Money & Banking

If Sarah uses her smart card to purchase movies over the internet, then the money to pay the retailer will come from: A. Sarah's M1 funds. B. the smart card company's M1 funds. C. the smart card company's M2 funds. D. Sarah's M2 funds.

A

If loans become far less available, then sectors of the economy that ______________ like business investment, home construction, and car manufacturing can be dealt a crushing blow. A. depend on borrowed money B. typically generate extraordinary gains C. make loans to financial capital markets D. failed to diversify risk

A

In an economy with _______________, money loses some buying power each year, but it remains money. A. inflation B. currency C. deflation D. a market orientation

A

In macroeconomics, a _______________ describes the common way in which market values are measured in an economy. A. unit of account B. medium of exchange C. store of value D. unit of exchange

A

Stealth bank has deposits of $350 million. It holds reserves of $30 million and government bonds worth $70 million. If the bank sells its loans at market value of $400 million, what will its total assets equal? A. $500 million B. $750 million C. $450 million D. $380 million

A

Stealth bank holds deposits of $600 million. It holds reserves of $30 million and government bonds worth $80 million. The current market value of the bank's loans is $400 million. What is the value of the bank's total liabilities? A. $600 million B. $110 million C. $200 million D. $90 million

A

The money multiplier is equal to the _______________ in the economy divided by the original _________________. A. total money; quantity of money B. original quantity of reserves; reserve ratio C. quantity of money; total money D. reserve ratio; original quantity of reserves

A

Which category of the money supply would you be contributing to if you invest in money market funds? A. M2 B. M1 C. time deposits D. savings deposits

A

If Evelyn uses her debit card to buy an iPod, then the money to pay the retailer will come from: A. the debit card company's M1 funds. B. the debit card company's M2 funds. C. her M2 funds. D. her M1 funds.

D

The term ___________________ describes the proportion of deposits that the bank must hold in the form of reserves that are not loaned out or invested in bonds. A. reserve ratio B. reserve funds C. term deposits D. bond reserves

A

Which of the following is a valid criticism of the use of money as a store of value in modern economies? A. annual inflationary loss of buying power B. money supply is too narrowly defined C. storing money is wasteful D. imperfect as a unit of account

A

________________ serves society in three functions: medium of exchange, unit of account, and store of value. A. Money B. Currency C. Barter D. A double coincidence of wants

A

__________________ pool the deposits of many investors together and invest them in a safe way like short-term government bonds. A. Money market funds B. Savings deposits C. Time deposits D. Certificates of deposit

A

Stealth bank holds deposits of $200 million. It holds reserves of $15 million. It has purchased government bonds worth $75 million. The current value of its loans, if sold at market value, is $130 million. What is the value of the Stealth bank's liabilities? A. $20 million B. $200 million C. $5 million D. $330 million

B

Banks typically come under financial stress because of: A. the money multiplier effect. B. a widespread decline in the value of their assets. C. diversification of loan assets. D. risks associated with extraordinary economic gains.

B

If Bill performs plumbing upgrades for Alice in exchange for her incorporating his business, then their _________________________ will be satisfied. A. balance of trade B. double coincidence of wants C. convenience of exchange D. division of labor

B

In 2010, Tara used $50,000.00 from funds she had invested in certificates of deposit as a down payment to buy a house. What function did this portion of her investments serve when she made the down payment? A. unit of exchange. B. medium of exchange. C. store of value. D. unit of account.

B

In macroeconomics, ___________________________ describes a situation in which two people each want to exchange some good or service that the other can provide. A. a medium of exchange B. a double coincidence of wants C. interrelated banking D. the usefulness of money

B

In uncertain economic times, ____________________ serves as a way of preserving economic value that can be spent or consumed in the future. A. buying a new car B. owning gold C. refinancing your home mortgage D. obtaining a credit card

B

Stealth bank has deposits of $300 million. It holds reserves of $20 million and has purchased government bonds worth $300 million. The bank's loans, if sold at current market value, would be worth $600 million. What does Stealth bank's net worth equal? A. $20 million B. $620 million C. $1.22 billion D. $920 million

B

Stealth bank has deposits of $700 million. It holds reserves of $20 million and has purchased government bonds worth $350 million. The bank's loans, if sold at current market value, would be worth $600 million. What does Stealth bank's net worth equal? A. $120 million B. $270 million C. $1.02 billion D. $970 million

B

The people in an economy have $10 million in money. There is only one bank that all the people deposit their money in and it holds 10% of the deposits as reserves. What is the money multiplier in this economy? A. 5 B. 10 C. 20 D. 1

B

The quantity of money in an economy and the _____________________ are inextricably intertwined. A. value of assets for loans B. quantity of credit for loans C. financial stress in the banking system D. extraordinary gains that can be made with money

B

_____________ are a form of financial instrument through which corporations and governments borrow money from financial investors and promise to repay with interest. A. Certificates of deposit B. Bonds C. Money market funds D. Time deposits

B

_______________________ that require the depositor to commit to leaving their funds in the bank for a certain period of time, in exchange for a higher rate of interest are also called ________________. A. Demand deposits; certificates of deposit B. Certificates of deposit; time deposits C. Money market funds; time deposits D. Bonds; term deposits

