Question 1

Bank deposit creation is limited by

Accepted Answer

A)  reserve requirements.
B)  the interest rate.
C)  whether a bank is nationally or state chartered.
D)  whether a bank is in a large city or rural area.E) A) and D)
F) B) and D)

Question 2

Large denomination time deposits are included in

Accepted Answer

A)  M2 only.
B)  M3 only.
C)  M2 and M3.
D)  M1 and M2.
E)  M1,M2,and M3.F) B) and E)
G) A) and E)

Question 3

Checkable deposits are money because they are

Accepted Answer

A)  legal tender.
B)  fiat money.
C)  a medium of exchange.
D)  token money.E) A) and D)
F) C) and D)

Question 4

The major decline in oil prices in early 1980 that resulted in bankruptcy of many banks and saving and loans in the southwest U.S.resulted in a major Midwestern bank taking bankruptcy because of

Accepted Answer

A)  interstate banking.
B)  intra bank loans.
C)  cost of gasoline declined at the pump.
D)  decrease in the values of oil leases in the Midwest.E) All of the above
F) None of the above

Question 5

In the last four decades our money supply

Accepted Answer

A)  grew every year.
B)  fell every year.
C)  grew in about half the years and fell the other years.
D)  grew almost every year and only fell in a few years.E) None of the above
F) A) and B)

Question 6

Mr.Retchnik keeps $10,000 in his firm's checking account to meet day-to-day business needs;this illustrates his firm's ________ demand for money.

Accepted Answer

The answer of Mr.Retchnik keeps $10,000 in his firm's checking...

Question 7

In the fractional reserve banking system

Accepted Answer

A)  only a fraction of bank assets at any one time may be used to create money.
B)  only a fraction of a bank's liabilities must be held as reserves to meet withdrawals at any one time.
C)  a bank receives only a fraction of the reserve it needs at any given time.
D)  All of the choices are correct.E) A) and B)
F) B) and D)

Question 8

The desire to hold money instead of other assets in anticipation of changes in economic conditions is the ________ motive.

Accepted Answer

The answer of The desire to hold money instead of...

Question 9

The speculative motive for holding money is

Accepted Answer

A)  the desire to hold money to undertake unexpected transactions.
B)  the desire to hold money instead of other assets in anticipation of changes in economic conditions.
C)  the desire to hold silver instead of gold.
D)  the desire to hold money to complete purchases of goods and services.E) B) and C)
F) C) and D)

Question 10

When the rate of monetary growth is less than the rate of growth of real GDP,most likely in the long run

Accepted Answer

A)  the inflation rate will decrease every year until it reaches zero.
B)  the deflation rate will decrease every year until the economy experiences inflation.
C)  the average price level will tend to increase over time.
D)  the average price level will tend to decrease over time.E) A) and B)
F) B) and C)

Question 11

Statement I: More than two-thirds of the nation's banks have state charters.
Statement II: All nationally chartered banks must join the Federal Reserve System

Accepted Answer

A)  Statement I is true and statement II is false.
B)  Statement II is true and statement I is false.
C)  Both statements are true.
D)  Both statements are false.E) A) and B)
F) None of the above

Question 12

The moment modern banking was born was when

Accepted Answer

A)  the number of goldsmiths' receipts exceeded the number of gold coins kept in goldsmiths' safes.
B)  the number of gold coins kept in goldsmiths' safes was equal to the number of goldsmiths' receipts in circulation.
C)  the number of gold coins in goldsmiths' safes exceeded the number of goldsmiths' receipts in circulation.D) B) and C)
E) A) and C)

Question 13

The precautionary demand for money arises

Accepted Answer

A)  because people feel relatively certain what the future will bring.
B)  because individuals are uncertain about the future.
C)  when nominal income exceeds potential income.
D)  as important exceptions to the Keynesian model.
E)  because the transaction demand for money is never adequate to absorb the money supply.F) A) and B)
G) A) and C)

Question 14

Statement I: Large denomination CDs are not part of M2,but are part of M3.
Statement II: Small denomination CDs are part of M2,but not of M3.

Accepted Answer

A)  Statement I is true and statement II is false.
B)  Statement II is true and statement I is false.
C)  Both statements are true.
D)  Both statements are false.E) None of the above
F) A) and B)

Question 15

The largest 10 banks in the United States hold slightly over ______ percent of the total deposits in the 8000 banks in the country.

