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| 1. Which of the following is the
most liquid asset in the U.S. economy?
a.
U.S. Treasury bonds
b. Savings
accounts
c. Demand
deposits
d. U.S.
currency
e. Travelers'
checks
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2. The functions
of money do not include
a.
a medium of exchange.
b. a
standard of deferred payment.
c. a
unit of account.
d. a
store of value.
e. an
exchange of purchasing power.
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3. If Mexico
experienced a period of rapid inflation, causing Mexicans to lose confidence
in the peso as a store of value, which of the following would be most likely
to occur?
a.
The value of the peso would appreciate on the foreign exchange market.
b. Foreign
currency would be used as a substitute for the peso.
c. The
peso would be used as a store of value in other countries.
d. Mexicans
would save more.
e. The
purchasing power of the peso would increase.
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4. M2 does not
include
a.
overnight Eurodollar deposits.
b. money
market deposit accounts.
c. automatic
transfer system accounts.
d. credit
union share draft accounts.
e. term
Eurodollar deposits.
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5. Which of the
following is a component of M2?
a.
Term repurchase agreements
b. Institutional
money market funds
c. Overnight
Eurodollar deposits
d. Treasury
bills
e. Large
time deposits
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| 6. Assume that a German company
invests DM10,000 in an ECU-denominated bond. What is the withdrawal amount
in DM when the exchange rate changes from ECU1 = DM2.0 to ECU1 = DM1.5
between the time of deposit and the time of withdrawal? (Interest earnings
are zero.)
a.
DM20,000
b. DM15,000
c. DM10,000
d. DM7,500
e. DM5,000
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7. Which of the
following is not considered a financial intermediary?
a.
Commercial banks
b. Savings
and loan associations
c. Credit
unions
d. Mutual
savings banks
e. The
Federal Deposit Insurance Corporation
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8. The FDIC was
established in 1933 to
a.
force banks to be more cautious in their lending practices.
b. discourage
bank runs by insuring deposits in commercial banks.
c. guarantee
a minimum rate of interest is paid on every deposit.
d. outlaw
bank failures.
e. increase
reserve requirements for commercial banks to 100 percent of deposits.
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| 9. Refer to the table above. What
is the reserve requirement if banks have zero excess reserves?
a.
20 percent
b. 15
percent
c. 25
percent
d. 11
percent
e. 10
percent
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| 10. Refer to the balance sheet above.
Assume a reserve requirement of 10 percent. The maximum amount of new loans
the bank could extend is
a.
$500.
b. $1,000.
c. $2,000.
d. $3,000.
e. $4,000.
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*Assume all excess
reserves are loaned out.
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| 11. Refer to the table above. What
is the reserve requirement?
a.
11 percent
b. 90
percent
c. 10
percent
d. 9
percent
e. 90
percent
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12. Refer to
the table above. What is the total increase in the money supply created
in the banking system as a result of the initial deposit of $10,000 in
Bank 1?
a.
$10,000
b. $27,000
c. $100,000
d. $90,000
e. $20,000
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| Answers: 1d,2e,3b,4e,5c,6d,7e,8b,9e,10d,11c,12c. |