Question 1

Statement I: Processing a teller transaction costs more than double what an ATM transaction costs.
Statement II: In 2009 there were about 425,000 ATMs in the U.S.

Accepted Answer

Statement I is true as processing a teller transaction typically involves more labor and overhead costs compared to an ATM transaction. Statement II is true as there were indeed approximately 425,000 ATMs in the U.S. around 2009.

Question 2

Suppose that an economy has 10 basic goods and services.If it were a barter economy it would need

Accepted Answer

In a barter economy, each good or service must be priced in terms of every other good or service, resulting in a large number of prices.

Question 3

The economy of Atlantis produces just ten goods and services;if it were a money economy there would be _____ prices;if it were a barter economy there would be _____ prices.

Accepted Answer

In a money economy, each good or service would have a price in terms of money, leading to 10 prices. In a barter economy, each good or service could be exchanged for every other good or service, leading to more than 10 prices due to the numerous exchange rates between goods.

Question 4

Which statement is false?

Accepted Answer

The answer of Which statement is false?
...

Question 5

M2 is ________ M1.

Accepted Answer

The answer of M2 is ________ M1.
...

Question 6

Statement I: Since 1985 our money supply has grown by at least 5 percent every year.
Statement II: Over 75 percent of M1 consists of checkable deposits.

Accepted Answer

The answer of Statement I: Since 1985 our money supply...

Question 7

Which statement is true?

Accepted Answer

The most important function of money is that it serves as a medium of exchange. While historically money may have been tied to gold, this is no longer universally true. Barter does not necessarily require specialization and statement A is therefore not true. Statement D cannot be true as at least one statement must be correct.

Question 8

Statement I: The first bank credit cards were issued by Bank of America in 1958.
Statement II: Credit cards are only pieces of plastic,not money.

Accepted Answer

Statement I is true as Bank of America indeed issued the first bank credit cards in 1958, known as BankAmericard, which later became Visa. Statement II is also true because credit cards themselves are not money but represent the cardholder's agreement to pay the issuer for the amounts charged, plus any agreed-upon charges.

Question 9

Statement I: With the passage of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994,the last barriers against opening branches in different states were swept away.
Statement II: Until 1995 interstate banking was legal.

Accepted Answer

Statement I is true, as the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 did indeed remove the last barriers to opening branches in different states. However, Statement II is false because prior to the passage of this act, interstate banking was generally prohibited by federal law, with a few exceptions.

Question 10

Statement I.The FDIC is now part of the Federal Reserve.
Statement II.The savings and loan crisis developed in the 1980s because the FDIC was much more lax about supervising the savings and loan associations than the commercial banks.

Accepted Answer

The FDIC (Federal Deposit Insurance Corporation) is an independent agency created by Congress and is not part of the Federal Reserve System. The savings and loan crisis was not due to the FDIC's lax supervision, as the FDIC primarily insures deposits at banks and does not directly supervise savings and loan associations; that was the role of the Federal Home Loan Bank Board (FHLBB) at the time.

Question 11

The typical credit cardholder has ______ credit cards.

Accepted Answer

The answer of The typical credit cardholder has ______ credit...

Question 12

M2 is _______ M1.

Accepted Answer

M2 is a measure of the money supply that includes all elements of M1 as well as "near money." M1 includes cash and checking deposits, while M2 includes M1 plus savings deposits, money market securities, mutual funds, and other time deposits. These additional components make M2 significantly larger than M1, typically about five times as large.

Question 13

People tend to hold less money as

Accepted Answer

People tend to hold less money when the interest rate falls because they prefer to invest in interest-bearing assets. When credit availability rises, individuals and businesses can more easily borrow, reducing the need to hold cash. If the average price level falls, less money is needed for transactions. Similarly, when incomes fall, people have less money to hold.

Question 14

Which of the following factors contributed to failure of Savings and Loan associations in the 1980s?

Accepted Answer

Declining real estate values played a significant role in the failure of Savings and Loan associations in the 1980s. Many S&Ls had invested heavily in real estate, especially in areas experiencing a boom in the early 1980s. When the real estate market collapsed, many of these investments became worthless, leading to the failure of many S&Ls. The other options (A, C, and D) did not contribute to the failure of S&Ls in the 1980s.

Question 15

Statement I: The largest American bank is the Bankers Trust.
Statement II: No bank in the U.S.has assets of over $200 billion.

Accepted Answer

The largest American bank is not the Bankers Trust; institutions like JPMorgan Chase & Co. are much larger. Also, several banks in the U.S. have assets well over $200 billion, making both statements false.

Question 16

Which statement is false?

Accepted Answer

The interest rate on business loans is typically higher than the interest rate banks pay their depositors. Banks pay depositors a lower interest rate for their deposits and charge borrowers a higher interest rate on loans to make a profit.

Question 17

Statement I: The most important job of money is as a store of value.
Statement II: Over 70 percent of our money supply consists of paper money.

Accepted Answer

Statement I is false because the most important job of money is generally considered to be as a medium of exchange. Statement II is false because the majority of the money supply in modern economies consists of bank deposits, not paper money.

Question 18

Membership in the Federal Reserve System

Accepted Answer

Membership in the Federal Reserve System is required for all national banks and open to state banks. State-chartered banks must meet certain requirements to join the Fed, but it is not forbidden to them.

Question 19

Which one of the following is part of our money supply?

Accepted Answer

NOW (Negotiable Order of Withdrawal) accounts are a type of checking account that can be accessed with checks or electronic transfers, and they are included in the M2 money supply. Gold is not considered part of our modern money supply, as it is not widely used as a medium of exchange. A credit card is a form of borrowing that is not included in the money supply until it is used to make a purchase (and creates debt). Personal checks are a form of payment that draw on bank deposits, but they are not included in the money supply until they are deposited and clear the banking system.

Question 20

People tend to hold more money as

Accepted Answer

People tend to hold more money when credit availability falls because it becomes harder to borrow money, leading individuals to keep more cash on hand for transactions and emergencies.

Quiz 13: Money and Banking

Statement I: Processing a teller transaction costs more than double what an ATM transaction costs. Statement II: In 2009 there were about 425,000 ATMs in the U.S.

Suppose that an economy has 10 basic goods and services.If it were a barter economy it would need

The economy of Atlantis produces just ten goods and services;if it were a money economy there would be _ prices;if it were a barter economy there would be _ prices.

Which statement is false?

M2 is ________ M1.

Statement I: Since 1985 our money supply has grown by at least 5 percent every year. Statement II: Over 75 percent of M1 consists of checkable deposits.

Which statement is true?

Statement I: The first bank credit cards were issued by Bank of America in 1958. Statement II: Credit cards are only pieces of plastic,not money.

Statement I: With the passage of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994,the last barriers against opening branches in different states were swept away. Statement II: Until 1995 interstate banking was legal.

Statement I.The FDIC is now part of the Federal Reserve. Statement II.The savings and loan crisis developed in the 1980s because the FDIC was much more lax about supervising the savings and loan associations than the commercial banks.

The typical credit cardholder has ______ credit cards.

M2 is _______ M1.

People tend to hold less money as

Which of the following factors contributed to failure of Savings and Loan associations in the 1980s?

Statement I: The largest American bank is the Bankers Trust. Statement II: No bank in the U.S.has assets of over $200 billion.

Which statement is false?

Statement I: The most important job of money is as a store of value. Statement II: Over 70 percent of our money supply consists of paper money.

Membership in the Federal Reserve System

Which one of the following is part of our money supply?

People tend to hold more money as