Question 1

A bank has reserves of $40, loans of $110, deposits of $90, and owners' equity of $60. Which of the following represents the bank's total assets?

Accepted Answer

The answer of A bank has reserves of $40, loans...

Question 2

-Refer to Table 13.2. First Charter Bank's total assets:

Accepted Answer

First Charter Bank's total assets are $900, as shown in the "Total Assets" column of Table 13.2.

Question 3

Dena won $1,000 at a bingo game. She deposits her $1,000 winnings into a money market fund so that she can use the money next year to pay for her tuition. This is an example of money serving as a (an):

Accepted Answer

By depositing her winnings into a money market fund, Dena is using money as a store of value, as she is keeping her money in a place where it can earn interest and retain its value until she needs it to pay for tuition.

Question 4

-Refer to Table 13.2. The required reserve ratio is 20%. If the First Charter Bank is meeting its reserve requirement and has no excess reserves, its reserves equal:

Accepted Answer

The answer of 
-Refer to Table 13.2. The required reserve...

Question 5

Recall Application 1, "City-Issued Money in the Great Depression," to answer the following questions:
-According to the application, which of the following entities issued their own scrip (money issued for emergency use) during the Great Depression?

Accepted Answer

According to the application, cities, school boards, and corporations issued their own scrip during the Great Depression.

Question 6

Owners' equity is:

Accepted Answer

Owners' equity is calculated as assets minus liabilities, representing the residual interest in the assets of the entity after deducting liabilities.

Question 7

-Refer to Table 13.4. First Charter Bank could still make additional loans of $40,000 if the required reserve ratio were:

Accepted Answer

The answer of 
-Refer to Table 13.4. First Charter Bank...

Question 8

The seven members of the Board of Governors are appointed to _______ terms by the President.

Accepted Answer

The seven members of the Board of Governors are appointed to 14-year terms by the President. This is meant to ensure their independence from political pressures and changes in presidential administrations. However, no member can serve more than one full term, and terms are staggered so that one term expires every two years.

Question 9

Recall Application 1, "City-Issued Money in the Great Depression," to answer the following questions:
-According to the application, which of the following were examples of scrip money issued during the Great Depression?

Accepted Answer

The application states that during the Great Depression, examples of scrip money included $1 bills created on old tires, clamshell money, and paper bills that resembled government-issued currency. Therefore, choice D, "All of the above are correct," is the best answer.

Question 10

Recall Application 2, "The Growth in Excess Reserves" to answer the following questions:
-According to the application, prior to 2007, banks earned:

Accepted Answer

Prior to 2007, banks did not earn any interest on required or excess reserves.

Question 11

Recall Application 2, "The Growth in Excess Reserves" to answer the following questions:
-According to the application, what was the interest rate banks earned on excess reserves prior to September 2008?

Accepted Answer

The application states that banks earned a zero percent interest rate on excess reserves prior to September 2008.

Question 12

The Bank of Texas has $1 million in deposits and $200,000 in reserves. If excess reserves are equal to $150,000, the required reserve ratio is:

Accepted Answer

The answer of The Bank of Texas has $1 million...

Question 13

How many individuals are included in the Federal Open Market Committee (FOMC)?

Accepted Answer

The FOMC consists of 12 individuals, including the seven members of the Board of Governors of the Federal Reserve System and five of the 12 Reserve Bank presidents.

Question 14

Which of the following assets is the largest component of M2?

Accepted Answer

Savings deposits are typically the largest component of M2, as they include a significant portion of the money supply held in savings accounts.

Question 15

Which of the following assets is easiest to make transactions with?

Accepted Answer

Checking deposits are the easiest to make transactions with as they allow for immediate access to funds and can be easily transferred or withdrawn. Time deposits, individual retirement accounts, and money market mutual funds may have restrictions or penalties for early withdrawal.

Question 16

Which of the following is a function of the Federal Reserve?

Accepted Answer

The Federal Reserve is responsible for providing a system of check collection, conducting monetary policy, and supplying currency to the economy. These are just a few of the many functions of the Federal Reserve, which is often referred to as the central bank of the United States. Other functions include regulating banks and other financial institutions and promoting financial stability. The Federal Reserve plays a critical role in the U.S. economy, and its actions can have a significant impact on everything from inflation and employment to interest rates and economic growth.

Question 17

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

Accepted Answer

Money market accounts are included in M2 but not in M1. M1 includes all of the most liquid forms of money, such as physical currency and checking account deposits, while M2 adds in slightly less liquid forms of money, such as savings account deposits and money market mutual funds.

Question 18

In order to provide liquidity to the economy after the September 11, 2001, terrorist attacks against the United States, the Fed:

Accepted Answer

The Fed implemented all three measures in order to provide liquidity to the economy after 9/11. Increasing direct lending to commercial banks and increasing the length of the "Federal Reserve float" both provide additional funds to banks to lend out to the economy. Purchasing government securities in the marketplace also injects cash into the economy by replacing those securities with funds in the hands of investors.

Question 19

The development of money as a medium of exchange makes trade easier because:

Accepted Answer

Money eliminates the "double coincidence of wants" problem, which means that people no longer have to find someone who wants exactly what they have in order to trade efficiently. This makes trade easier and more efficient. Holding money may increase income or wealth, but those are not direct benefits of money as a medium of exchange. The availability of other mediums of exchange is also not necessarily relevant to the development of money as a medium of exchange.

Question 20

If the total assets of the bank exceeds the banks total liabilities, then:

Accepted Answer

If the total assets of the bank exceed its total liabilities, then the owner's equity is positive. This is because owner's equity is the difference between the bank's total assets and total liabilities.

Quiz 13: Money and the Banking System