Chapter Fourteen: Module Quiz -- Money and Banking

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  1. A barter economy

      requires a double coincidence of wants.
      has no monetary system.
      makes it difficult to carry out transactions.
      all of the above

  2. Which statement best describes the distinction that economist makes between "money" and "income?"

      Money is the amount of money you make in a given time period (for example, I make $10 per hour) while income is the amount of money you make in a year.
      Income is the amount that you must pay taxes on while money is what is left over after taxes that can be put in the bank.
      Income is the flow of revenue over a particular time period (for example, I make $10 per hour) while money is something used to facilitate transactions.
      Income and money are interchangeable For example, I could ask "How much money do you make?" or "How much income do you make?"
      None of the above.

  3. Which of the following assets qualifies as "money" meaning M1?

      government bonds
      checking account balances
      savings account balances
      all of the above

  4. Two assumptions required to achieve the maximum money supply expansion are

      banks hold no excess reserves, and all cash is deposited into a checking account.
      banks hold no excess reserves, and all cash is deposited into a checking or saving account.
      banks hold no reserves at all, nor do any people hold cash.
      banks hold no excess reserves and customers take out funds in the form of loans.

  5. Rank these assets from most liquid to least liquid: 
    1. checking account	3. savings account
2. car			4. stocks

      1-2-3-4
      1-4-3-2
      3-1-4-2
      1-3-4-2
      None of the above

  6. Suppose the RRR is 10 percent and a bank accepts $100 in new deposits. The maximum amount that the money supply can expand is

      $0
      $100
      $500
      $900
      $1,000

  7. Suppose the RRR is 100 percent and a bank accepts $100 in new deposits. The maximum amount that the money supply can expand is

      $0
      $100
      $500
      $900
      $1,000

  8. The following are all bank assets except

      Loans Outstanding
      Reserves
      Certificates of Deposit
      Government bonds

  9. The US dollar is still backed by gold; its value resides in the vaults at Fort Knox because the government will exchange dollars for gold.

      True
      False

  10. The United States has a fractional reserve banking system. This term means that banks can break all of their reserves up and lend them out to many different borrowers.

      True
      False
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