Q&A Hero

Q: "Banks hold about 50 percent of their assets as reserves." Is the previous statement correct or not?

Q: M2 consists of A) M1 plus traveler's checks. B) M1 plus saving deposits, small time deposits, and money market funds. C) M1 plus checkable deposits. D) M1 plus currency at the banks. E) M1 plus Federal Reserve notes.

Q: "Banks make a profit by paying depositors a high rate to attract funds and making loans at a low rate to encourage borrowing." Is the previous statement correct or not?

Q: Susan just sold her text books for $200 cash and deposited the cash she received in her checking account. This transaction has A) increased the quantity of M1. B) decreased the quantity of M1. C) increased the quantity of M2. D) decreased the quantity of M2. E) not changed either M1 or M2.

Q: Explain what is meant by the phrase a bank's "balancing act."

Q: If Joe withdraws a $100 bill from his checking account and Jack deposits another $100 bill in his savings account, by how will M1 and M2 change? A) M1 will decrease, but M2 will remain the same. B) M1 will increase, and M2 will increase. C) M2 will decrease by $100. D) Both M1 and M2 will remain the same. E) M1 will remain the same, and M2 will increase.

Q: What are the three types of financial institutions that accept deposits that are part of the U.S. money supply? Briefly describe each of the three types of financial institutions.

Q: In December 2009, currency was $400 billion, traveler's checks were $5 billion; checkable deposits owned by individuals and businesses were $600 billion, saving deposits were $2,00 billion, time deposits were $1,500 billion; and money market funds were $1,200 billion. What was the M1 in December 2009? A) M1 = $405 billion B) M1 = $1,005 billion C) M1 = $3,005 billion D) M1 = $3500 billion E) M1 = $3505 billion

Q: What are the institutions that make up the nation's banking system?

Q: If you deposit $1,000 in cash in your checkable deposit at your bank, the quantity of M1 immediately A) increases by $1,000. B) decreases by $1,000. C) increases by $2,000. D) does not change in size. E) changes, but more information about the required reserve ratio is necessary to determine the amount of the change.

Q: If you hold $25 in cash, have $150 in a checking account, and have $250 in a savings account, how much of M2 do you have?

Q: When people make deposits of currency into a bank, the quantity of M1 A) immediately decreases by the amount of the deposit. B) immediately increases by the amount of the deposit. C) does not immediately change. D) immediately changes but whether it increases or decreases depends on whether the bank had excess reserves or did not have excess reserves. E) changes only if the deposit is an open market operation.

Q: If you have assets that include $50 in cash, a checking account with $135, a savings account with $500, and a jar of coins for laundry of $15.75, how much M1 do you have?

Q: When Maria deposits $100 in currency in her checkable deposit at Bank of America, the immediate effect is that the quantity of M1 ________ because ________. A) decreases; checkable deposits are included in M2 but are not included in M1 B) does not change; both currency and checkable deposits are included in M1 C) increases; both currency and checkable deposits are included in M1 D) changes, but the direction of the change cannot be determined; the direction of the change depends on what Bank of America does with the deposit E) changes only if Bank of America has excess reserves; if the bank does not have excess reserves, the overall effect to M1 is too small to notice

Q: "By definition, all parts of M2 are money." Is the previous statement correct or not? Explain your answer.

Q: When Maria deposits $100 in currency in her checkable deposit at Bank of America, the immediate effect is that the quantity of M1 A) decreases. B) does not change. C) increases. D) changes, but the direction of the change depends on whether the deposit was accepted by a thrift institution or a commercial bank. E) changes only if Bank of America does not have excess reserves.

Q: What is larger: M1 or M2? Why?

Q: Suppose you use your debit card to buy soda from a soda machine. Which of the following is true regarding the transaction? A) The debit card is not money; it's only an instruction to make a loan. B) The debit card is money; your use reflects the exchange of a good. C) The debit card is not money; its use is only a tool to cause money to move from your account. D) Your use makes the debit card money, as funds are transferred between your account and the machine owner. E) Using the debit card is like using a check and is, therefore, money.

Q: Explain what is included in M1 and M2. Is all of M1 money? Is all of M2 money?

