ECON 214 quiz 10 solutions complete answers

ECON 214 quiz 10 solutions complete answers 

 

Money does NOT function as:

           

For something to be considered money, it must:

           

Which of the following is not a characteristic of fiat money?

           

A major advantage of money over barter is that it is:

           

When money is acting as a medium of exchange, it:

           

Money eliminated the need for the double coincidence of wants through its role as:

           

What function of money is highlighted when I pay for my cell phone bill with cash?

           

What function of money is highlighted when I buy flowers for my girlfriend for our eighth-day anniversary?

           

Which of the following would be a consequence in an economy where there is no money?

           

Why isn’t the barter method of exchange more common in the U.S. economy?

           

In economic terms, how would you state what has happened when your neighbor says he is unwilling to help you mow your lawn because you are unwilling to help him teach his kids how to speak with a British accent?

           

Which of the following is an example of barter where the double coincidence of wants may not always occur?

           

Which of the following statements is true?

           

Which of the following events could cause inflation in the United States—a country that uses fiat money?

           

When money is acting as a unit of account, it:

           

What function of money is highlighted when I am comparing the price of one product to another?

           

In which of the following situations does money serve as a unit of account?

           

When gasoline gallons are priced in terms of number of seashells, seashells serve as:

           

In which of the following situations does money serve as a store of value?

           

What function of money is highlighted when I put cash under my mattress to have on hand for unexpected emergencies?

           

What function of money is highlighted when I am depositing a portion of my paycheck into my savings account to pay for my child’s future education?

           

If I were to give cash to my mother for her birthday and she kept the cash under her mattress, which of the following changes would take place?

           

If I were to give cash to my father for his birthday and he deposited the cash into his savings account, which of the following changes would take place?

           

When an economy experiences inflation, the value of money:

           

The value of money:

           

If the government were to print more money, which of the following would occur?

           

If I were to receive cash from my sister and I deposited it into my checking account, which of the following changes would occur?

           

I am about to leave on a trip and I have used cash to buy traveler’s checks. Which of the following changes have occurred?

           

I have decided to use my credit card to purchase a new television. What is the immediate consequence of this purchase?

           

Which of the following would NOT increase the supply of money in a fiat money economy?

           

Which of the following would NOT decrease the supply of money in a fiat money economy?

           

If Ann were to convert some of her checkable deposits into a certificate of deposit, which of the following changes would take place?

           

Using the table, what is the value of M1?

           

Using the table, what is the value of M2?

           

Using the table, what is the value of M2 that is not part of M1?

           

In a fiat money economy, M1 includes currency as well as:

           

Which of the following is not a component of M1?

           

Which of the following statements about traveler’s checks is true?

           

Which of the following is most liquid?

           

Which of the following is not a component of M2?

           

If I were to deposit cash into my savings account, which of the following changes would take place?

           

The largest component of M2 is:

           

Which of the following is NOT considered part of M2?

           

As credit card balances increase, what will be the consequence for M1 and M2?

           

Using a credit card is most like:

           

As financial intermediaries, how do commercial banks pay their expenses and earn a profit?

           

Which of the following cannot be found on a bank’s balance sheet?

           

 If the Federal Reserve determined that banks needed to increase the amount of owner’s equity, how could this be achieved?

           

The local bank needs to borrow funds from a bank in the next town. How does this affect the local bank’s balance sheet?

           

The bank in your hometown has decided to double the number of its local branch offices. How will this affect the bank’s balance sheet?

           

 Loans and deposits within a bank are:

           

 If a bank increases the amount of cash it has in its vault, how would this affect the bank’s balance sheet?

           

 The Coppock Bank began the day with $10,000,000 in its reserve account and ended the day with the same amount. If loans, other assets, and Treasury securities were $3,000,000 and owner’s equity was $2,000,000, what is the bank’s total amount of assets?

           

I have a checking account at the local bank, and my sister has a car loan at the same bank. How does each of these appear on the bank’s balance sheet?

           

The Coppock Bank has $34,000,000 in deposits. If borrowings are $7,000,000, reserves are $3,500,000, and owner’s equity is $2,000,000, what are the bank’s total liabilities and net worth?

           

The Coppock Bank has $34,000,000 in deposits. If total liabilities and net worth are $47,000,000, loans are $25,000,000, and borrowings are $17,000,000, what is the amount of assets?

           

 If a local bank decides to convert some of its U.S. Treasury securities into cash, which it will hold in its vault, what impact will this have on the bank’s balance sheet?

           

Which of the following would NOT be an asset for a commercial bank?

           

When a bank decided to invest in cash-counting equipment and new cubicles for its loan officers, they were recorded on the bank balance sheet as:

           

Which of the following would NOT be an asset for a commercial bank?

           

When I decide to deposit $100 in cash into my savings account at the bank, how would this be reflected on the bank’s balance sheet?

           

My sister has been given a loan for $10,000, and she deposited the full loan amount into her checking account. How would this be reflected on her bank’s balance sheet?

           

____________ is/are considered a liability on a bank’s balance sheet.

           

How is owner’s equity calculated?

           

Imagine that you deposit $25,000 in currency (which you had been storing in your closet), into your checking account at the bank. Assume that this institution has a required reserve ratio of 25%.    

      

As a result of this deposit, by how much will the bank’s reserves increase?

           

As a result of this deposit, by how much will the bank’s required reserves increase?

           

As a result of this deposit, by how much will the bank’s excess reserves increase?

           

As a result of this deposit, what is the maximum amount the bank can hold as loans?

           

As a result of this deposit, what is the maximum amount in loans that can be made by all the banks in the banking system?