B

_________________________ are included in the aggregate amount of MI money currently in circulation. A. Savings deposits B. Traveler's checks C. Short-term bonds D. Foreign currency deposits

B

___________are funds that the bank keeps on hand that are not loaned out or invested in bonds. A. Certificates of deposit B. Reserves C. Time deposits D. Demand deposits

B

Antonio tries to limit his risk of overexposure to debt by using a ________________ to store a certain amount of value that he then uses to make purchases. A. debit card B. credit card C. smart card D. chip card

C

If Brent uses his credit card to purchase a new television, then the money to pay the retailer is taken from: A. his M1 funds. B. his M2 funds. C. the credit card company's M1 funds. D. the credit card company's M2 funds.

C

If the central bank decreases the amount of reserves banks are required to hold from 20% to 10%, then: A. the money multiplier will increase and the supply of money in the economy will decrease. B. both the money multiplier and the supply of money in the economy will decrease. C. both the money multiplier and the supply of money in the economy will increase. D. the money multiplier will decrease and the supply of money in the economy will increase.

C

In macroeconomics, _____________________________ describes a situation where a bank's liabilities can be withdrawn in the short-term while its assets are being repaid in the long-term. A. diversification B. reserve ratio C. an asset-liability time mismatch D. a negative net worth

C

Lance paid $175,000 for his house in 2003 and sold it for $325,000 in 2006. What function did the house serve during the time Lance owned it? A. medium of exchange B. unit of account C. store of value D. unit of exchange

C

Stealth bank has deposits of $700 million. It holds reserves of $20 million and has purchased government bonds worth $350 million. The banks loans, if sold at current market value, would be worth $600 million. What is the total value of Stealth bank's assets? A. $1.3 billion B. $1.7 billion C. $970 million D. $470 million

C

The market in which loans are bought and sold is called the: A. loan market. B. money market. C. secondary loan market. D. primary loan market.

C

The people in an economy have $10 million in money. There is only one bank that all the people deposit their money in and it holds 5% of the deposits as reserves. What is the money multiplier in this economy? A. 5 B. 1 C. 20 D. 10

C

The process of banks making loans in financial capital markets is intimately tied to the: A. redistribution of wealth. B. financial stress levels of banks. C. creation of money. D. home construction industry.

C

Which of the following would be classified in the M1 category of the money supply? A. savings deposits B. money market deposit C. demand deposits D. certificates of deposit

C

Which of the following would function as a store of value, and also provide a medium of exchange, and unit of account? A. a new car B. an iPod C. an estate D. gym membership

C

Why do banks use a T-account? A. if a bank has become bankrupt, net worth will be shown as a zero on the balance sheet B. the T-account separates the liabilities on the left from assets on the right C. the T-account separates assets on the left from liabilities on the right D. the T-account ensures the final entry made under the assets column is bank reserves

C

____________ is a completely inadequate mechanism ____________________ in a modern advanced economy. A. Currency; for providing a medium of exchange B. Money; for providing a store of value C. Barter; for trying to coordinate trades D. Money; to use as a unit of account

C

Banks can protect themselves against an unexpectedly high rate of loan defaults and against the risk of ____________________ by adopting a strategy that will ______________. A. rising interest rates; diversify its loans B. rising interest rates; provide loans to a variety of customers C. an increased reserve requirement; provide loans to a variety of customers D. an asset-liability time mismatch; diversify its loans

D

If mollusk shells were accepted as a method of payment in modern-day markets, what economic role would they play in the financial system? A. capital exchange B. currency exchange C. unit of exchange D. medium of exchange

D

If the central bank increases the amount of reserves banks are required to hold to 20%, then: A. the money multiplier will increase and the supply of money in the economy will decrease. B. both the money multiplier and the supply of money in the economy will increase. C. the money multiplier will decrease and the supply of money in the economy will increase. D. both the money multiplier and supply of money in the economy will decrease.

D

In modern economies, _____________________ receive money from savers and provide funds to borrowers. A. governments B. credit unions C. banks D. financial intermediaries

D

In modern economies, credit cards are a _________________ because of their wide acceptance as a method of payment for both goods and services. A. unit of exchange B. store of value C. unit of account D. medium of exchange

D

Stealth bank has deposits of $600 million. It holds reserves of $30 million and government bonds worth $80 million. If the bank sells its loans at market value of $400 million, what will its total assets equal? A. $110 million B. $710 million C. $480 million D. $510 million

D

The market where loans are made to borrowers is called the: A. secondary loan market. B. money market. C. loan market. D. primary loan market.

D

Which of the following is omitted in a barter transaction? A. trade B. medium of exchange C. store of value D. money

D

Which of the following terms is considered to be a narrow definition of the money supply that includes, among other things, currency? A. savings B. money C. M2 D. M1

D

With respect to measuring the money supply, which of the following terms describes a checking account? A. demand certificates B. currency deposits C. cash certificates D. demand deposits

D

_________________________ are a form of deposits held in banks that are available by making a cash withdrawal or writing a check. A. Direct deposits B. Savings deposits C. Time deposits D. Demand deposits

D