In a fractional reserve banking system,

• the Federal Reserve has no control over the amount of money in circulation.

• banks can create money through the lending process.

•   the monetary system must be backed by gold.

•   bank panics cannot occur.

If you write a check on a bank to purchase a used Honda Civic, you are using money primarily as

• a medium of exchange.

• an economic investment.

• a store of value.

• a unit of account.

During periods of rapid inflation, money may cease to work as a medium of exchange

• unless it is backed by gold

• because it is too scarce for everyone to have enough for transactions.

• unless it has been designated legal tender.

• because people and businesses will not want to accept it in transactions

The reserve ratio refers to the ratio of a bank's

• reserves to its liabilities and net worth.

• capital stock to its total assets.

• required reserves to its checkable-deposit liabilities.

• checkable deposits to its total liabilities.

When loans are repaid at commercial banks,

• money is destroyed.

• the assets of commercial banks increase

• the net worth of commercial banks increases

• money is created.

Most modern banking systems are based on

• commodity money.

• fractional reserves

• money of intrinsic value

• 100 percent reserves.

Checkable deposits are

• not included in either Ml or M2.

• included in M1

• also called time deposits

• considered to be a near money

A commercial bank's reserves are

• liabilities to the commercial bank and assets to the Federal Reserve Bank holding them

• assets to both the commercial bank and the Federal Reserve Bank holding them.

• liabilities to both the commercial bank and the Federal Reserve Bank holding them.

• assets to the commercial bank and liabilities to the Federal Reserve Bank holding them.

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

• the sum of its checkable deposits and time deposits.

• its checkable deposits multiplied by the reserve requirement.

• the amount of its checkable deposits.

• its checkable deposits divided by its total assets.

The paper money used in the United States is

• Federal Reserve notes.

• Treasury notes

• National Bank notes

• United States notes.