Macro Homework 11

question

In economics, money is defined as A. the total value of one’s assets in current prices B. the total value of one’s assets minus the total value of one’s debts, in current prices C. the total amount of salary, interest, and rental income earned in a year D. any asset people generally accept in exchange for goods and services
answer

D. any asset people generally accept in exchange for goods and services
question

The major shortcoming of a barter economy is A. the requirement of a double coincidence of wants. B. the requirement of specialization and exchange. C. that goods and services are not traded. D. that money loses value from inflation.
answer

A. the requirement of a double coincidence of wants.
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Silver is an example of a A. commodity money B. barter money C. fiat money D. representative money
answer

A. commodity money
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The statement, “My iPhone is worth $300” 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
answer

B. a unit of account
question

Which of the following functions of money would be violated if inflation were high? A. unit of account B. store of value C. certificate of gold D. medium of exchange
answer

B. store of value
question

Which of the following information about fiat money is false? Fiat money A. is backed by gold. B. serves as a medium of exchange. C. has little to no value except as money. D. is authorized by a central bank or governmental body.
answer

A. is backed by gold.
question

The M1 measure of the money supply equals A. paper money plus coins in circulation. B. currency plus checking account balances. C. currency plus checking account balances plus traveler’s checks. D. currency plus checking account balances plus traveler’s checks plus savings account balances.
answer

C. currency plus checking account balances plus traveler’s checks.
question

If a person withdraws $500 from his/her savings account and puts it in his/her checking account, then M1 will ________ and M2 will ________. A. increase; decrease B. increase; not change C. not change; increase D. not change; decrease
answer

B. increase; not change
question

The M2 measure of the money supply equals A. savings account balances plus small-denomination time deposits plus traveler’s checks. 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 savings account balances plus small-denomination time deposits plus noninstitutional money market fund shares.
answer

D. M1 plus savings account balances plus small-denomination time deposits plus noninstitutional money market fund shares.
question

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.
answer

C. reserves, loans, and holdings of securities.
question

The largest liability on the balance sheet of most banks is its A. loans. B. holdings of securities. C. deposits with the Federal Reserve. D. checking account and savings account deposits of its customers.
answer

D. checking account and savings account deposits of its customers.
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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
answer

B. deposits multiplied by
question

Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. As a result of Kristy’s deposit, Bank A’s reserves immediately increase by A. $2,000 B. $8,000 C. $10,000 D. $50,000
answer

C. $10,000
question

Suppose you withdraw $500 from your checking account deposit and bury it in a jar in your back yard. If the required reserve ratio is 10 percent, checking account deposits in the banking system as a whole could drop up to a maximum of A. $0 B. $50 C. $500 D. $5,000
answer

D. $5,000
question

Assets Liabilities Reserves +$8000 Deposits +$8000 Refer to Table above. Suppose a transaction changes a bank’s balance sheet as indicated in the following T-account, and the required reserve ratio is 10 percent. As a result of the transaction, the bank can make a maximum loan of A. $0 B. $800 C. $7,200 D. $8,000
answer

C. $7,200
question

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.
answer

A. actual reserves equal their required reserves.
question

Which of the following best describes how banks create money? A. Banks charge higher interest rates on loans than they pay on deposits. B. Banks charge fees for providing financial advice. C. Banks create checking account deposits when making loans from excess reserves. D. Banks make loans from reserves
answer

C. Banks create checking account deposits when making loans from excess reserves.
question

Economies cannot function without money. A. True B. False
answer

B. False
question

The amount of national income in an economy equals the money supply in an economy. A. True B. False
answer

B. False
question

If banks receive a greater amount of reserves and do not hold all of these reserves as excess reserves, the money supply expands. A. True B. False
answer

A. True

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