question

When economists say that money serves as a medium of exchange, they mean that it is:

answer

a means of payment.

question

Currency held in the vault of First National Bank is:

answer

not counted as part of the money supply.

question

Currency (paper money plus coins) constitutes about:

answer

45 percent of the U.S. M1 money supply.

question

To say that coins are \"token money\" means that:

answer

their face value is greater than their intrinsic value.

question

A $20 bill is a:

answer

Federal Reserve Note.

question

Coins held in commercial banks are:

answer

not part of the nation's money supply.

question

\"Near-monies\" are included in:

answer

M2 only.

question

Answer the question on the basis of the following list of assets: 1. Large-denominated ($100,000 and over) time deposits 2. Noncheckable savings deposits 3. Currency (coins and paper money) in circulation 4. Small-denominated (under $100,000) time deposits 5. Stock certificates 6. Checkable deposits 7. Money market deposit accounts 8. Money market mutual fund balances held by individuals 9. Money market mutual fund balances held by businesses 10. Currency held in bank vaults Refer to the given list. Which of the following are considered to be \"near-monies?\"

answer

Items 2, 4, 7, and 8.

question

Answer the question on the basis of the following table: Refer to the table. The value of the dollar in year 4 is:

answer

$2.00.

question

In the U.S. economy, the money supply is controlled by the:

answer

Federal Reserve System.

question

The Federal Open Market Committee (FOMC) is made up of:

answer

the seven members of the Board of Governors of the Federal Reserve System along with the president of the New York Federal Reserve Bank and four other Federal Reserve Bank presidents on a rotating basis.

question

The group that sets the Federal Reserve System's policy on buying and selling government securities (bills, notes, and bonds) is the:

answer

Federal Open Market Committee (FOMC).

question

Approximately how many commercial banks are now operating in the United States?

answer

About 6,000.

question

Some economists are concerned that the financial rescue provided by the TARP will encourage financial investors and firms to take on greater risks in the future. This is an example of:

answer

moral hazard.

question

In 2009, approximately how much of the money on deposit was held by the three largest U.S. banks?

answer

30 percent

question

Firms whose central business is providing individual account shares of a group of stocks, bonds, or both are known as:

answer

mutual funds companies.

question

(Last Word) After years of aiding drug cartels, mobsters, and terrorist groups laundering money, HSBC bank was:

answer

fined about five weeks' worth of profits.

question

(Last Word) The Assistant U.S. Attorney General in charge of prosecuting financial crimes did which of the following in response to HSBC bank's years of money laundering and helping firms and individuals cheat on their taxes?

answer

Imposed only modest fines on HSBC so as not to destabilize the bank and the financial system.

question

As part of its response to the financial crisis of 2007 and 2008, Federal Reserve Banks began paying interest on reserve deposits.

answer

True

question

(Consider This) Credit cards are defined as money because they facilitate transactions.

answer

False

question

Commercial bank reserves are an asset to commercial banks but a liability to the Federal Reserve Bank holding them.

answer

True.

question

The basic reason why the commercial banking system can increase its checkable deposits by a multiple of its excess reserves is that:

answer

reserves lost by any particular bank will be gained by some other bank.

question

Refer to row 1 in the table. The number appropriate for space W is:

answer

10.

question

Refer to the table. When the legal reserve ratio is 25 percent, the excess reserves of this single bank are:

answer

$0.

question

If actual reserves in the banking system are $8,000, checkable deposits are $70,000, and the legal reserve ratio is 10 percent, then excess reserves are:

answer

$1000

question

Suppose a commercial bank has checkable deposits of $100,000 and the legal reserve ratio is 10 percent. If the bank's required and excess reserves are equal, then its actual reserves:

answer

are $20,000.

question

Money is destroyed when:

answer

loans are repaid.

question

If actual reserves in the banking system are $50,000, excess reserves are $5,000, and checkable deposits are $225,000, then the monetary multiplier is:

answer

5.

question

Suppose a credit union has checkable deposits of $500,000 and the legal reserve ratio is 10 percent. If the institution has excess reserves of $4,000, then its actual reserves are:

answer

$54,000.

question

A bank that has liabilities of $150 billion and a net worth of $20 billion must have:

answer

assets of $170 billion.

question

Loans made to customers are a liability on a bank's balance sheet.

answer

False.

question

The claims of the owners of a firm against the firm's assets are called:

answer

net worth.

question

In a fractional reserve banking system:

answer

banks can create money through the lending process.

question

Excess reserves refer to the:

answer

difference between actual reserves and required reserves.

question

Assume that Smith deposits $600 in currency into her checking account in the XYZ Bank. Later that same day Jones negotiates a loan for $1,200 at the same bank. In what direction and by what amount has the supply of money changed?

answer

Increased by $1,200.

question

Commercial banks monetize claims when they:

answer

make loans to the public.

question

Checkable deposits are a liability on a bank's balance sheet.

answer

True.

question

Refer to the data. The commercial banking system has excess reserves of:

answer

$9 billion.

