Question 1

According to the textbook,many people believe that the character Dorothy,in the book The Wonderful Wizard of Oz,represents

Accepted Answer

Many people believe that Dorothy represents William Jennings Bryan, the populist candidate for president who believed in the power of silver over gold (represented by the ruby slippers in the book). Dorothy's journey to Oz and her eventual return home can be seen as a metaphor for Bryan's unsuccessful presidential campaigns and his return to his home state of Nebraska.

Question 2

Which of the following is not included in M1?

Accepted Answer

Retail money market mutual funds are not included in M1 as they are considered part of M2, which includes assets that are less liquid than M1. Checkable deposits and traveler's checks are both included in M1 as they are readily available for transactions and can be used as a medium of exchange.

Question 3

Which of the following is true?

Accepted Answer

B and C are correct because they accurately describe the relationship between total reserves, required reserves, and excess reserves in banking. Total reserves are the sum of required reserves and excess reserves (C), and excess reserves can be calculated by subtracting required reserves from total reserves (B).

Question 4

When a bank makes a loan to one of its customers,to the bank the loan is classified as

Accepted Answer

When a bank makes a loan to one of its customers, it is considered an asset to the bank because it is money that is owed to them and is expected to be paid back with interest. This is because the bank can earn interest on the loan and generate income from it.

Question 5

A bank has $10,000 in excess reserves and the required reserve ratio is 20 percent.This means the bank could have __________ in checkable deposit liabilities and __________ in total reserves.

Accepted Answer

The bank could support $100,000 in checkable deposits because with a 20% reserve requirement, $20,000 (20% of $100,000) is required as reserves. Since it has $10,000 in excess reserves, its total reserves must be $30,000 ($20,000 required plus $10,000 excess).

Question 6

Reserves held beyond the required amount are called __________ reserves.

Accepted Answer

Excess reserves are reserves held beyond the required amount, which banks can use for lending or investment purposes. Redundant and surplus reserves are not commonly used terms in banking, while precautionary reserves are reserves held by banks to mitigate any unexpected losses or withdrawals.

Question 7

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?

Accepted Answer

The required reserves are 8% of $200 million, which is $16 million. The total reserves are $18 million, so the excess reserves are $18 million - $16 million = $2 million.

Question 8

M2 includes M1 plus all of the following except

Accepted Answer

M2 includes M1 (currency in circulation, demand deposits, traveler's checks, and other checkable deposits) plus savings deposits, retail money market mutual funds, and small-denomination time deposits. However, short-term U.S. government securities are not included in M2 but rather in M3, which is a broader measure of money supply that includes M2 plus large-denomination time deposits, repurchase agreements, and institutional money market mutual fund balances.

Question 9

The store of value function of money refers to the ability of money to

Accepted Answer

The store of value function of money refers to its ability to maintain its value over time. Money is valuable and widely accepted because it retains its purchasing power over time, making it a reliable store of value.

Question 10

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

Accepted Answer

The bank's required reserves are 8% of $900,000, which equals $72,000. Since the bank has total reserves of $112,000, the excess reserves are $112,000 - $72,000 = $40,000.

Question 11

Bank A has checkable deposits of $800,000 and total reserves of $200,000.If the required reserve ratio is 0.11,the bank has required reserves of

Accepted Answer

The required reserves are calculated by multiplying the checkable deposits by the required reserve ratio: $800,000 * 0.11 = $88,000.

Question 12

A bank has $7 million in checkable deposits and $1.2 million in total reserves.If the required reserve ratio is 10 percent,then the bank has

Accepted Answer

The required reserves are calculated as 10% of checkable deposits, which is 10% of $7 million = $700,000. Excess reserves are total reserves minus required reserves, which is $1.2 million - $700,000 = $500,000. Therefore, both A and B are correct.

Question 13

Money is defined by economists as

Accepted Answer

Money is widely accepted in exchange and is used for the repayment of debts. It is not directly tied to the market value of any particular asset, and while it can be received during a specified period of time, that is not the defining characteristic of money. Therefore, option C is the most accurate definition of money according to economists.

Question 14

The amount of required reserves a bank holds depends on the

Accepted Answer

The amount of required reserves a bank holds is dependent on the required reserve ratio, which is set by the central bank. The required reserve ratio is the percentage of deposits that banks are required to hold as reserves.

Question 15

"Barter" implies that

Accepted Answer

Barter is a system of exchange where goods or services are traded directly for other goods or services without the use of money. Therefore, to get one good or service, an individual offers another.

Question 16

Bank A holds $1 million in required reserves and the required reserve ratio is 9 percent.It follows that Bank A holds checkable deposit liabilities that total approximately

Accepted Answer

The required reserve ratio is the percentage of deposits that a bank must hold as reserves. To find the total checkable deposit liabilities, divide the required reserves by the reserve ratio: $1 million / 0.09 = approximately $11.11 million.

Question 17

If checkable deposits in Bank A total $620 million and the required reserve ratio is 9 percent,then required reserves at Bank A equal

Accepted Answer

Required reserves are calculated by multiplying the checkable deposits by the reserve ratio: $620 million * 0.09 = $55.8 million.

Question 18

The unit of account function of money refers to the

Accepted Answer

The unit of account function of money refers to the common denominator of measurement that is provided by money. Money allows us to measure and compare the value of goods and services to each other in a standardized way. Option A is incorrect because money and income are not the same thing. Option C is incorrect because not all money is intrinsically valuable.

Question 19

In a barter economy,

Accepted Answer

In a barter economy, goods and services are traded directly for each other without the use of money or coins. The exchange is based on the perceived value of the goods or services being traded. Money as a medium of exchange and store of value is not present in this type of economy.

Question 20

Tenth National Bank holds $285 million in checkable deposits and $35 million in reserves.With a required reserve ratio of 11 percent,how much in excess reserves is Tenth National holding?

Accepted Answer

First, calculate the required reserves by multiplying the checkable deposits by the required reserve ratio: 
$285 million x 0.11 = $31.35 million

Then, subtract the required reserves from the actual reserves: 
$35 million - $31.35 million = $3.65 million

Therefore, the amount of excess reserves that Tenth National is holding is $3.65 million.

Quiz 12: Government and Product Markets: Antitrust and Regulation