Economics Practice Questions – Flashcards

Dena won $200 in the lottery. She deposits her $200 winnings into a money market fund so that she can use the money next year to help her pay her tuition. This is an example of money serving as a(n) A) investment good. B) medium of exchange. C) store of value. D) unit of account.

After World War II, cigarettes were used as money in Germany. This is an example of A) commodity money. B) token money. C) legal money. D) fiat money.

Currency held outside banks + demand deposits + travelers checks + other checkable deposits = A) M3. B) M1. C) M2 - M1. D) M3 - M1

Which of the following would NOT be included in M2? A) Money market accounts B) Demand deposits C) Checking accounts D) None of the above

Among the liabilities of commercial banks are A) demand deposits. B) loans. C) reserves. D) All of the above

Bank of Sim City has $600 million in deposits. The required reserve ratio is 25%. Bank of Sim City must keep ________ in reserves. A) $160 million B) $700 million C) $150 million D) $125 million

* Use this table for the following "starred" ?'s * ASSETS: Reserves: $200,000 Loans: $1.8 million Total: $2 million LIABILITIES: Deposits: $2million Totals: $2 million

* Question #1 * Refer to Table * If the required reserve ratio is 10%, First Charter Bank: A) is loaned up. B) has excess reserves of $100,000. C) as too few reserves on hand. D) is meeting its required reserve ratio and has no excess reserves.

* Question #2 * Refer to Table * First Charter Bank will be loaned up if the required reserve ratio is A) 15%. B) 20%. C) 10%. D) 30%.

Suppose the required reserve ratio is 20%. A $10 million cash deposit will allow commercial banks to create at most A) $20 million. B) $100 million. C) $50 million. D) $2 million

The required reserve ratio is 10%. The money multiplier is: A) 1. B) 0.1. C) 10. D) 9.

Which of the following activities is one of the responsibilities of the Federal Reserve? A) Assisting banks that are in a difficult financial position B) Auditing the various agencies and departments of the federal government C) Issuing new bonds to finance the federal budget deficit D) Loaning money to other countries that are friendly to the United States

Which of the following instruments is not used by the Federal Reserve to change the money supply? A) The discount rate B) Open market operations C) The required reserve ratio D) The federal tax code