Studied by 4 people
1. A person can trade their labor for money and then use that money to purchase needed goods and services without having to barter their labor for goods and services directly. This describes which aspect of money?
a. Fungibility
b. Illiquidity
c. Unity of account
d. Medium of exchange
d. Medium of exchange
2. You deposit money into your savings account from each paycheck. This saved money in your account is being used as
a. A medium of exchange
b. A store of value
c. A unit of account
d. An illiquid asset
e. A savings bond
b. A store of value
3. Which of the following is NOT part of M1?
a. Time deposits
b. Checkable deposits
c. Coins
d. Travelers checks
e. Currency
a. Time deposits
4. Assume the required ratio is .1. If a bank initially has no Excess Reserves and $10,000 cash is deposited in the bank, the maximum amount by which this bank may initially increase its loans is
a. $10,000
b. $9,000
c. $8,000
d. $5,000
e. $1,000
b. $9,000
5. Which of the following is true regarding commercial banking and balance sheets?
a. Assets owned by banks are usually interest or return-making, such as bonds, loans, etc.
b. Liabilities are things which the bank must pay to others, such as customers with deposits are the bank
c. Banks create money by turning deposits into loans
d. American banks have reserve ratios that are generally set by the Federal Reserve
e. Banks are not legal required to loan out excess reserves
N/A
6. If the reserve requirement is 25 percent, the existence of $200 worth of excess reserves in the banking system can lead to a maximum expansion of the money supply equal to
a. $200
b. $0
c. $400
d. $800
e. $600
N/A
7. Assume that the reserve requirement is 10 percent, but banks voluntarily keep some excess reserves. A $2 million increase in new excess reserves will result in
9. Which of the following is true for the money market (graphically or conceptually)?
a. The demand for money is vertical
b. The supply of money is perfectly elastic
c. There is no relationship between the nominal interest rate and the quantity of money demanded
d. There is an inverse relationship between the nominal interest rate and the quantity of money demanded
e. A decrease in the nominal interest rate will shift the money supply to the right
f. The supply of money is vertical
g. The Federal Reserve can change money supply if it chooses
h. Private banks are the only institutions that can change the money supply
b. The supply of money is perfectly elastic
d. There is an inverse relationship between the nominal interest rate and the quantity of money demanded
f. The supply of money is vertical
g. The Federal Reserve can change money supply if it chooses
10. Open market operations refer to which of the following activities?
a. The buying and selling of stocks by private individuals
b. The requiring of banks to hold reserves from each deposit
c. The buying and selling of government debt by the Federal Reserve
d. Local governments issuing bonds to build schools
e. Government purchases of goods and services
c. The buying and selling of government debt by the Federal Reserve
Note 
Flashcard (50)