Question 1

The currency of Camelot is the noble.King Arthur orders the minting of a five-noble gold coin,but it costs only four nobles to mine and process the amount of gold in the coin.Which of the following statements is true?

Accepted Answer

The answer of The currency of Camelot is the noble.King...

Question 2

If the cost of producing coins is lower than the face value of the coins,then the government receives revenue called

Accepted Answer

Seigniorage is the revenue earned by the government when the cost of producing coins is lower than the face value of the coins. In this case, the government produces token coins with face value higher than the cost of production, which means the government earns a profit called seigniorage. This answer is the only one that correctly matches the revenue term with the type of coins produced.

Question 3

In the world of banking,checks are

Accepted Answer

Checks are written instructions from a depositor to the bank to withdraw a certain amount of money from their account and transfer it to another account or payee. They do not serve as a form of money themselves, but rather authorize the transfer of funds from one account to another.

Question 4

The first bankers were probably

Accepted Answer

Historically, goldsmiths in ancient Greece and Rome were the first to provide banking services such as money lending and currency exchange. They also stored valuable items such as gold and silver for wealthy clients. Over time, their services evolved and they began to issue paper receipts for deposits, which eventually led to the creation of paper currency.

Question 5

Goldsmiths are considered to be the forerunners of modern banks because they

Accepted Answer

Goldsmiths used to lend out their gold reserves to earn interest, and they created "gold notes" as receipts for the gold deposited. These receipts could then be used as a form of payment, essentially creating money. This practice eventually evolved into modern fractional reserve banking.

Question 6

Which of the following have,at one time or another,been part of the U.S.money supply?

Accepted Answer

The answer of Which of the following have,at one time...

Question 7

An important function of commercial banks is to

Accepted Answer

Commercial banks make loans to individuals, businesses, and governments, which is a crucial function of the banking industry. This helps stimulate economic growth through investment and consumption. The other choices (printing new currency, issuing fiat money, minting coins, and redeeming currency for precious metals) are typically the responsibility of central banks or government agencies.

Question 8

The currency of Camelot is the noble.King Arthur orders the minting of a ten-noble gold coin,but it costs only seven nobles to mine and process the amount of gold in the coin.Which of the following statements is true?

Accepted Answer

The answer of The currency of Camelot is the noble.King...

Question 9

Under a fractional reserve banking system,banks may lend out only a fraction of their reserves.

Accepted Answer

This is the definition of a fractional reserve banking system - banks are required to hold only a fraction of their deposited funds in reserve, and can lend out the rest. This allows for an expansion of the money supply, but also creates the risk of a bank run if too many depositors try to withdraw their funds at once.

Question 10

The term seigniorage refers to

Accepted Answer

Seigniorage is the difference between the cost of producing coins or banknotes and their face value, which represents revenue earned by the government through the power to create and issue money.

Question 11

A government receives seigniorage whenever it

Accepted Answer

Seigniorage is the profit a government makes by minting coins with a face value greater than the cost of producing them. When people use these coins to buy goods and services, the government earns seigniorage.

Question 12

The currency of Camelot is the noble.King Arthur orders the minting of a five-noble gold coin,but it costs only four nobles to mine and process the amount of gold in the coin.Which of the following statements is true?

Accepted Answer

The answer of The currency of Camelot is the noble.King...

Question 13

Mary Ellen deposits $100 into her savings account every month.Her daughter Carolyn keeps all her pennies in a piggy bank.These are examples of money functioning as

Accepted Answer

The answer of Mary Ellen deposits $100 into her savings...

Question 14

Any bank that uses deposits to make loans

Accepted Answer

Banks that use deposits to make loans operate on a fractional reserve system, where they keep only a portion of deposits as reserves and lend out the rest.

Question 15

In the United States economy which one of the following is not money?

Accepted Answer

While a $100 U.S. Government bond represents a financial asset, it is not considered money because it cannot be used directly as a medium of exchange to purchase goods and services. The other options (A, B, C, and D) are all forms of money accepted as payment in the United States.

Question 16

To make sure they can accommodate withdrawal requests at any time,banks must keep a dollar on reserve in the bank vault for each dollar of deposits.

Accepted Answer

Banks are required to keep a certain percentage of deposits as reserves, which is determined by the reserve requirement determined by the central bank. This percentage is not always 100%, so banks do not need to keep a dollar on reserve for each dollar of deposits.

Question 17

Under a fractional reserve banking system,

Accepted Answer

Under fractional reserve banking system, banks are required to hold only a fraction of their deposits as reserves, while the rest can be lent out to earn interest. Therefore, bank reserves represent only a fraction of bank deposits.

Question 18

The original bankers were

Accepted Answer

The original bankers were goldsmiths who provided a safe place for people to store their precious metals and valuables. Over time, they began to issue paper receipts as a convenient way for individuals to conduct transactions without having to physically exchange metal. These receipts eventually became known as banknotes, and through this evolution, the goldsmiths transformed into modern banks.

Question 19

The first checks were probably notes written to a goldsmith asking him to transfer ownership of some designated amount of gold from the writer of the note to its bearer.

Accepted Answer

This is believed to be the origin of checks, which eventually evolved into the modern-day banking system.

Question 20

The reserve ratio is the ratio of

Accepted Answer

The reserve ratio is a measure of a bank's reserve holdings as a percentage of its total deposits. Therefore, it is calculated by dividing a bank's reserves by its total deposits. Choices A, B, C, and D are incorrect because they do not accurately reflect the definition of the reserve ratio.

Quiz 14: Money and the Financial System

The currency of Camelot is the noble.King Arthur orders the minting of a five-noble gold coin,but it costs only four nobles to mine and process the amount of gold in the coin.Which of the following statements is true?

If the cost of producing coins is lower than the face value of the coins,then the government receives revenue called

In the world of banking,checks are

The first bankers were probably

Goldsmiths are considered to be the forerunners of modern banks because they

Which of the following have,at one time or another,been part of the U.S.money supply?

An important function of commercial banks is to

The currency of Camelot is the noble.King Arthur orders the minting of a ten-noble gold coin,but it costs only seven nobles to mine and process the amount of gold in the coin.Which of the following statements is true?

Under a fractional reserve banking system,banks may lend out only a fraction of their reserves.

The term seigniorage refers to

A government receives seigniorage whenever it

The currency of Camelot is the noble.King Arthur orders the minting of a five-noble gold coin,but it costs only four nobles to mine and process the amount of gold in the coin.Which of the following statements is true?

Mary Ellen deposits $100 into her savings account every month.Her daughter Carolyn keeps all her pennies in a piggy bank.These are examples of money functioning as

Any bank that uses deposits to make loans

In the United States economy which one of the following is not money?

To make sure they can accommodate withdrawal requests at any time,banks must keep a dollar on reserve in the bank vault for each dollar of deposits.

Under a fractional reserve banking system,

The original bankers were

The first checks were probably notes written to a goldsmith asking him to transfer ownership of some designated amount of gold from the writer of the note to its bearer.

The reserve ratio is the ratio of