Question 1

Checking accounts that pay interest are included in the

Accepted Answer

A)   "demand deposits" part of M1.
B)   "other checkable deposits" part of M1.
C)   "savings deposits" part of M2.
D)   "money market mutual funds deposits" part of M2.E) B) and C)
F) A) and D)

Question 2

A bank's reserves

Accepted Answer

A)   are the sum of its excess and required reserves.
B)   can be held as cash in its vault.
C)   can be held as deposits with the Federal Reserve.
D)   all of the aboveE) A) and C)
F) B) and C)

Question 3

An example of money is

Accepted Answer

A)   a dollar bill.
B)   a checking account balance.
C)   a traveler's check.
D)   all of the aboveE) None of the above
F) A) and D)

Question 4

By law, banks are required to

Accepted Answer

A)   hold 100 percent of customer deposits as reserves.
B)   hold a fraction of their reserves at the Federal Reserve bank.
C)   hold a fraction of demand deposits as reserves.
D)   lend out no more than the amount of their required reserves.E) C) and D)
F) All of the above

Question 5

List and explain the three subgroups of the Federal Reserve System.

Accepted Answer

The 12 Federal Reserve banks are the reg...

Question 6

Which of the following is included in M2?

Accepted Answer

A)   commercial paper
B)   U.S. Treasury bonds
C)   savings accounts
D)   stocksE) A) and B)
F) A) and C)

Question 7

Suppose a bank has $1 million in deposits, a reserve ratio of 25 percent, and reserves of $250,000. This bank has excess reserves of

Accepted Answer

A)   $250,000.
B)   $125,000.
C)   $62,500.
D)   $0.E) B) and D)
F) C) and D)

Question 8

Economists use different definitions of money because

Accepted Answer

A)   there are differences in the frequency with which depositors use their accounts.
B)   deposits can be domestic or international.
C)   deposits may be held at banks or savings and loans.
D)   it is not always clear which assets are used primarily as money.E) B) and C)
F) A) and B)

Question 9

Given the following information about Gotham Bank:
Bank Deposits $50,000
Loans 34,000
Reserves 12,000
Reserve Requirement 20 percent
Gotham Bank is holding ________ in excess reserves.

Accepted Answer

A)   $22,000
B)   $12,000
C)   $2,000
D)   -$2,000E) C) and D)
F) None of the above

Question 10

If the reserve ratio is 0.9, the money multiplier will be 10.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following appears in M2 and NOT M1?

Accepted Answer

A)   currency
B)   checking account balances
C)   money market mutual funds
D)   traveler's checksE) A) and B)
F) All of the above

Question 12

Which of the following is a bank asset?

Accepted Answer

A)   demand deposits
B)   savings account deposits
C)   certificates of deposit held by the public
D)   loans made to customersE) A) and B)
F) C) and D)

Question 13

Suppose Darrell has $4,000 in currency which he deposits in his bank. If the reserve ratio is 25 percent, this will lead to a maximum increase of ________ in M1 throughout all banks.

Accepted Answer

A)   $0
B)   $4,000
C)   $6,000
D)   $12,000E) All of the above
F) None of the above

Question 14

The formula for an infinite sum is

Accepted Answer

A)   1 + b + b2 + b3 + b4 + ... = 1 / b.
B)   1 + b + b2 + b3 + b4 + ... = 1 / (1 + b) .
C)   1 + b + b2 + b3 + b4 + ... = 1 / (1 - b) .
D)   1 + b + b2 + b3 + b4 + ... = b / (1 - b) .E) B) and D)
F) B) and C)

Question 15

Money market mutual funds are hard to classify because they are used both for making transactions and savings.

Accepted Answer

A) True 
 B)False

Question 16

If the reserve ratio is designated by "r," the amount of deposits a bank can hold as excess reserves is equal to 1 / (1 - r).

Accepted Answer

A) True 
 B)False

Question 17

Assuming all excess reserves are loaned out, if the reserve ratio is 25 percent, the money multiplier will be equal to

Accepted Answer

A)   0.5.
B)   2.5.
C)   4.
D)   5.E) B) and C)
F) None of the above

Question 18

U.S. banks are required by law to keep most of their assets as reserves.

Accepted Answer

A) True 
 B)False

Question 19

Define "money."

Accepted Answer

anything that is use...

