Question 1

Which of the following statements is false?

Accepted Answer

All the statements provided are true, reflecting different aspects of economic theories related to information asymmetry, moral hazard, and adverse selection.

Question 2

Banks in the United States operate under a fractional reserve system,which means they must maintain only a fraction of their deposits in the form of

Accepted Answer

Banks in the United States must maintain only a fraction of their deposits in the form of reserves, meaning they hold a portion of customers' deposits on hand, either as cash or on deposit with the Federal Reserve. This reserve serves as a safeguard against mass withdrawals and allows banks to lend out the remainder of their deposits in the form of loans. The other options (A, B, and C) are not accurate descriptions of a fractional reserve system.

Question 3

To a bank,reserves are classified as

Accepted Answer

Reserves are considered an asset for a bank because they represent funds that the bank holds and can use to meet its obligations.

Question 4

If M1 is $1,200 billion,currency held outside banks is $400 billion,and traveler's checks is $10 billion,then small-denomination time deposits equal

Accepted Answer

The question provides information about M1, currency held outside banks, and traveler's checks, but small-denomination time deposits are not directly related to these values without additional information about demand deposits, other checkable deposits, or the total of M2 (which includes M1 and small-denomination time deposits among other components). Therefore, we cannot calculate the value of small-denomination time deposits with the given information.

Question 5

To a bank,a checkable deposit is classified as

Accepted Answer

A checkable deposit is money that a customer has deposited in a bank that can be withdrawn on demand using methods such as writing a check or using an ATM card. It is classified as a liability for the bank because it represents a debt owed to the customer. The bank must hold onto the customer's funds until the customer decides to withdraw them. While the bank earns interest on these deposits, it must also ensure that it has enough liquidity to meet any demand for withdrawals.

Question 6

If checkable deposits rise,it follows that the

Accepted Answer

When checkable deposits rise, banks require more reserves to cover potential withdrawals. Therefore, the dollar amount of reserves will rise to meet the required reserve ratio.

Question 7

When economists say that banks must hold a percentage of their total deposits in reserve form,what does this mean?

Accepted Answer

When economists say that banks must hold a percentage of their total deposits in reserve form, it means that banks must hold a fraction of their customers' deposits either as bank deposits at the Federal Reserve or as vault cash or both. This reserve requirement is a tool used by central banks to control the money supply and manage inflation. With this reserve requirement, the banks cannot lend out all their deposits, thereby reducing the amount of money in circulation.

Question 8

Which of the following statements is false?

Accepted Answer

Credit cards are not considered money because they do not represent a store of value or a medium of exchange in and of themselves. They simply facilitate transactions using an existing form of money (such as currency or a checking account).

Question 9

When people in a barter economy began to accept the good that had greater acceptability than all other goods,they weren't trying to create the institution of money.They were simply trying to __________.

Accepted Answer

The statement indicates that when people began accepting a particular good with greater acceptability than all other goods, it was for the purpose of making trading easier for themselves. This implies that they were trying to establish a more efficient system for exchanging goods, which is consistent with the development of a medium of exchange, such as money. The other choices (A, B, D, and E) are not supported by the information given in the statement.

Question 10

If reserves equal $29 million and vault cash equals $29 million,it follows that

Accepted Answer

Reserves in a bank include vault cash and deposits at the Federal Reserve. Since both reserves and vault cash are equal at $29 million, bank deposits at the Federal Reserve must be $0 (Option D). The information given in the question does not provide any insight into currency in the hands of the public or excess reserves, so options A, B, and C cannot be determined.

Question 11

To a bank,a loan the bank has made to its borrowers is classified as

Accepted Answer

A loan made by a bank is an asset because it represents the amount of money the bank expects to be repaid with interest.

Question 12

In which setting are the transaction costs of making an exchange likely to be the highest?

Accepted Answer

Buying a house involves numerous transaction costs such as real estate agent fees, legal fees, appraisal fees, and potentially inspection fees. These costs can add up to a significant amount, making the transaction costs of buying a house likely to be the highest compared to the other options listed.

Question 13

Which of the following statements is true?

Accepted Answer

- Statement A is true as savings deposits are not a part of the most basic definition of money supply (M1). 
- Statement B is also true as M1 refers to the money that can be used for making transactions, such as currency, demand deposits, traveler's checks, etc. 
- Statement C is true as money acts as a medium of exchange and reduces the transaction costs involved in barter exchanges. 
Therefore, all three statements are true and the best choice is E.

Question 14

A bank has $50,000 in excess reserves and the required reserve ratio is 10 percent.This means the bank could have __________ in checkable deposit liabilities and __________ in (total)reserves.

Accepted Answer

The answer of A bank has $50,000 in excess reserves...

Question 15

The risk of specializing (in the production of one good or service)is

Accepted Answer

Specializing in the production of one good or service involves relying on trade to obtain other goods or services. In a barter economy, the risk of being unable to find a trading partner with a double coincidence of wants is greater, increasing the risk of specialization. In a money economy, the use of money as a medium of exchange reduces this risk, making specialization less risky. Therefore, answer choice B is incorrect, and E is correct.

Question 16

Which of the following is not a component of M1?

Accepted Answer

M1 is a measure of the money supply that includes the most liquid types of money, which are currency held outside of banks (A), traveler's checks (B), and checkable deposits (D). Savings deposits (C) are not included in M1 since they have withdrawal restrictions and are not as easily converted into cash.