Q: If Rob deposits $300 in currency into his savings account at Bank of America, A) M1 decreases. B) M1 does not change. C) M2 increases. D) M2 decreases. E) M1 and M2 both increase.

Q: What assets are included in M1? In M2? Is all of M1 and M2 money? If some assets of M1 or M2 are not money, why are they included in M1 or M2?

Q: Which of the following is NOT a component of M1? A) demand deposits B) traveler's checks C) savings deposits D) currency E) Both answers C and D are correct.

Q: What makes up M1? Is M1 larger or smaller than real GDP?

Q: Which of the following items is included in the M1 money supply? A) $10 bills in the Bank of America B) a $5,000 student loan granted to a U.S. citizen C) coins in a Pepsi vending machine, waiting to be used as change D) a $5,000 line of credit on a newly graduated student's credit card E) $1,500 in a student's saving account

Q: Are credit cards or debit cards money? Explain your answer.

Q: M1 is defined as a measure of money including, in part, A) checkable deposits and currency. B) time deposits and currency. C) currency and savings deposits. D) time deposits and money market fund deposits. E) the lines of credit on credit cards and currency.

Q: "Credit cards are considered money because they serve to purchase goods and services." Is the previous statement true or false?

Q: Which of the following are included in the M1 definition of money? A) currency and checkable deposits B) currency and savings deposits C) traveler's checks and money market mutual funds D) currency and small time deposits E) traveler's checks and savings deposits

Q: Are checks money?

Q: M1 is composed of A) currency held by individuals and businesses, traveler's checks, and checkable deposits owned by individuals and businesses. B) checkable deposits owned by individuals and businesses, saving deposits, and certificates of deposit. C) currency inside of banks, traveler's checks, and government-issued checks. D) traveler's checks, credit cards, and e-cash. E) currency held by individuals and businesses, traveler's checks, and the credit line on credit cards.

Q: "Even though we can convert them into money, deposits at banks are not money." Is the previous statement correct or not?

Q: An official measure of money in the United States is M1, which includes the sum of A) checkable deposits plus small time deposits. B) currency plus checkable deposits. C) currency plus credit card transactions. D) currency plus traveler's checks plus time deposits. E) currency plus traveler's checks plus checkable deposits plus small time deposits plus money market funds and other deposits.

Q: What is fiat money?

Q: Which of the following are considered money? i. electronic checks ii. paper checks iii. the deposit transferred using an e-check A) i, ii and iii B) i and iii C) i and ii D) iii only E) ii and iii

Q: Explain which of the following count as money. a. a check in Ann's checkbook b. currency in Ann's bank c. currency in Ann's purse d. Ann's checking deposit

Q: A debit card is A) money because it is a means of payment. B) not money but is used to transfer bank deposits which are money. C) money because it is generally accepted as a means of payment. D) not money because it is not officially issued by the government. E) part of the M2 money supply but not part of the M1 money supply.

Q: What is barter? What is a double coincidence of wants? How does the existence of money affect barter?

Q: Debit cards and e-checks are not money because A) they can be forged easily. B) they can fail their purpose of being mediums of exchange as a result of technical difficulties. C) they are just instruments to transfer money between people. D) not all banks offer them and not all businesses accept them. E) they are not regulated by the government.

Q: List and define the three functions of money.

Q: When Dale buys a new computer for $1,000 using a credit card, A) he is taking out a loan for $1,000. B) his bank account decreases by $1,000. C) the credit card is acting as money. D) the money supply decreases by $1,000. E) the credit card is performing the function of an unit of account.

Q: Define money and list its functions.

Q: Credit cards are i. a generally accepted form of payment and therefore part of M1. ii. included in M1 because you write a check to pay your monthly bill. iii. a means of borrowing money. A) i only B) ii only C) iii only D) i and ii E) i and iii

Q: If the Fed buys a $100,000 government security from a bank when the desired reserve ratio is 10 percent and the currency drain ratio is 50 percent, the bank can loan a maximum of A) $50,000. B) $40,000. C) $100,000. D) $90,000. E) $60,000.

Q: When you use a credit card to pay your tuition, A) you've used the credit card as money because it is a means of payment. B) the credit card is not money but is an ID card for an instant loan. C) the credit card is not money because it involves an electronic transaction. D) the credit card is not money because it is not officially issued by the government. E) you've used the credit card as money because you received something in return.

Q: If the Fed buys a $100,000 government security from a bank when the desired reserve ratio is 20 percent and the currency drain ratio is 5 percent, the bank can loan a maximum of A) $75,000. B) $80,000. C) $100,000. D) $95,000. E) $85,000.

Q: Credit cards are A) a form of money used to make purchases. B) a special ID card that is not money. C) a special ID card that is the same as money. D) a form of money that is not generally accepted. E) included in the M1 measure of money.

Q: If the desired reserve ratio decreases, then A) banks' desired reserves increase and their excess reserves decrease. B) bank customers become more willing to make deposits in banks. C) banks are able to make more loans. D) banks are forced to buy fewer government securities. E) banks' desired reserves decrease and their excess reserves do not change.

Q: A credit card is A) money. B) barter money. C) not money. D) fiat money. E) not money, but the card's credit line is money.

Q: If the desired reserve ratio increases, then A) banks' desired reserves increase and their excess reserves decrease. B) bank customers become more willing to make deposits in banks. C) banks are able to make more loans. D) banks can buy more government securities. E) the Fed has supplied banks with more reserves.

Q: If you use a check to pay your monthly rent, A) the check is considered money because you received something in return. B) the check is not money because it is just an instruction to your bank to make a payment. C) you have used money because the landlord accepted it as a means of payment. D) the check becomes money when it arrives at the landlord's bank. E) the check is not money because it is not part of M1.

Q: Which of the following financial institutions does NOT have to meet minimum reserve ratios? i. the Fed ii. commercial banks iii. credit unions A) i only B) ii only C) iii only D) ii and iii E) i, ii, and iii

Q: Checks are not money because they A) are just instruments to transfer money between banks. B) are not guaranteed by banks. C) can bounce when there are not enough funds to cash them. D) are not issued by the government. E) are not always accepted when trying to purchase goods or services.

Q: Money market mutual funds A) are included in M2 but not M1. B) are included in M1 but not M2. C) are included in M1 and M2. D) are the largest part of the monetary base. E) None of the above is correct.

Q: Which of the following is money? A) debit cards B) e-checks C) credit cards D) checkable deposits E) checks

Q: The Fed makes an open market operation purchase of $200,000. The currency drain ratio is 33.33 percent and the desired reserve ratio is 10 percent. By how much does the quantity of money increase? A) $800,000 B) $333,333 C) $2,000,000 D) $615,416 E) $465,116

Q: Which of the following is money? A) a credit card with no credit left B) the check you write to pay tuition C) a credit card that still has credit available on it D) a checkable deposit in your bank E) the current credit available on a credit card

Q: The money multiplier is used to determine how much the A) monetary base increases when the Fed purchases government securities. B) quantity of money increases when the monetary base increases. C) monetary base increases when the quantity of money increases. D) quantity of money increases when the required reserve ratio increases. E) monetary base increases when the Fed sells government securities.

Q: Which of the following is money? A) credit card B) debit card C) e-checks D) checkable deposit E) checks

Q: A currency drain is cash ________ and has ________ effect on the money multiplier. A) draining into the banks; no B) draining into the banks; an C) held outside the banks; an D) held at the Fed; an E) held as reserves; no

Q: Which of the following is the best example of money? A) phone card B) checkable deposit C) credit card D) gold E) share of Intel stock

Q: When the Fed conducts an open market purchase, the first round changes in the money creation process are that excess reserves ________, bank deposits ________, and the quantity of money ________. A) decrease; decrease; decreases B) increase; do not change; increases C) decrease; increase; does not change D) do not change; increase; increases E) increase; increase; increases

Q: Checkable deposits are money because A) they are protected by the Federal Reserve. B) they are guaranteed by banks. C) checks bounce when there are not enough funds to cash them. D) they can be converted into currency on demand and are used directly as a means of payment. E) only banks and other financial institutions can offer them.

Q: The Citizens First Bank sells $100,000 of government securities to the Fed. This sale immediately A) decreases the quantity of money. B) decreases the bank's checkable deposits. C) increases the bank's reserves. D) decreases the bank's assets. E) increases the bank's required reserves.