           

What is true about banks in a fractional reserve banking system?

           

One way to increase a bank’s amount of required reserves is to:

           

One reason why banks are required to deposit a minimum amount of reserves at the Federal Reserve is so that:

           

 If a bank has a required reserve ratio of 15% and has required reserves of $225,000,000, how much does the bank hold in deposits?

           

If a bank has a required reserve ratio of 20% and has required reserves of $300,000,000, how much does the bank hold in deposits?

           

If a bank has a required reserve ratio of 10% and has required reserves of $100,000,000, how much does the bank hold in deposits?

           

If a bank has a required reserve ratio of 25% and there is $10,000 in deposits, what is the amount of required reserves?

           

If a bank has a required reserve ratio of 25% and there is $10,000 in deposits, what is the maximum amount of loans that can be made by this bank?

           

If Bank of Mateer has a required reserve ratio of 40% and there is $100,000 in deposits, what is the amount of required reserves?

           

If Bank of Mateer has a required reserve ratio of 40% and there is $100,000 in deposits,  is the maximum amount of money it can loan.

           

What effect does a bank’s decision to hold excess reserves have on a bank’s balance sheet?

           

 When can a bank make loans?

           

 A bank can make loans when:

           

A bank’s balance sheet will indicate that institution’s ability to manage which of the following two conflicting objectives?

           

If a bank has a required reserve ratio of 10%, excess reserves of $10,000,000, and deposits of $500,000,000, how much can the bank lend out?

           

 If a bank has a required reserve ratio of 30%, excess reserves of $45,000,000, and deposits of $100,000,000, how much can the bank lend out?

           

 If a bank has required reserves of $45,000,000, excess reserves of $12,000,000, and deposits of $90,000,000 with a required reserve ratio of 50%, how much can the bank lend out?

           

If a bank has required reserves of $27,000,000 and deposits of $90,000,000 with a required reserve ratio of 30%, how much can the bank lend out?

           

Suppose that the Bank of Apples has excess reserves of $450,000 and checkable deposits of $30,000,000. If the bank has a reserve requirement of 30%, what is the bank’s total amount of reserves?

           

 Suppose that the Bank of Bananas has excess reserves of $10,000,000 and checkable deposits $200,000,000. If the bank has a reserve requirement of 25%, what is the bank’s total amount of required reserves?

           

Suppose that the Bank of Oranges has excess reserves of $80,000,000 and checkable deposits of $500,000,000. If the bank has a reserve requirement of 10%, what is the bank’s total amount of reserves?

           

 You receive a bonus check from your employer for $10,000, and you deposit this in a bank that faces a 20% reserve ratio. What is the consequence if the bank then deposits your check at the Federal Reserve?

           

You receive a $1,000 check from your parents for your birthday, and you deposit this in a bank that faces a 10% reserve ratio. What is the consequence if the bank then deposits your check at the Federal Reserve?

           

 If a bank that faces a 25% reserve ratio received a deposit of $30,000 and makes a loan to a customer for $10,000, what is the consequence if the bank then deposits the rest of the funds at the Federal Reserve?

           

If a bank that faces a 10% reserve ratio received a deposit of $50,000 and makes a loan to a customer for $5,000, what is the consequence if the bank then deposits the rest of the funds at the Federal Reserve?

______________ is the phenomenon when one party that is protected from risk behaves differently than if it were fully exposed to the risk.

           

How is it that the banking system is able to lend by a multiple of its excess reserves?

           

Which of the following is true about banks in a fractional reserve banking system?

           

Sam Black deposits the $5,000 in coins she had been storing between her couch cushions into her savings account at the bank. How would this be recorded on the bank’s balance sheet?

           

Tom Goldman deposits $1,000 in newly printed birthday cash into his checking account at the bank. How would this be recorded on the bank’s balance sheet?

           

Dave Macy decides to sell his gold jewelry and deposits the cash at his local bank. How would this be recorded on the bank’s balance sheet?

           

In a fiat money economy, money is created when:

           

Which of the following is an assumption made in the money-creation process?

           

Which of the following is an assumption made in the money-creation process?

           

In reality, individuals do not deposit all of their cash into the banking system. Consequently:

           

To the extent a bank holds excess reserves, which of the following is a consequence?

           

If the required reserve ratio is 20%, what is the simple deposit multiplier?

           

If the required reserve ratio is 10%, what is the simple deposit multiplier?

           

If a bank has a required reserve ratio of 25% and there is $10,000 in deposits, what is the maximum possible change to the money supply?

           

A bank has excess reserves of $1,000,000 and makes a new loan for $500,000. If the bank faces a 10% required reserve ratio, by how much will the money supply increase when the loan is made?

           

A bank has excess reserves of $400,000 and makes a new loan for $50,000. If the bank faces a 25% required reserve ratio, by how much will the money supply increase when the loan is made?

           

A bank will often hold government securities as an asset. If a bank were to sell $100,000 in government securities to an individual who paid for the bond in cash and the bank placed this cash in their vault, by how much would the money supply change as a result?

           

A bank will often hold government securities as an asset. If a bank were to sell $500,000 in government securities to an individual who paid for the bond in cash and the bank placed this cash in their vault, by how much would the money supply change as a result?

           

The Federal Reserve System was created in:

           

What are federal funds?

           

To decrease the money supply, the Federal Reserve could do which of the following?

           

The sale of existing U.S. Treasury securities by the Federal Reserve:

           

The purchase of existing U.S. Treasury securities by the Federal Reserve:

           

To increase the money supply, the Federal Reserve could do which of the following?