Accepted Answer

A)  15
B)  25
C)  40
D)  50E) B) and D)
F) None of the above

Question 16

Suppose that an economy has 10 basic goods and services.If it were a barter economy it would need

Accepted Answer

A)  more than four times as many prices as money economy.
B)  more than twice as many prices as a money economy.
C)  as many prices as a money economy.
D)  half as many prices as a money economy.
E)  less than a quarter as many prices as money economy.F) B) and E)
G) A) and B)

Question 17

Banks create money when they

Accepted Answer

A)  add to their reserves in the Federal Reserve Bank.
B)  accept deposits of cash.
C)  sell government bonds.
D)  exchange demand deposits for loans to businesses and individuals.E) C) and D)
F) A) and C)

Question 18

In a fractional reserve banking system

Accepted Answer

A)  commercial banks are required to hold savings account in other banks as reserves against their deposits.
B)  commercial banks are required to hold a certain fraction of their deposits in reserves.
C)  all deposits must be held in reserves.
D)  commercial banks hold no deposits in reserve.E) A) and B)
F) B) and C)

Question 19

Statement I: The whole idea of the FDIC is to avert bank panics by assuring the public that the federal government stands behind the banking system.
Statement II: The FDIC is backed by the Congress,the Treasury,and the Federal Reserve.

Accepted Answer

A)  Statement I is true and statement II is false.
B)  Statement II is true and statement I is false.
C)  Both statements are true.
D)  Both statements are false.E) None of the above
F) A) and D)

Question 20

Statement I: With the passage of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994,the last barriers against opening branches in different states were swept away.
Statement II: Until 1995 interstate banking was legal.

Accepted Answer

A)  Statement I is true and statement II is false.
B)  Statement II is true and statement I is false.
C)  Both statements are true.
D)  Both statements are false.E) C) and D)
F) A) and D)

Exam 13: Money and Banking

Checkable deposits are money because they are

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Banks create money when they

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Statement I: Large denomination CDs are not part of M2,but are part of M3. Statement II: Small denomination CDs are part of M2,but not of M3.

Correct AnswerverifiedShow Answer

The major decline in oil prices in early 1980 that resulted in bankruptcy of many banks and saving and loans in the southwest U.S.resulted in a major Midwestern bank taking bankruptcy because of

Correct AnswerverifiedShow Answer

The precautionary demand for money arises

Correct AnswerverifiedShow Answer

Bank deposit creation is limited by

Correct AnswerverifiedShow Answer

When the rate of monetary growth is less than the rate of growth of real GDP,most likely in the long run

Correct AnswerverifiedShow Answer

Mr.Retchnik keeps $10,000 in his firm's checking account to meet day-to-day business needs;this illustrates his firm's ________ demand for money.

Correct AnswerverifiedShow Answer

The largest 10 banks in the United States hold slightly over ______ percent of the total deposits in the 8000 banks in the country.

Correct AnswerverifiedShow Answer

Statement I: The whole idea of the FDIC is to avert bank panics by assuring the public that the federal government stands behind the banking system. Statement II: The FDIC is backed by the Congress,the Treasury,and the Federal Reserve.

Correct AnswerverifiedShow Answer

Statement I: More than two-thirds of the nation's banks have state charters. Statement II: All nationally chartered banks must join the Federal Reserve System

Correct AnswerverifiedShow Answer

The moment modern banking was born was when

Correct AnswerverifiedShow Answer

Statement I: With the passage of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994,the last barriers against opening branches in different states were swept away. Statement II: Until 1995 interstate banking was legal.

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In a fractional reserve banking system

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The desire to hold money instead of other assets in anticipation of changes in economic conditions is the ________ motive.

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The speculative motive for holding money is

Correct AnswerverifiedShow Answer

Suppose that an economy has 10 basic goods and services.If it were a barter economy it would need

Correct AnswerverifiedShow Answer

Large denomination time deposits are included in

Correct AnswerverifiedShow Answer

In the fractional reserve banking system

Correct AnswerverifiedShow Answer

In the last four decades our money supply

Correct AnswerverifiedShow Answer

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