Question 1

People tend to hold more money as

Accepted Answer

As the price level rises, people tend to hold more money because it loses purchasing power. Additionally, if credit availability falls, people may not have access to as much credit, so they may need to hold more cash for purchases and emergencies.

Question 2

The unintended consequences of the federal deregulation of the interest paid depositors in the savings and loans was

Accepted Answer

B

Question 3

Money is created when someone

Accepted Answer

Money is created when someone takes out a bank loan because when the bank approves the loan, they deposit the loan amount into the borrower's bank account, increasing the money supply in circulation.

Question 4

Which statement is true?

Accepted Answer

M2 consists of currency, demand deposits, and other liquid deposits, while M3 includes M2 plus large denomination time deposits. Therefore, M2 plus large denomination time deposits equals M3.

Question 5

Which statement is true?

Accepted Answer

M2 is about five times the size of M1.

Question 6

In the early 1980s the savings and loan associations started making _____ loans and paying their shareholders _____ interest rates.

Accepted Answer

In the early 1980s, savings and loan associations started making riskier loans (such as commercial real estate loans) in an attempt to compete with commercial banks, and they paid their shareholders higher interest rates to attract more capital. This eventually led to a crisis in the industry in the late 1980s, as many of these loans failed and the savings and loans became insolvent.

Question 7

Which statement is true?

Accepted Answer

According to recent data from the Federal Reserve, as of August 2021, M2 (which includes cash, checking deposits, savings deposits, and other liquid assets) was over $20 trillion. It is important to note that numbers may fluctuate over time, but currently, option C is the most accurate. Options A and B are incorrect as currency only accounts for approximately 10% of the total money supply, and the double coincidence of wants is not required for the use of modern money. Option D is incorrect as option C is true.

Question 8

Statement I: The savings and loan debacle has cost the U.S.taxpayers hundreds of billions of dollars.
Statement II: One of the main causes of the savings and loan debacle was federal deregulation of that industry.

Accepted Answer

Both statements are true. The savings and loan debacle, which refers to the collapse of many savings and loan associations in the 1980s and early 1990s, did indeed cost the US taxpayers hundreds of billions of dollars. This was due to the government having to cover the losses incurred by failed savings and loan institutions. One of the main causes of the debacle was federal deregulation of the industry that allowed many savings and loan institutions to engage in risky lending practices, leading to their eventual collapse.

Question 9

The _____ demand for money is most sensitive to interest rate changes.

Accepted Answer

The speculative demand for money is based on the desire to hold money in order to take advantage of investment opportunities. As interest rates increase, the opportunity cost of holding money increases as well, causing a decrease in the speculative demand for money. Therefore, it is the most sensitive to interest rate changes.

Question 10

Statement I.Between 1987 and 1997 nearly one-third of all commercial banks failed.
Statement II: There are about 10 times as many commercial banks as savings and loan associations.

Accepted Answer

The answer of Statement I.Between 1987 and 1997 nearly one-third...

Question 11

Bank deposit creation is limited by

Accepted Answer

Reserve requirements set by the central bank limit the amount of deposits a bank can create through the lending process. The other options do not directly affect the ability of banks to create deposits.

Question 12

Banking began in

Accepted Answer

Banking can be traced back to medieval times when merchants and money lenders began keeping their coins and valuables in secure places and offering loans to others. The first banks as we know them today, however, began emerging in the 17th century in Europe.

Question 13

Back in the Middle Ages,the only safe place to put your money was

Accepted Answer

During the Middle Ages, there were no government-backed Treasury bills or stable financial institutions like banks. Therefore, the only option for keeping one's money safe was to entrust it to goldsmiths' safes. These safes were highly secure and well-guarded, which made them an ideal choice for storing valuables and currency. Real estate was not a practical investment option for most people during this time, and commodity futures trading did not exist in the way it does today.

Question 14

All large financial institutions have to hold a reserve of almost ____% of their demand deposits.

Accepted Answer

The correct answer is 10%. This is a common reserve requirement set by central banks or regulatory authorities to ensure that financial institutions have enough liquidity to meet short-term obligations and withdrawals.

Question 15

Statement I: In the 1980s,many savings and loan associations made very risky real estate loans that were not repaid.
Statement II: Risky investments in junk bonds played a role in the decline and fall of the savings and loan industry.

Accepted Answer

Both statements are true. In the 1980s, many savings and loan associations made risky real estate loans that ultimately led to their failure. At the same time, investments in junk bonds, which were highly speculative and had poor credit ratings, also played a role in the decline of the savings and loan industry. The failure of many savings and loan associations had a significant impact on the US economy at the time.

Question 16

A medium of exchange is

Accepted Answer

The answer of A medium of exchange is
...

Question 17

John Maynard Keynes said that people have three motives for holding money.Each of the following is a Keynesian motive except

Accepted Answer

The three motives for holding money according to Keynes are transactions, speculative, and precautionary. Inflation is not one of the three motives.

Question 18

Which one of the following is not money?

Accepted Answer

Although gold is a valuable commodity, it is not considered to be money because it is not widely accepted as a medium of exchange in most transactions. Money is typically defined as a universally accepted medium of exchange, store of value, and unit of account. A dime, a demand deposit, and a NOW account are all types of money because they fulfill these functions.

Question 19

Which of the following is money?

Accepted Answer

Money is defined as a medium of exchange, a measure of value, and a store of value. A credit card and a check represent a promise of payment but are not considered money until the payment has been made. A share of corporate stock represents ownership in a company, not a medium of exchange, measure of value, or store of value. Therefore, none of the choices are considered money.

Question 20

Which one of the following is not part of our money supply?

Accepted Answer

Gold is not considered a part of our money supply as it is not commonly used as a medium of exchange in daily transactions. It can, however, serve as a store of value and a hedge against inflation.

Quiz 13: Money and Banking

People tend to hold more money as

The unintended consequences of the federal deregulation of the interest paid depositors in the savings and loans was

Money is created when someone

Which statement is true?

Which statement is true?

In the early 1980s the savings and loan associations started making _ loans and paying their shareholders _ interest rates.

Which statement is true?

Statement I: The savings and loan debacle has cost the U.S.taxpayers hundreds of billions of dollars. Statement II: One of the main causes of the savings and loan debacle was federal deregulation of that industry.

The _____ demand for money is most sensitive to interest rate changes.

Statement I.Between 1987 and 1997 nearly one-third of all commercial banks failed. Statement II: There are about 10 times as many commercial banks as savings and loan associations.

Bank deposit creation is limited by

Banking began in

Back in the Middle Ages,the only safe place to put your money was

All large financial institutions have to hold a reserve of almost ____% of their demand deposits.

Statement I: In the 1980s,many savings and loan associations made very risky real estate loans that were not repaid. Statement II: Risky investments in junk bonds played a role in the decline and fall of the savings and loan industry.

A medium of exchange is

John Maynard Keynes said that people have three motives for holding money.Each of the following is a Keynesian motive except

Which one of the following is not money?

Which of the following is money?

Which one of the following is not part of our money supply?