Q: The objects we use as money today include A) currency inside banks and bank deposits. B) currency outside the banks and bank deposits. C) only currency outside the banks. D) only deposits inside the banks. E) credit cards and debit cards.

Q: If the Fed buys government securities, then A) the quantity of money is not changed, just its composition. B) new bank reserves are created. C) the quantity of money decreases. D) bank reserves are destroyed. E) banks' excess reserves decrease.

Q: Which of the following is an example of money? A) currency in your wallet B) currency inside the banks C) checks written as payment for a good or service D) credit card used as a payment for a good or service E) a debit card

Q: Banks can make loans up to an amount equal to their A) total deposits. B) total reserves. C) required reserves. D) excess reserves. E) total government securities.

Q: Which statement most accurately captures the state of money today? A) Money today includes currency, bank deposits and checks. B) Money today includes currency and checks but not bank deposits. C) Money today includes bank deposits and currency but not checks. D) Money today includes bank deposits and checks but not currency. E) Money today includes checks and credit cards.

Q: Excess reserves are the A) same as the required reserves. B) amount of reserves the Fed requires banks to hold. C) amount of reserves held over what is desired. D) amount of reserves a bank holds at the Fed. E) amount of reserves banks keep in their vaults.

Q: The objects that we use as money today are A) checks and credit cards. B) currency and checks. C) currency and deposits. D) deposits and checks. E) currency, deposits, and gold.

Q: During the 2008 financial crisis, banks restricted ________, and the M2 money multiplier ________. A) lending; decreased B) lending; increased C) deposits; increased D) buying securities; increased E) deposits; decreased

Q: Fiat money means A) Italian currency. B) money's value does not change. C) the government has decreed that something is money. D) the money can be converted into gold. E) only currency counts as money.

Q: The M2 multiplier in the United States is currently about A) 1. B) 4. C) 16. D) 50. E) 23.

Q: The U.S. dollar is called A) fiat money because the law decrees it is money. B) faith money. C) commodity money, because it is convertible into gold. D) frail money because wear and tear ruins paper bills. E) convertible money because the government stands ready to convert it into gold or silver.

Q: As of 2013, the U.S. monetary base has ________ its 2007 level, the level held before the 2008 financial crisis, as a direct result of ________. A) quadrupled; the Fed's actions with quantitative easing B) doubled; the Fed's actions with quantitative easing C) tripled; the Fed's actions with quantitative easing D) quadrupled; the Fed's actions and the resulting reduction of the money multiplier E) tripled; the Fed's actions and the resulting reduction of the currency drain

Q: Money today A) is the demand for loanable funds. B) is the supply of loanable funds. C) is only currency inside banks. D) is fiat money. E) in the United States, is only dollar bills and coins .

Q: As a result of the Fed's actions during the 2008 financial crisis and banks' lending policies, the money multiplier ________ as a direct result of the ________. A) fell from about 9 to about 4; surge in banks' desired reserve ratios as they took on less risk B) rose from about 4 to about 9; surge in banks' desired reserve ratios as they took on less risk C) fell from about 9 to about 4; low risk experienced by banks because of the FDIC increasing their default coverage amounts D) rose drastically; consistent decrease in banks' desired reserve ratios as they took on less risk E) decreased drastically; consistent decrease in banks' desired reserve ratios as they took on less risk

Q: The word "fiat" is A) used to describe today's money because it is money set by law. B) used to describe money from when Kings ruled by decree or fiat. C) the term used to define the concept of barter. D) another word to mean the "double coincidence of wants." E) Latin for "backed by gold."

Q: As a result of the Fed's actions during the 2008 financial crisis and banks' lending policies, A) the M2 money multiplier has fallen from about 9 to about 4. B) the M2 money multiplier more than doubled. C) the monetary base decreased by 50 percent. D) the ratio of currency to M2 deposits more than doubled. E) the reserve requirement ratio increased.

Q: Keeping $20 in currency to be able to buy gasoline, money is performing which function? A) medium of exchange B) unit of account C) store of value D) barter mechanism E) symbol of fiat