Title: Money and Banking
Course: Macro Quiz Test

Q: Which of the following descriptions is excluded from being a function of money?
- medium of exchange, standard of deferred payment
- store of value, unit of account
- price level, measurement of wealth, unit of scale
A: price level, measurement of wealth, unit of scale

Q: What serves as a medium of exchange, and is widely accepted as a means of payment?
- manufacturer coupons
- debt
- money
A: money

Q: ________ is defined as goods are exchanged directly for other goods.
- Currency
- Commodity
- Barter
A: Barter

Q: Because money functions as a ________ it eliminates the need for bartering.
- double coincidence of wants
- store of value
- medium of exchange
A: medium of exchange

Q: Which of the following does NOT qualify as "money"?
- commodity money
- fiat money
- barter exchange
A: barter exchange

Q: Under certain conditions, goats, coins, and checks can all be used as payments. In economic terms these things are all considered ________.
- money
- terms of trade
- a medium of exchange
A: a medium of exchange

Q: Around the world oil is priced consistently in United States dollars. In economic terms this is an example of:
- store of value.
- flexible values.
- units of account.
A: units of account.

Q: All over the globe commodities (e.g. corn, wheat, beans) are priced in United States dollars. This in economic terms, is an example of
- store of value.
- flexible values.
- units of account.
A: units of account.

Q: Of the following descriptions, which characteristic is a true statement about money?
- A government must back it.
- Generally it doesn’t have to be accepted as a means of payment.
- It must represent value.
A: It must represent value.

Q: Which of the following characteristics is true of money?
- it must be backed by the government.
- it does not generally need to be accepted as a means of payment.
- It must represent value.
A: It must represent value.

Q: Money that has no significant non-monetary value is called
- commodity money.
- intrinsic value money.
- fiat money.
A: fiat money.

Q: What is money called if it has no significant non-monetary value?
- commodity money
- intrinsic value money
- fiat money
A: fiat money

Q: Which of the following is an example of what backs fiat money?
- precious metals such as silver
- bartering arrangements
- trust the public has that it can be exchanged for services and goods
A: trust the public has that it can be exchanged for services and goods

Q: Fiat money is backed by
- precious metals such as gold.
- bartering arrangements.
- the public’s trust that it can be exchanged for goods and services.
A: the public’s trust that it can be exchanged for goods and services.

Q: Silver and gold are examples of what kind of money?
- fiat
- M2
- commodity
A: commodity

Q: A historical example of ________ is when communities used cocoa beans or cowrie shells as a kind of money.
- fiat money
- M3
- commodity money
A: commodity money

Q: Cigarettes can be used as a form of ________.
- fiat money
- fake money
- barter
A: barter

Q: Homemade pies can be used as a form of ________.
- fiat money
- commodity-backed currency
- barter
A: barter

Q: Which source of money is most liquid, or available for consumers to use?
- M2
- Certificates of deposit
- M1
A: M1

Q: The most liquid source of money is ________.
- M2
- Certificates of deposit
- M1
A: M1

Q: The M2 money supply consists of everything in the M1 money supply, savings deposits and which of the following?
- long term debt
- personal checks
- certificates of deposit
A: certificates of deposit

Q: The M2 measure of the money supply is defined as currency
- plus savings accounts and other timed deposits, CDs and money market funds, and is smaller in sum than M1.
- minus savings accounts and other timed deposits, CDs and money market funds, and is larger in sum than M1.
- plus savings accounts and other timed deposits, CDs and money market funds, and is larger in sum than M1.
A: plus savings accounts and other timed deposits, CDs and money market funds, and is larger in sum than M1.

Q: The ease with which an asset can be used to buy a good or service is the asset’s
- exchange rate.
- money supply.
- liquidity.
A: liquidity.

Q: The definition of ________ is the ease with which an asset can be used to buy a service or a good.
- exchange rate
- money supply
- liquidity
A: liquidity

Q: M1, the narrowest of the Fed's money supply definitions include(s)
- savings deposits.
- money market funds.
- currency in circulation.
A: currency in circulation.

Q: The most limited definition of the Fed's money supply, M1, exclude(s)
- currency in circulation.
- checkable deposits (also called demand deposits).
- savings deposits.
A: savings deposits.

Q: The M2 measure of money include(s)
- debit cards.
- credit cards.
- money market funds.
A: money market funds.

Q: Which is an example of M2 money?
- debit cards.
- credit cards.
- certificates of deposit.
A: certificates of deposit.

Q: Which of the following are types of debt?
- futures
- insurance payments
- credit cards
A: credit cards

Q: Of the examples below, which is an example of debt?
- debit card
- amazon gift card
- student loan
A: student loan

Q: If you purchase a good or service with credit it means that
- money is directly drawn from your bank account.
- it would be better for you to wait and purchase the good or service with money.
- your total debt is increasing.
A: your total debt is increasing.

Q: Making a purchase with credit means
- you are taking money out of your bank account.
- you are always better off waiting until you have the money.
- you are adding to your debt.
A: you are adding to your debt.

Q: Debit cards are a form of
- debt.
- credit.
- money.
A: money.

Q: If a debit card is used for a purchase it is like using
- debt.
- credit.
- cash.
A: cash.

Q: Credit is
- a way to purchase items smaller amounts over a long period of time.
- a way to purchase goods using a debit card.
- a tool for buying things you cannot afford to pay for all at once.
A: a tool for buying things you cannot afford to pay for all at once.

Q: What is the definition of credit?
- Credit is a means of purchasing items in smaller sums over a longer period of time.
- Credit is a means of purchasing services using a debit card.
- Credit is a way to purchase goods or services now when you cannot afford to pay for it all at once with cash.
A: Credit is a way to purchase goods or services now when you cannot afford to pay for it all at once with cash.

Q: ________ is considered the marketspace that bring lenders and borrowers together.
- A financial incentives
- A financial product
- The financial market
A: The financial market

Q: What type of financial vehicle or market brings lenders and borrowers together?
- Financial incentives.
- A financial product.
- The financial market.
A: The financial market.

Q: When organizations need money, they often borrow through what main method?
- Equity
- Assets
- Bonds
A: Bonds

Q: What is one of the main methods of borrowing for firms?
- Equity
- Assets
- Bonds
A: Bonds

Q: An example of a financial market is the ________.
- Fiat Market
- the Liability Market
- NASDAQ Stock Market
A: NASDAQ Stock Market

Q: Which of the following is an example of a financial market?
- Fiat Market
- The Barter Network
- New York Stock Exchange
A: New York Stock Exchange

Q: Corporate stock ________.
- represents debt in a firm.
- is considered to be a loan from a bank.
- represents ownership in a firm.
A: represents ownership in a firm.

Q: If a person owns stock in a corporation, what do they own?
- Corporate stock represents firm debt.
- Corporate stock is considered to be a bank bond.
- Corporate stock represents ownership in a firm.
A: Corporate stock represents ownership in a firm.

Q: Which of the following examples is excluded from being in the financial market for money?
- A household that deposits its savings in its local bank.
- A tech startup that needs a loan.
- A neighborhood watch service that charges by the day.
A: A neighborhood watch service that charges by the day.

Q: Which of the following scenarios illustrates a different market other than the financial market for money?
- A business going public on the New York Stock Exchange.
- A household securing a home loan from a bank.
- A child’s lemonade stand where she charges $1 cash per glass.
A: A child’s lemonade stand where she charges $1 cash per glass.

Q: Which of the following is considered a security?
- debit card
- $20 bill
- savings bond
A: savings bond

Q: What is an example of a security?
- Fiat money
- Checking account
- Credit cards
A: Credit cards

Q: Which economics principle is present in financial markets?
- conspicuous consumption
- rational decision making
- supply and demand
A: supply and demand

Q: In financial markets one of the main economics principles present is________.
- a command economy
- nominal decision making
- supply and demand
A: supply and demand

Q: What is NOT an example of a security?
- equities
- bonds
- fiat money
A: fiat money

Q: Of the following examples of securities, which example is excluded from being a security?
- equities
- bonds
- fiat money
A: fiat money

Q: What makes all financial markets linked directly or indirectly?
- Financial markets are linked because each financial market is isolated to be only a source of borrowed funds or only a destination for saving, not both.
- Because supply and demand is not an economic force operating in financial markets.
- Financial markets are vehicles for both borrowing funds and also where funds are saved.
A: Financial markets are vehicles for both borrowing funds and also where funds are saved.

