. C. Set reserve requirements for the banking system. D. Provide funds for home mortgages.

A

banks are required to keep a minimum amount of funds in reserve because A. depositors may decide to withdraw funds at any time B. the fed may decide to withdraw funds at any time C. the bank may decide to increase AD at any time D. borrowers may decide to repay loans ahead of schedule

A

the banking system can lend the sum of its excess reserves because A. banks are required to keep only a fraction of deposits on reserve B. bank assets are greater than bank liabilities C. required reserves are a leakage from the banking system D. the money multiplier is less than 1

A

the different components of the money supply reflect A. variations in liquidity and accessibility of assets B. whether deposits are domestic or international C. how often depositors use their accounts D. whether the deposits are earned or inherited

A

trusted money does all of the following except A. reduce the efficiency with which market exchanges take place B. serve as a mechanism for transforming current income into future purchases C. promote efficient division of labor D. facilitate the continuous series of exchanges that characterizes a market economy

A

when money is used to acquire goods and services, it is functioning as a A. medium of exchange B. store of value C. standard of account D. standard of value

A

which of the following appears in M2 but not in M1 A. savings accounts B. NOW and ATS accounts C. traveler's checks D. credit union share drafts

A

which of the following explains why banks try to keep their holdings of excess reserves low A. to maximize profits B. to keep the money multiplier low C. to escape fed penalties D. to please bank examiners

A

which of the following is not a characteristic of money A. mechanism for barter B. medium of exchange C. store of value D. standard of value

A

which of the following reflects the concept of fractional reserves A. the money multiplier is greater than 1 B. excess reserves are equal to 0 C. required reserves are equal to total reserves D. banks can lend only their required reserves

A

which of the following is not true about M1? A. it includes the most liquid forms of money B. it is the narrowest defitintion of the money supply C. savings accounts makes up approximately 1/3 of it D. currency in circulation makes up approximately 1/2 of it

C

which of the following is not included in the narrowest definition of money supply or M1 A. currency in circulation B. transactions and account balances C. credit card balances D. traveler's checks

C

In the 2008 credit crisis, A. Home prices rose and caused a shortage in housing. B. Home prices fell and caused hone owners to default on loans. C. Home prices had no effect on the economy. D. None of the choices are correct.

B

The money supply will grow even larger through deposit creation when A. People decide to use cash instead of checks for transactions. B. Consumers, businesses, and government increasing their borrowing. C. Banks stop making new loans because they are too risky. D. Interest rates rise, causing people to move money out of banks and into bonds.

B

initially a bank has a required reserve ratio of 20 percent and no excess reserves. If 5,000 is deposited into the bank, then initially, A. this bank can increase its loans by 5,000 B. this bank can increase its loans by 4,000 C. total reserves will increase by 4,000 D. required reserves will increase by 5,000

B

one of the main functions of banks is A. borrowing money and lending to savers B. creating money C. ownership of projects in which they invest D. maintaining a constant money supply

B

savings accounts are included in A. M1 only B. M2 only C. both D. none

B

suppose oscar withdraws 100 from his checking account and deposits it into his savings account. This transaction causes M1 to A. increase by 100 and M2 to remain the same B. decrease by 100 and M2 remain the same C. decrease by 100 and M2 increase by 100 D. remain the same and M2 to increase by 100

B

the ration of a bank's total reserves to its total transactions deposits is known as the A. required reserves B. reserve ratio C. excess reserves D. deposit ratio

B

the various money supply measures (M1 and M2) are used to distinguish the A. rate at which money flows through the economy B. liquidity and accessibility of assets C. speed with which banks transfer funds between savings and checking accounts D. speed with which banks transfer funds between themselves

B

when a bank makes a loan, it A. reduces the amount of money in the monetary system B. creates a transactions account balance for the borrower C. is insured against losses from borrowers who fail to pay off their loans D. must hold deposits of an equal amount to offset the loan

B

when money serves as a mechanism for transforming current income into future purchases, it is functioning as a A. medium of exchange B. store of value C. standard of account D. standard of value

B

which of the following gave the US federal government authority to issue money A. the constitution B. the national banking act of 1863 C. the creation of FDIC and FSLIC in 1933 D. the monetary control act of 1980

B

which of the following is not correct about the money kept in transactions accounts A. it permits direct payment to a third party B. it is backed by gold held by the government C. it is part of the basic money supply D. it is a good substitute for cash in many cases

B

which of the following is true about the quantity of money in the US economy A. it is equal to the amount of currency in circulation B. it is baked by gold held by the government C. it is part of the basic money supply D. it is a good substitute for cash in many cases

B

In the 2008 credit crisis, the FDIC increases the limit on insured deposits from A. $50,000 to $100,000 B. $100,000 to $200,000 C. $100,000 to $250,000 D. $250,000 to $500,000

C

Students Bank and Trust has zero excess reserves. Ceteris paribus, if the required reserve ration decreases. A. Required reserves will increase. B. Bank assets will decrease. C. The bank will be able to make additional loans. D. The money multiplier will decrease.

