WorksheetsChapter 12 - Money & Banking Review
Total questions: 25
Worksheet time: 50mins
Changing from a barter economy to a money economy can reduce transaction costs.
True
False
Small-denomination time deposits are part of M2, but not part of M1.
True
Falsee
Required reserves are a set percentage of total reserves that must be held in cash in a bank's vault or in the bank’s reserve account at the Fed.
True
False
The Fed pays banks interest on bank deposits held on reserve at the Fed.
True
False
A financial system is a means of bringing together savers and borrowers.
True
False
Barter is
the exchange of goods and services for goods and services without the use of money.
the exchange of money for goods and then the exchange of those goods for money.
the exchange of money for money, or the exchange of money for stocks and bonds.
any exchange, with or without the use of money, in which the participants negotiate (or barter) the price of the goods to be exchanged.
Which of the following illustrates a barter transaction?
A bushel of oranges is traded for a bushel of apples.
Someone buys a pizza for the special price of $4.
Someone buys a house for $100,000.
Someone buys a pizza for the special price of $4 & Someone buys a house for $100,000.
Transaction costs are best defined as the
various costs of different goods and services.
cost of one good in terms of another; that is, the price of apples in terms of oranges.
costs involved in borrowing money from someone, that is, the interest that must be paid for the use of someone else's money.
costs associated with the time and effort necessary to make an exchange.
Which of the following is a correct listing of money's functions?
source of credit, value of transaction costs, unit of barter
medium of barter, medium of exchange, medium of transactions
unit of barter, unit of account, a unit of income
store of value, store of exchange, measure of account
store of value, medium of exchange, unit of account
Money's basic advantage as compared to barter is that
everybody has money but not everyone has the opportunity to barter.
a money system relies on a double coincidence of wants.
money reduces transaction costs.
money is the only medium you can use to store your wealth.
If a person uses money to buy a pair of shoes, money is functioning as
a unit of account.
a store of value.
a medium of exchange.
none of the answers are correct
Compared to barter, money __________ transaction costs, making transactions __________ time-consuming.
increases ; more
increases ; less
reduces ; more
reduces ; less
Your neighbor has knowledge of economics and you would like her to share it with you. You own a car, a CD player and a new pair of running shoes. You wish to make a trade, but the neighbor does not want what you have. The problem can be stated as follows: You are not satisfying the
rule of transaction costs.
double coincidence of wants.
law of marketability.
terms of a common denominator.
Historically, which of the following goods have evolved into money?
gold
salt
cattle
cocoa beans
all of the answers are correct
A savings deposit is a type of
time deposit that is payable on demand.
time deposit that earns interest and allows the depositor to write checks payable to other persons.
time deposit that does not earn interest but does offer limited check-writing services.
interest-earning account at a bank or thrift institution in which funds can be withdrawn at any time without a penalty payment.
checkable deposit that also pays interest.
Fractional reserve banking is a term used to describe a banking system whereby
individual banks share a fraction of the total funds deposited in the whole banking system.
banks are required to quote interest rates in fractions.
banks hold reserves equal to only a fraction of their deposit liabilities.
banks hold reserves equal to a multiple of their deposit liabilities; that is, fractional in this case really means multiple.
banks are required to maintain a certain fraction of their deposits in the form of checkable deposits, a certain fraction of their deposits in the form of savings deposits, etc.
A "money market deposit account" is a(n)
checking account that pays no interest.
bank account with a specified maturity date.
store of Federal Reserve Notes held in bank vaults to cash checkable deposits on demand.
checking account created from an automatic transfer from a savings account.
interest-earning account at a bank or thrift institution that usually has a minimum balance requirement.
To an economist, credit cards ___________ money. When a credit card is used to make a purchase, _____________ is incurred, which ________ the case when money is used to make a purchase.
are ; an asset ; is not
are not; an asset ; is also
are ; a liability ; is also
are not ; a liability ; is not
In banking, another term for bank capital is
net worth
total liabilities
total assets
checkable deposits
Total bank reserves equal
checkable deposits + vault cash + traveler's checks.
vault cash + currency in the hands of the nonbanking public.
bank deposits at the Federal Reserve
bank deposits at the Federal Reserve + vault cash.
If checkable deposits in Bank A total $620 million and the required reserve ratio is 9 percent, then required reserves at Bank A equal
$564.2 million.
$468 million.
$28.8 million.
$55.8 million.
$558 million.
Ninth National Bank holds $200 million in checkable deposits and $18,000,000 in total reserves. With a required reserve ratio of 8 percent, how much in excess reserves is Ninth National holding?
$1,440,000
$218,000,000
$17,440,000
$16,000,000
$2,000,000
Reserves held beyond the required amount are called __________ reserves.
redundant
precautionary
excess
surplus
Bank A has checkable deposits of $900,000 and total reserves of $112,000. If the required reserve ratio is 8 percent, the bank has excess reserves of
$40,000
$72,000
$13,440
$4,000
When a bank makes a loan to one of its customers, to the bank the loan is classified as
an asset
an asset
a liability
neither an asset nor a liability
an asset in some cases and liability in other cases, depending on the type of loan
