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Multiple Choice Quiz
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1
Money is anything:
A)That can be used to barter
B)That a government declares to have value
C)That has value
D)Generally accepted as a medium of exchange
2
Which of the following is not money:
A)Checking account balances
B)Cash and coins
C)Credit cards
D)Debit cards
3
M1 includes all of the following except:
A)Cash out in circulation
B)Checking account balances
C)Savings accounts
D)Travelers checks
4
The largest component of M1 is:
A)Cash in circulation
B)Checking account balances
C)Savings accounts
D)Travelers checks
5
Which of the following is included in M2:
A)Travelers checks
B)Cash in circulation
C)Savings accounts
D)All of the above
6
When a bank makes a loan it is:
A)Creating money by crediting a transaction balance
B)Taking on a liability
C)Giving the borrower cash
D)All of the above
7
Bank reserves are:
A)Liabilities of the bank
B)The loan portfolio of the bank
C)Assets which are used to meet its deposit obligations
D)Equal to the bank's excess reserves
8
The reserve ratio is the ratio of:
A)Bank reserves to savings accounts
B)Bank transactions deposits to required reserves
C)Bank reserves to total transactions deposits
D)Required reserves to excess reserves
9
A bank's required reserve ratio is:
A)A minimum amount of reserves a bank is required to hold
B)Set by the Federal Reserve Bank
C)Is equal to the total deposits times the required reserve ratio
D)All of the above
10
A bank has 10 million in transaction balances and the required reserve ratio is 12%. The bank must hold:
A)1 million in required reserves
B)12 million in required reserves
C)10 million in required reserves
D)1.2 million in required reserves
11
The banking system as a whole can create additional money beyond initial deposits because:
A)They must hold 100% of deposits as required reserves
B)Banks do not want to loan out excess reserves
C)People withdraw cash from deposits
D)There are multiple banks and there is fractional reserve banking
12
XYZ bank has 15 million in transaction balances and 20 million in total reserves. The required reserve ratio is 10%. How much does the bank have in excess reserves?
A)3 million
B)5 million
C)3.5 million
D)4 million
13
Suppose a banking system has $100,000 in deposits and a required reserve ratio of 10%, and the total bank reserves for the whole system of $25,000. Then the whole system can potentially make new loans in the amount of:
A)$10,000
B)$15,000
C)$150,000
D)$250,000
14
If the required reserve ratio is 12% the money multiplier is:
A)10
B)5
C)9
D)8.3
15
If the Federal Reserve Bank wanted to increase the amount of bank lending it will:
A)Require banks to call loans
B)Ask banks to sell assets
C)Raise the required reserve ratio
D)Lower the amount of money banks must hold as required reserves





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