Q: How are all financial markets linked indirectly or directly?
- The link is created because various financial markets specialize in either being solely a destination for savings or solely a source of borrowed funds, but not both.
- Financial markets remain uninhibited by the economic principle of supply and demand.
- Financial markets whether directly or indirectly have access to both borrowing funds and saving funds through various financial vehicles.
A: Financial markets whether directly or indirectly have access to both borrowing funds and saving funds through various financial vehicles.

Q: When the supply of loanable funds exceeds demand for loanable funds
- the interest rate will rise.
- the interest rate is unchanged.
- the interest rate will fall.
A: the interest rate will fall.

Q: The law of demand in the loanable funds market predicts a
- fall in consumer credit card use if the interest rate falls.
- decrease in credit card issuance if the interest rate rises.
- fall in consumer credit card use if the interest rate rises.
A: fall in consumer credit card use if the interest rate rises.

Q: Equilibrium in financial markets occurs at an interest rate where the quantity of loanable funds demanded is
- greater than the quantity of loanable funds supplied.
- less than the quantity of loanable funds supplied.
- equal to the quantity of loanable funds supplied.
A: equal to the quantity of loanable funds supplied.

Q: The equilibrium interest rate is the
- highest interest rate that borrowers are willing to pay on their loans.
- lowest interest rate at which lenders are willing to supply financial capital.
- interest rate at which the quantity of borrowed money equals the quantity of financial capital supplied.
A: interest rate at which the quantity of borrowed money equals the quantity of financial capital supplied.

Q: An interest rate is the ________ and the reward for lending money.
- total price of a purchase
- annual stock dividend
- price of borrowing money
A: price of borrowing money

Q: An interest rate is the price of borrowing money and the ________.
- total price of a purchase
- annual stock dividend
- reward for lending money
A: reward for lending money

Q: Consumers must choose whether they prefer to consume goods, including money, now or in the future. This is known as:
- the law of demand.
- consumer confidence.
- intertemporal decision making.
A: intertemporal decision making.

Q: ________ means that consumers make decisions across time about when they will consuming goods, including money, either in the future or at the present time.
- The law of supply
- Consumer determined decisions
- Intertemporal decision making
A: Intertemporal decision making

Q: Banks are financial intermediaries because they
- print money as needed for borrowers whether business, individual, or government entities.
- hold all the money in the economic system in currency form.
- link savers who deposit money and borrowers who seek loans.
A: link savers who deposit money and borrowers who seek loans.

Q: Why are banks considered financial intermediaries?
- Because banks assess the needs of borrowers whether business, individual, or government entities and print the necessary amount to meet those needs.
- Because all of the money (in currency form) in the economic system is held in banks.
- Because banks link borrowers of loans with savers who deposit money.
A: Because banks link borrowers of loans with savers who deposit money.

Q: A key function of a bank is
- own assets in the real estate market.
- create demand deposits for customers.
- to be an intermediary between savers and borrowers.
A: to be an intermediary between savers and borrowers.

Q: Identify one of the key functions of a bank.
- It invests and own assets in the real estate market.
- It offers demand deposits for customers.
- It serves as an intermediary between borrowers and savers.
A: It serves as an intermediary between borrowers and savers.

Q: Demand deposits are considered a(n) ________ to a bank.
- liability
- retained earning
- asset
A: asset

Q: From a banks perspective, demand deposits are considered a(n) ________.
- liability
- retained earning
- asset
A: asset

Q: Which is true about a certificate of deposit (CD)?
- It pays a lower interest rate than a savings account.
- The time frame to deposit money is variable.
- There is a penalty to withdrawal early.
A: There is a penalty to withdrawal early.

Q: Which one of the following statements about a certificate of deposit (CD) is correct?
- A savings account pays a higher interest rate than a CD.
- The time frame for depositing money varies.
- There is an early withdrawal penalty.
A: There is an early withdrawal penalty.

Q: Savings banks and credit unions are both examples of which of these?
- Federal Reserve
- U.S. government securities
- depository institutions
A: depository institutions

Q: What is true about savings banks and credit unions?
- they are nonprofits
- they are typically members only
- they are depository institutions
A: they are depository institutions

Q: Which type of depository institution is considered safest?
- savings banks
- investment banks
- credit unions
A: credit unions

Q: If you were looking to use the safest depository institution for your money, what type of institution would that be?
- savings bank
- investment bank
- credit union
A: credit union

Q: What is true about a credit union?
- It is typically for-profit.
- It is typically made up of diverse members.
- Its focus is to make loans to its members.
A: Its focus is to make loans to its members.

Q: Which of the following is a true statement about a credit union?
- It is typically a for-profit institution.
- Its members are usually a diverse mix of customers.
- Its main focus is to make loan funds to its members.
A: Its main focus is to make loan funds to its members.

Q: What is one of the main differences between a bank and a credit union?
- Typically a bank is owned and run by its members.
- A credit union has to be FDIC insured, but not banks.
- Typically a credit union is owned and run by its members.
A: Typically a credit union is owned and run by its members.

Q: If you were to identify one of the main differences between a bank and a credit union, what would it be?
- A bank is owned and run by its members.
- A credit union has to be FDIC insured, but not banks.
- A credit union is owned and run by its members.
A: A credit union is owned and run by its members.

Q: An asset in a bank’s T-account is ________.
- something the bank owes someone else
- how much the bank is worth
- something owned by the bank
A: something owned by the bank

Q: A bank’s T-account includes assets which are
- items of value the bank owes to someone else.
- the total of a banks worth.
- items of value owned by the bank.
A: items of value owned by the bank.

Q: A liability in a bank’s T-account is
- something owned by the bank.
- how much the bank is worth.
- something the bank owes someone else.
A: something the bank owes someone else.

Q: A bank’s T-account includes liabilities which are
- items of value owned by the bank.
- the total of a banks worth.
- items of value the bank owes to someone else.
A: items of value the bank owes to someone else.

Q: An example of a bank asset is ________.
- a demand deposit made by a customer
- a payment made for the electricity bill
- a loan made out to a customer
A: a loan made out to a customer

Q: Which of the following is an example of a bank asset?
- A customer’s demand deposit in the bank.
- A bank’s payment for its utility bill.
- A loan given to a customer by the bank.
A: A loan given to a customer by the bank.

Q: An example of a bank liability is ________.
- a loan made to a customer
- a fee made by a customer
- an interest payment made on a savings account
A: an interest payment made on a savings account

Q: Which of the following is an example of a bank liability?
- A customer loan made by the bank.
- A customer’s checking account fee.
- The savings account interest payment.
A: The savings account interest payment.

Q: Banks that go bankrupt have a ________ net worth.
- positive
- average
- negative
A: negative

Q: If a bank goes bankrupt, then its assets are worth ________ than its liabilities.
- more
- the same
- less
A: less

Q: A well-run bank will ________.
- assume all borrowers will pay their loans on time
- not factor in missing payment into its planning
- assume some borrowers will not repay their loans on time
A: assume some borrowers will not repay their loans on time

Q: A bank is operating well if it assumes ________.
- all borrowers will be punctual with their loan payments
- it will not need plan for missed payments
- there will be borrowers who will not repay their loans in a timely fashion
A: there will be borrowers who will not repay their loans in a timely fashion

Q: Loan defaults are when ________.
- customers pay back their loans early
- customers pay back their loans
- customers do not repay their loans
A: customers do not repay their loans

Q: What is meant by a bank if a loan defaults?
- The loan customers will often opt for paying off their loans early.
- The default mode of customers is to pay back their loans.
- There are customers who do not repay their loans.
A: There are customers who do not repay their loans.

Q: What is a step a bank can take to protect itself from loan defaults which can lead to recessions?
- A bank can plan for recessions by opening new branches and more ATMs.
- A bank can increase the same loans to build a larger pool of funds.
- A bank can diversify its loans.
A: A bank can diversify its loans.

Q: How can a bank strategize to protect itself from loan default levels that will potentially create recessions?
- A bank could plan for recessions by limiting the number of ATMs.
- A bank could increase the size of loans to build a larger pool of funds.
- A bank could diversify its loans by lending to a variety of customers.
A: A bank could diversify its loans by lending to a variety of customers.

Q: Which is true of banks' deposits?
- Banks lend out all of their deposits to earn income.
- Banks keep all of their deposits on hand as cash to enable them to pay out withdrawals by depositors.
- Banks lend out most, but not all, of the deposits to earn income.
A: Banks lend out most, but not all, of the deposits to earn income.

Q: Which is inaccurate about banks' deposits?
- Banks lend out most of the deposits to earn income.
- Banks keep some of their deposits on hand as cash to enable them to pay out withdrawals by depositors.
- Banks lend out all of their deposits to earn income.
A: Banks lend out all of their deposits to earn income.

Q: When banks receive new deposits, they can make new loans and thus create money
- equal to the full amount of the new deposits.
- up to the amount of their checkable deposits.
- only up to the amount of their excess reserves.
A: only up to the amount of their excess reserves.

Q: How much money can a bank loan out, and make money on, of the banks’ newly received deposits?
- The bank can loan out what is equal to the full amount of the new deposits.
- The bank can loan out up to the amount of their checkable deposits.
- The bank can loan out only up to the amount of its excess reserves.
A: The bank can loan out only up to the amount of its excess reserves.

Q: Banks create money through which of the following processes?
- printing money
- writing checks on bank deposits
- lending money
A: lending money

Q: Which process is used by banks to create money?
- Banks printing money.
- Banks using bank deposits to pay expenses.
- Banks lend money and collect interest on the loans.
A: Banks lend money and collect interest on the loans.

Q: Money creation in the United States results from which of the following?
- The rise in the value of gold.
- The purchases of government securities.
- The process of multiple banks’ lending out deposits.
A: The process of multiple banks’ lending out deposits.

Q: Which answer is true for how money is created in the United States?
- The value of silver increases.
- Government securities are purchased.
- Many banks lend out deposited money.
A: Many banks lend out deposited money.

Q: The money multiplier defines the amount of
- consumer demand following an increase in government spending.
- money that a bank can create.
- money that the banking system can create.
A: money that the banking system can create.

Q: The money multiplier is defined as
- the change in deposits divided by the change in the money supply.
- consumer demand following government spending.
- the change in the money supply divided by the change in deposits newly deposited into the banking system.
A: the change in the money supply divided by the change in deposits newly deposited into the banking system.

Q: If the reserve requirement is 10 percent and a monetary expansion increases excess reserves by $5 million, the total change in the money supply after all rounds of lending are completed is ________.
- 100 million
- 5 million
- 50 million
A: 50 million

Q: If the reserve requirement is 10 percent and a monetary expansion increases excess reserves by $10 million, the total change in the money supply after all rounds of lending are completed is ________.
- 50 million
- 5 million
- 100 million
A: 100 million

Q: The required reserve ratio for Jack's bank is 10 percent. If Jack deposits $2,000 cash in his checking account, what is the amount of new money the bank would create when it lends out its excess reserves?
- $200
- $1,000
- $1,800
A: $1,800

Q: The required reserve ratio for Julie's bank is 10 percent. If Julie deposits $5,000 cash into her checking account, what amount of new money could the bank create when it lends out its excess reserves?
- $500
- $2,500
- $4,500
A: $4,500

Q: The money supply may expand by less than the amount predicted by the money multiplier if
- unemployment is low.
- banks loan out all of their excess reserves.
- banks do not loan out all of their excess reserves.
A: banks do not loan out all of their excess reserves.

Q: If money supply expansion falls below expected amounts predicted by the money multiplier, what has most likely occurred?
- There is low unemployment.
- Banks have loaned out all of their excess reserves.
- Banks have failed to loan out all of their excess reserves.
A: Banks have failed to loan out all of their excess reserves.