Question 17

Bank deposits at the Federal Reserve = $40 billion,vault cash = $2 billion,the required reserve ratio = 0.10,and total checkable deposits = $400 billion.It follows that required reserves equal __________ billion,(total)reserves equal __________ billion and excess reserves equal __________ billion.

Accepted Answer

The answer of Bank deposits at the Federal Reserve =...

Question 18

Asymmetric information exists when

Accepted Answer

Asymmetric information occurs when the two parties in an exchange have different levels of knowledge about the good being exchanged. This can create problems such as adverse selection and moral hazard, where one party takes advantage of the other's lack of knowledge. Choices A, B, and D do not accurately describe asymmetric information.

Question 19

If excess reserves are $10 million,(total)reserves are $14 million,and the required reserve ratio is 10%,then required reserves equal ________________ and checkable deposits equal ____________________.

Accepted Answer

Required reserves are calculated as total reserves minus excess reserves, which equals $4 million ($14 million - $10 million). Checkable deposits are calculated by dividing the required reserves by the required reserve ratio, which equals $40 million ($4 million / 0.10).

Question 20

If reserves equal $59 million and vault cash equals $29 million,it follows that

Accepted Answer

Reserves = Vault cash + Deposits at Federal Reserve
$59 million = $29 million + Deposits at Federal Reserve
Deposits at Federal Reserve = $59 million - $29 million = $30 million. Therefore, the answer is D (bank deposits at the Federal Reserve equal $30 million).

Quiz 12: Government and Product Markets: Antitrust and Regulation

Which of the following statements is false?

Banks in the United States operate under a fractional reserve system,which means they must maintain only a fraction of their deposits in the form of

To a bank,reserves are classified as

If M1 is $1,200 billion,currency held outside banks is $400 billion,and traveler's checks is $10 billion,then small-denomination time deposits equal

To a bank,a checkable deposit is classified as

If checkable deposits rise,it follows that the

When economists say that banks must hold a percentage of their total deposits in reserve form,what does this mean?

Which of the following statements is false?

When people in a barter economy began to accept the good that had greater acceptability than all other goods,they weren't trying to create the institution of money.They were simply trying to __________.

If reserves equal $29 million and vault cash equals $29 million,it follows that

To a bank,a loan the bank has made to its borrowers is classified as

In which setting are the transaction costs of making an exchange likely to be the highest?

Which of the following statements is true?

A bank has $50,000 in excess reserves and the required reserve ratio is 10 percent.This means the bank could have in checkable deposit liabilities and in (total) reserves.

The risk of specializing (in the production of one good or service) is

Which of the following is not a component of M1?

Bank deposits at the Federal Reserve = $40 billion,vault cash = $2 billion,the required reserve ratio = 0.10,and total checkable deposits = $400 billion.It follows that required reserves equal billion,(total) reserves equal billion and excess reserves equal __ billion.

Asymmetric information exists when

If excess reserves are $10 million,(total) reserves are $14 million,and the required reserve ratio is 10%,then required reserves equal and checkable deposits equal ____.

If reserves equal $59 million and vault cash equals $29 million,it follows that

Quiz 12: Government and Product Markets: Antitrust and Regulation

Which of the following statements is false?

Banks in the United States operate under a fractional reserve system,which means they must maintain only a fraction of their deposits in the form of

To a bank,reserves are classified as

If M1 is $1,200 billion,currency held outside banks is $400 billion,and traveler's checks is $10 billion,then small-denomination time deposits equal

To a bank,a checkable deposit is classified as

If checkable deposits rise,it follows that the

When economists say that banks must hold a percentage of their total deposits in reserve form,what does this mean?

Which of the following statements is false?

When people in a barter economy began to accept the good that had greater acceptability than all other goods,they weren't trying to create the institution of money.They were simply trying to __________.

If reserves equal $29 million and vault cash equals $29 million,it follows that

To a bank,a loan the bank has made to its borrowers is classified as

In which setting are the transaction costs of making an exchange likely to be the highest?

Which of the following statements is true?

A bank has $50,000 in excess reserves and the required reserve ratio is 10 percent.This means the bank could have __________ in checkable deposit liabilities and __________ in (total) reserves.

The risk of specializing (in the production of one good or service) is

Which of the following is not a component of M1?

Bank deposits at the Federal Reserve = $40 billion,vault cash = $2 billion,the required reserve ratio = 0.10,and total checkable deposits = $400 billion.It follows that required reserves equal __________ billion,(total) reserves equal __________ billion and excess reserves equal __________ billion.

Asymmetric information exists when

If excess reserves are $10 million,(total) reserves are $14 million,and the required reserve ratio is 10%,then required reserves equal ________________ and checkable deposits equal ____________________.

If reserves equal $59 million and vault cash equals $29 million,it follows that

A bank has $50,000 in excess reserves and the required reserve ratio is 10 percent.This means the bank could have in checkable deposit liabilities and in (total) reserves.

Bank deposits at the Federal Reserve = $40 billion,vault cash = $2 billion,the required reserve ratio = 0.10,and total checkable deposits = $400 billion.It follows that required reserves equal billion,(total) reserves equal billion and excess reserves equal __ billion.

If excess reserves are $10 million,(total) reserves are $14 million,and the required reserve ratio is 10%,then required reserves equal and checkable deposits equal ____.