Question 20

Recall the Application about the Fed increasing bank reserves during the financial crisis in 2008 to answer the following question(s) . During the height of the financial crisis in September 2008, The Fed injected large amounts of reserves into banks, and in the next month, they started paying interest to banks on these reserves. Prior to this time, banks earned no interest on either required or excess reserves.
-According to this Application, the Fed injected large amounts of reserves into banks during the 2008 financial crisis. The Fed needs to make sure that, in the long run, banks do not loan out too many of these reserves or the result will be

Accepted Answer

A)   higher inflation.
B)   higher interest rates.
C)   additional unemployment.
D)   a smaller money multiplier.E) A) and B)
F) A) and C)

Exam 13: Money and the Banking System

If the reserve ratio is 0.9, the money multiplier will be 10.

Correct Answer
verified

Which of the following is a bank asset?

Correct Answer
verified

List and explain the three subgroups of the Federal Reserve System.

Correct Answer
verified
The 12 Federal Reserve banks are the reg...
View Answer

Suppose a bank has $1 million in deposits, a reserve ratio of 25 percent, and reserves of $250,000. This bank has excess reserves of

Correct Answer
verified

Money market mutual funds are hard to classify because they are used both for making transactions and savings.

Correct Answer
verified

The formula for an infinite sum is

Correct Answer
verified

Which of the following appears in M2 and NOT M1?

Correct Answer
verified

Suppose Darrell has $4,000 in currency which he deposits in his bank. If the reserve ratio is 25 percent, this will lead to a maximum increase of ________ in M1 throughout all banks.

Correct Answer
verified

By law, banks are required to

Correct Answer
verified

Assuming all excess reserves are loaned out, if the reserve ratio is 25 percent, the money multiplier will be equal to

Correct Answer
verified

A bank's reserves

Correct Answer
verified

Checking accounts that pay interest are included in the

Correct Answer
verified

Which of the following is included in M2?

Correct Answer
verified

Economists use different definitions of money because

Correct Answer
verified

Define "money."

Correct Answer
verified
anything that is use...
View Answer

U.S. banks are required by law to keep most of their assets as reserves.

Correct Answer
verified

Given the following information about Gotham Bank: Bank Deposits $50,000 Loans 34,000 Reserves 12,000 Reserve Requirement 20 percent Gotham Bank is holding ________ in excess reserves.

Correct Answer
verified

If the reserve ratio is designated by "r," the amount of deposits a bank can hold as excess reserves is equal to 1 / (1 - r).

Correct Answer
verified

An example of money is

Correct Answer
verified

Correct Answer
verified

Exam 13: Money and the Banking System

If the reserve ratio is 0.9, the money multiplier will be 10.

Correct AnswerverifiedShow Answer

Which of the following is a bank asset?

Correct AnswerverifiedShow Answer

List and explain the three subgroups of the Federal Reserve System.

Correct AnswerverifiedThe 12 Federal Reserve banks are the reg...View AnswerShow Answer

Suppose a bank has $1 million in deposits, a reserve ratio of 25 percent, and reserves of $250,000. This bank has excess reserves of

Correct AnswerverifiedShow Answer

Money market mutual funds are hard to classify because they are used both for making transactions and savings.

Correct AnswerverifiedShow Answer

The formula for an infinite sum is

Correct AnswerverifiedShow Answer

Which of the following appears in M2 and NOT M1?

Correct AnswerverifiedShow Answer

Suppose Darrell has $4,000 in currency which he deposits in his bank. If the reserve ratio is 25 percent, this will lead to a maximum increase of ________ in M1 throughout all banks.

Correct AnswerverifiedShow Answer

By law, banks are required to

Correct AnswerverifiedShow Answer

Assuming all excess reserves are loaned out, if the reserve ratio is 25 percent, the money multiplier will be equal to

Correct AnswerverifiedShow Answer

A bank's reserves

Correct AnswerverifiedShow Answer

Checking accounts that pay interest are included in the

Correct AnswerverifiedShow Answer

Which of the following is included in M2?

Correct AnswerverifiedShow Answer

Economists use different definitions of money because

Correct AnswerverifiedShow Answer

Define "money."

Correct Answerverifiedanything that is use...View AnswerShow Answer

U.S. banks are required by law to keep most of their assets as reserves.

Correct AnswerverifiedShow Answer

Given the following information about Gotham Bank: Bank Deposits $50,000 Loans 34,000 Reserves 12,000 Reserve Requirement 20 percent Gotham Bank is holding ________ in excess reserves.

Correct AnswerverifiedShow Answer

If the reserve ratio is designated by "r," the amount of deposits a bank can hold as excess reserves is equal to 1 / (1 - r).

Correct AnswerverifiedShow Answer

An example of money is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The 12 Federal Reserve banks are the reg...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
anything that is use...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified