eco test 4 part 2
3) A bank will consider a car loan to a customer ________ and a customer's checking account to be ________. A) a liability; an asset B) an asset; a liability C) a liability; a liability D) an asset; an asset
B
3) The Federal Reserve's narrowest definition of the money supply is A) M0 B) M1. C) M2. D) M3.
B
38) Paper currency is a A) commodity money. B) fiat money. C) barter money. D) bond.
B
40) Fiat money is generally issued by A) private banks. B) central banks. C) brokerage firms. D) major multinational corporations.
B
12) Which of the following assets is most liquid? A) money B) bond C) a house D) stock
A
20) Banks can continue to make loans until their A) actual reserves equal their required reserves. B) excess reserves equal their required reserves. C) actual reserves equal their excess reserves. D) actual reserves equal their checking account balances.
A
21) Money is A) an asset that people are willing to accept in exchange for goods and services. B) a liability that people are willing to accept in exchange for goods and services. C) the income one earns over a period of time. D) one's assets net of one's liabilities at any point in time.
A
36) Gold is an example of A) commodity money. B) fiat money. C) barter money. D) M1.
A
4) Bank reserves include A) vault cash and deposits with the Federal Reserve. B) loans to bank customers and deposits with the Federal Reserve. C) vault cash and loans to bank customers. D) customer checking accounts and vault cash.
A
40) The minimum fraction of ________ that banks are required to keep as reserves are called ________. A) deposits; required reserves B) deposits; excess reserves C) loans; excess reserves D) loans; required reserves
A
41) Which of the following is a true statement? A) excess reserves = actual reserves - required reserves B) excess reserves = deposits - required reserves C) excess reserves = deposits - loans D) excess reserves = loans - required reserves
A
1) The most liquid measure of money supply is A) M0. B) M1. C) M2. D) M3.
B
10) The statement, "My iPhone is worth $700" represents money's function as A) a medium of exchange. B) a unit of account .C) a store of value. D) a standard of deferred payment.
B
15) If the required reserve ratio (RR) is 20 percent, the simple deposit multiplier is A) 2. B) 5. C) 10. D) 20.
B
21) Most payments in the United States for goods and services are made using A) currency. B) checking account deposits. C) bitcoins. D) gold.
B
45) A balance sheet A) measures flows of income and expenditure over a given period of time. B) measures assets, liabilities, and net worth at a giving instance in time. C) equates flows of revenue with flows of expenditure. D) None of the above are correct.
B
5) The required reserves of a bank equal its ________ the required reserve ratio. A) deposits divided by B) deposits multiplied by C) loans divided by D) loans multiplied by
B
6) Which of the following is not counted in M1? A) checking account balances B) credit card balances C) coins in circulation D) currency in circulation
B
1) The major assets on a bank's balance sheet are its A) checking and savings account deposits. B) loans, and checking and savings account deposits. C) reserves, loans, and holdings of securities. D) reserves, checking and savings account deposits.
C
18) In the United States, currency includes A) gold, silver, and paper money. B) checking and savings account deposits. C) paper money and coins in circulation. D) bitcoins.
C
20) M1 does not include A) currency in circulation. B) checking account deposits in banks. C) credit card balances. D) coins held by households and firms.
C
32) Net worth is A) a measure of a firm's profits. B) unrelated to stockholders' equity. C) the difference between a firm's assets and liabilities D) listed on the asset side of a firm's balance sheet.
C
35) A bank's largest liability is its A) short-term borrowing. B) long-term debt. C) deposits of its customers. D) shareholder equity.
C
38) A bank holds its reserves as ________ and ________. A) securities; loans B) securities; deposits at the Federal Reserve C) vault cash; deposits at the Federal Reserve D) vault cash; loans
C
49) Suppose a transaction changes a bank's balance sheet as indicated in the following T-account, and the required reserve ratio is 10 percent. Assets Reserves + $2,000 Liabilities Deposits + $2,000 As a result of the transaction, the bank can make a maximum loan of A) $0. B) $200. C) $1,800. D) $2,000.
C
25) If households in the economy decide to take money out of checking account deposits and hold it as currency, this will initially A) not change M1 and increase M2. B) decrease M1 and decrease M2. C) decrease M1 and not change M2. D) not change M1 and not change M2.
D
26) Which of the following is a function that money serves? A) medium of exchange B) unit of account C) store of value D) All of the above are correct.
D
33) Which of the following is an asset for a bank? A) deposits of its customers B) short-term borrowing C) shareholders' equity D) loans
D
47) A commercial bank like Comerica creates money by A) printing paper money B) earning profits. C) selling corporate bonds. D) making loans.
D
51) If the required reserve ratio is 5 percent, then the simple deposit multiplier is A) 2. B) 5. C) 10. D) 20.
D
56) A cash withdrawal from the banking system A) decreases reserves. B) decreases deposits. C) decreases excess reserves. D) All of the above are correct.
D
9) The M2 measure of the money supply equals A) savings account balances plus small-denomination time deposits. B) savings account balances plus small-denomination time deposits plus noninstitutional money market fund shares. C) M1 plus savings account balances plus small-denomination time deposits. D) M1 plus small-denomination time deposits plus noninstitutional money market mutual fund shares.
D
63) Your checking account balance is included in your bank's assets. TRUE OR FALSE
FLASE
