Banking

Which of the following best describes money as a "medium of exchange"?

• An asset used to buy and sell goods and services.

• A unit of measurement for economic transactions.

• A method for storing financial value over time.

• A system for governmental tax collection.

How is money used as a "unit of account"?

• By being a standard numerical monetary unit of measure.

• By facilitating the exchange of services only.

• By acting as a legal tender for debts.

• By regulating the stock market.

What is the primary factor that makes money valuable?

• Its color and design

• The demand relative to its supply

• The number of people using it

• The material it is made of

What must happen to the supply of money for its purchasing power to remain stable over time?

• It must be unlimited

• It must grow at the same rate as goods and services

• It must be limited

• It must be replaced by digital currency

What are the components of M1 in the measurement of the money supply?

• Currency, savings deposits, money market mutual funds

• Currency, checking deposits, traveler's checks

• Currency, time deposits, traveler's checks

• Checking deposits, savings deposits, time deposits

Which of the following is included in M2 but not in M1?

• Currency

• Checking deposits

• Savings deposits

• Traveler's checks

What does M2 include that is not a part of M1?

• Currency and checking deposits

• Savings deposits and money market mutual funds

• Traveler's checks and time deposits

• Checking deposits and traveler's checks

How do banks typically use the majority of the deposits they receive?

• They are kept in the vault for security purposes

• They are used to pay high salaries to bank executives

• They are invested and loaned out, providing interest income for the bank

• They are used to pay utility bills and other operational costs

What do banks use as reserves to meet their daily obligations toward their depositors?

• Foreign currencies only

• Gold reserves

• A portion of their assets, either as cash or deposits with the Fed

• Stocks and bonds

What effect does a lower percentage of the reserve requirement have on the money supply when banks extend loans?

• Decreases the money supply

• No effect on the money supply

• Reduces the number of loans

• Increases the potential expansion of the money supply