C

Suppose a bank has 500,000 in deposits and a required reserve ratio of 10 percent. Then required reserves are A. 5,000,000 B. 500,000 C. 50,000 D. 10,000

C

Which of the following insures deposits at banks? A. The Federal Reserve. B. The RTC C. The FDIC D. The FSLIC

C

a single bank with 10,000 of reserves and a reserve ratio of 25 percent could support total transactions account balances of at most A. 10,000 B. 5,000 C. 40,000 D. 25,000

C

currency in circulation is included in A. M1 only B. M2 only C. both D. none

C

money is functioning as a store of value when you A. use it to compare the cost of tuition 10 years ago to the cost today B. take out a student loan to buy books C. save your cash to pay for tuition next semester D. pay your tuition in installments rather than all at one time

C

one of the essential functions a bank performs is that of A. creating money by lending required reserves B. participating in the stock market C. transferring money from savers to borrowers D. purchasing government bonds

C

suppose university bank has zero excess reserves. If the require reserve ratio decreases, the A. bank's assets will increase B. bank will not have enough required reserves C. bank will be able to make more loans D. money multiplier will decrease

C

when cash or coins are initially deposited into a bank A. neither the composition nor the size of the money supply changes B. the composition of the money supply does not change, but the size of the money supply does change C. the composition of the money supply changes, but the size of the money supply does not change D. both the composition and the size of the money supply change

C

which of the following is a bank liability A. reserve deposits at the fed B. securities the bank has purchased C. transactions account balances D. loans made to customers

C

which of the following statements is false about the us monetary system A. the federal government did not print paper money until the civil war B. between 1789 and 1865, paper money was issued by hundreds of state-chartered banks C. credit cards are the most common form of money today D. early in the US history, the money supply consisted of items such as tobacco an bullets

C

A bank may end an amount equal to its A. Required reserves. B. Total reserves. C. Total assets. D. Excess reserves

D

Which of the following could cause the money supply to decrease? A. People and institutions borrow more. B. The economy emerges from a recession into rapid growth. C. The society moves to a cashless society. D. Banks become more conservative in making loans.

D

Which of the following is not a constraint on deposit creation? A. The reserve requirement increases. B. Businesses and consumers stop using and accepting checks or debit cards. C. Banks become less willing to lend money to businesses and consumers. D. The interest rate falls, making borrowing less costly for businesses and consumers.

D

banks make loans to which of the following A. businesses for new plants and equipment B. consumers for new homes and cars C. the government for its projects D. all of these

D

if bank customers decide as a group to pay off their loans and to not take out any new loans A. excess reserves will decrease B. the money multiplier will decrease C. the money supply will increase D. the money supply will decrease

D

suppose Jared takes 200 from his savings account and holds it as cash. The immediate result of this transaction is that M2 A. increases by 200 and M1 remains the same B. decreases by 200 and M1 remains the same C. and M1 do not change D. remains the same and M1 increases by 200

D

suppose a bank has 2 million in deposits, a required reserve ratio of 10 percent, and total reserves of 500,000. Then it has excess reserves of A. 50,000 B. 200,000 C. 500,000 D. 300,000

D

suppose a bank has 200,000 in deposits, a required reserve ratio of 10 percent, and bank reserves of 45,000. Then this bank can make new loans in the amount of A. 2,500 B. 10,000 C. 20,000 D. 25,000

D

the minimum amount of reserves a bank is required to hold is known as A. the money multiplier B. total reserves C. excess reserves D. required reserves

D

when the reserve requirement changes, which of the following will change for an individual bank A. transactions account balances and lending capacity. B. transactions account balances, total reserves, and excess reserves C. total reserves, required reserves, and excess reserves D. require reserves, excess reserves, and lending capacity

D

which of the following is not true about barter? A. it involves direct exchange of one good or service for another B. it is more likely to occur if people lose faith in a nation's currency C. it is considered to be less efficient than the use of money D. it allows people to obtain more goods than they would under a money payment system

D