question

The amount of reserves that a commercial bank is required to hold is equal to:

answer

its checkable deposits multiplied by the reserve requirement.

question

Refer to the table. When the legal reserve ratio is 10 percent, the money-creating potential of this single bank is:

answer

$6,000.

question

The consolidation in the financial industry into fewer and larger firms:

answer

Progressed further in the Financial Crisis of 2007-2008

question

As of February 2013, more than half of the money supply (M1) was in the form of:

answer

Checkable deposits

question

How many members can serve on the Board of Governors of the Federal Reserve System?

answer

7

question

The following programs were part of the Fed's \"lender of last resort\" efforts in response to the Financial Crisis of 2007-2008, except:

answer

TARP (Troubled Asset Relief Program)

question

Holding the money deposits of businesses and households and making loans to the public are the basic functions of:

answer

Commercial banks and thrift institutions

question

Which of the following would be considered to be the most liquid?

answer

Checkable deposits

question

Debit card balances are part of money supply M1, but credit card balances are not.

answer

True

question

The Federal Reserve System consists of which of the following?

answer

Board of Governors and the 12 Federal Reserve Banks

question

The use of a credit card is most similar to:

answer

Obtaining a short-term loan

question

When you use money to purchase groceries, money is functioning as a store of value.

answer

False

question

Refer to the table above. The size of the M2 money supply is:

answer

$5,899 billion

question

The destabilizing effects of defaulting mortgages quickly spread throughout the financial system because those mortgages were involved in widespread:

answer

Securitization

question

The most important among the Federal Reserve district banks in conducting monetary policy is the:

answer

New York bank

question

Economic studies conducted in industrially advanced countries suggest there is:

answer

An inverse relationship between the degree of independence of the central bank and the size of the average annual rate of inflation

question

The M1 money supply is composed of currency, checkable deposits, and savings deposits.

answer

False

question

In the United States, all money is essentially the debt of the Fed, commercial banks, and thrift institutions.

answer

True

question

The so-called near-monies have the following characteristics, except:

answer

Part of money supply M1

question

The Financial Crisis of 2007-2008 was triggered by problems in the dot.com sector of the economy.

answer

False

question

The Federal Reserve System is a bankers' bank, and thereby acts as a \"lender of last resort\" to banks.

answer

True

question

If product prices were stated in terms of tobacco leaves, then tobacco leaves would be functioning primarily as:

answer

A unit of account

question

If all depositors of a bank were to try withdrawing all their deposits at the same time, a good solid bank should be able to meet all the withdrawals.

answer

False

question

Which of the following statements is correct?

answer

A bank can only grant loans to customers if it has excess reserves

question

Money is \"created\" when:

answer

A bank grants a loan to a customer

question

Assume that the required reserve ratio is 20 percent. A business deposits a $50,000 check at Bank A; the check is drawn against Bank B. What happens to the excess reserves at Bank A and Bank B?

answer

Increase by $10,000 at Bank A, and decrease by $10,000 at Bank B

question

Refer to the data given above. If the required reserve ratio is 10 percent, the bank has excess reserves of:

answer

$22,000

question

The granting of a $10,000 loan and the purchase of a $10,000 government bond from a securities dealer by a commercial bank would have the same effect on the money supply.

answer

True

question

When a bank buys government securities from the Fed, then the bank's ability to \"create money\" will be reduced.

answer

True

question

When a bank grants a loan, the money supply M1 will increase, even if the funds from the loan are not spent.

answer

True.

question

When a check is cleared against a bank, the bank will lose:

answer

Checkable deposits and reserves

question

A bank is in the position to make loans when required reserves:

answer

Are less than actual reserves

question

During a recession when banks tend to increase their excess reserves, the money supply M1 decreases.

answer

True

question

A bank's net worth is equal to its:

answer

Assets minus its liabilities

question

When loans are repaid at commercial banks:

answer

Money is destroyed

question

A single commercial bank must meet a 25 percent reserve requirement. If it initially has no excess reserves and then $2,000 in cash is deposited in the bank, it can increase its loans by a maximum of:

answer

$1,500

question

When a bank accepts additional deposits, its required reserves and excess reserves will both increase.

answer

True

question

If a bank has excess reserves of $100,000, then it can lend out only up to $100,000; but if the banking system has excess reserves of $100,000, then the system can make additional loans totaling more than $100,000.

answer

True

question

Refer to the data above. If a check for $14,000 is drawn and cleared against this bank, then its reserves and checkable deposits will be, respectively:

answer

$36,000 and $106,000

question

The relative importance of various asset items on a commercial bank's balance sheet reflects a bank's pursuit of which two conflicting goals?

answer

Liquidity and profits

question

Refer to the above information. The maximum amount by which this commercial banking system can expand the supply of money by lending is:

answer

$900,000 billion

question

Suppose that the reserve ratio is 6%, and applies only to checkable deposits. A bank has non-checkable time deposits of $300 million, checkable deposits of $100 million, and reserves of $8 million. What are the excess reserves of this bank?

answer

$2 million

Macro Chap. 14 & 15

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