Question 1

Among the liabilities of commercial banks are

Accepted Answer

The answer of Among the liabilities of commercial banks are
...

Question 2

The M1 definition of money includes money market accounts.

Accepted Answer

The M1 definition of money includes cash and checking deposits but does not include money market accounts; those are part of M2.

Question 3

The main advantage of using M2 instead of M1 as the measure for money is that

Accepted Answer

M2 is more stable than M1 because it includes more liquid assets such as savings deposits and time deposits, which are less likely to be withdrawn immediately than demand deposits (which are included in M1).

Question 4

Related to the Economics in Practice on p.503: In Santa Cruz,the red feathers of the Scarlet Honeyeater bird were used as currency.In this instance,the feathers would be considered

Accepted Answer

The red feathers of the Scarlet Honeyeater bird were used as currency in Santa Cruz which means they were exchanged as a medium of exchange, unit of account, and store of value. Since the value of the feathers were based on their scarcity and usefulness as an object of decoration, they can be considered as commodity money. Fiat money is not backed by any physical commodity, token money has no intrinsic value but represents the value of a physical commodity, and legal tender refers to the currency that must be accepted by law to settle debts.

Question 5

The M2 definition of money includes demand deposits.

Accepted Answer

The M2 definition of money includes demand deposits, along with currency, checking deposits, savings deposits, and money market securities.

Question 6

If all banks are loaned up and so will not make further loans,a $1,000 deposit creates $1,000 in new money.

Accepted Answer

The answer of If all banks are loaned up and...

Question 7

Napoli National Bank has liabilities of $3 million and net worth of $200,000.Napoli National Bank's assets are

Accepted Answer

The assets of the Napoli National Bank can be calculated using the formula:
Assets = Liabilities + Net Worth
Substituting the given values, we get:
Assets = $3 million + $200,000
Assets = $3.2 million
Therefore, the assets of the Napoli National Bank are $3.2 million. Option D is the correct answer.

Question 8

An equation for M1 is

Accepted Answer

M1 is defined as the sum of currency held by the public, checkable deposits, and traveler’s checks. Choice B subtracts the components of M2 (savings accounts, money market accounts, and other near monies) from M2 to get M1.

Question 9

Money is anything that generally is accepted as a medium of exchange.

Accepted Answer

This is the definition of money as accepted by economists and experts in finance.

Question 10

Fiat money is money the government says is money.

Accepted Answer

Fiat money is currency that a government has declared to be legal tender, despite the fact that it has no intrinsic value and is not backed by reserves. Its value comes from the government's declaration and the general acceptance of the currency by people and businesses within the country.

Question 11

Saturn County Savings and Loan has liabilities of $400,000 and net worth of $125,000.Saturn County Savings and Loan's assets are

Accepted Answer

The assets of Saturn County Savings and Loan can be calculated by subtracting liabilities from net worth:
Assets = Liabilities + Net Worth
Assets = $400,000 + $125,000
Assets = $525,000

Question 12

Commercial banks

Accepted Answer

Commercial banks are financial intermediaries that accept deposits and lend funds to individuals and businesses. They make profits by charging higher interest rates on loans than they pay on deposits.

Option A is incorrect because the implementation of monetary policy is the responsibility of the central bank, not commercial banks. Option B is incorrect because commercial banks exist to make profits, not for non-profit purposes. Option D is incorrect because bank capital is separate from reserves, which are held to meet deposit withdrawals and other obligations.

Question 13

When you take $100 from your saving account and deposit it in your checking account,M2 decreases.

Accepted Answer

When you transfer $100 from your savings account to your checking account, it results in an increase in M2. M2 is a measure of the money supply, which includes physical currency, checking accounts, savings accounts, and certain money market accounts. When you transfer money from savings to checking, it increases the amount of money in circulation, which in turn increases M2.

Question 14

Thompson National Trust has assets of $500,000 and liabilities of $400,000.Thompson National Trust's net worth is

Accepted Answer

Net worth is calculated as assets minus liabilities, which in this case is $500,000 - $400,000 = $100,000.

Question 15

In an economy that uses fiat money,there is no need for double coincidence of wants.

Accepted Answer

In an economy that uses fiat money, goods and services can be exchanged for money, which serves as a universally accepted medium of exchange. This eliminates the need for a double coincidence of wants, where two parties have to each have something the other wants in order to make a direct exchange.

Question 16

A commercial bank lists

Accepted Answer

Deposits are considered liabilities for commercial banks because they represent funds that the bank owes to its customers. Loans, on the other hand, are assets for the bank because they represent the money owed to the bank by borrowers. Required reserves and excess reserves are both considered assets for the bank because they represent funds that the bank has on hand.

Question 17

Net worth is

Accepted Answer

Net worth is calculated by subtracting all liabilities from all assets. This gives a measure of an individual's or company's overall financial health and their ability to meet their debts and obligations.

Question 18

Among the assets of a commercial bank are

Accepted Answer

The answer of Among the assets of a commercial bank...

Question 19

Related to the Economics in Practice on p.503: In Santa Cruz,the red feathers of the Scarlet Honeyeater bird were used as currency.Using feathers to make a purchase would be using the feathers as a(n)

Accepted Answer

The use of red feathers of the Scarlet Honeyeater bird as a means of payment indicates that they were being used as a medium of exchange, facilitating the transaction of goods and services between individuals in Santa Cruz. Store of value refers to the ability of an asset to be held for future use without losing its value, unit of account refers to the standard used to measure and compare the value of goods and services, and legal tender refers to the accepted currency authorized by law.

Question 20

When you use money to fill your car with gas every week,you are using money as a unit of account.

Accepted Answer

When you use money to fill your car with gas, you are using money as a medium of exchange, not as a unit of account. A unit of account is a standard numerical unit of measurement of the market value of goods, services, and other transactions.

Quiz 10: The Money Supply and the Federal Reserve System