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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 intrinsic value.
D)That is generally accepted as a medium of exchange.
2
Which of the following is not considered to be part of the money supply?
A)Checking account balances.
B)Cash and coins.
C)Credit cards.
D)Savings accounts.
3
Which of the following is included in both M1 and M2?
A)Traveler's checks.
B)Cash in circulation.
C)Savings accounts.
D)Treasury bills.
4
Bank reserves are
A)Liabilities of the bank.
B)The loan portfolio of the bank.
C)Assets that are used to meet deposit obligations.
D)Equal to the bank's excess reserves.
5
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.
6
A bank has $10 million in transactions balances, and the required reserve ratio is 12 percent. The bank must hold required reserves of
A)$1 million.
B)$1.2 million.
C)$10 million.
D)$12 million.
7
The banking system as a whole can create money beyond initial deposits because
A)Banks must hold 100 percent of deposits as required reserves.
B)Much cash is located in ATMs.
C)Financial regulation is lax.
D)There are multiple banks and there is fractional reserve banking.
8
Suppose a banking system has $100,000 in deposits and a required reserve ratio of 10 percent, and the total bank reserves of $25,000. The banking system can potentially make new loans in the amount of
A)$10,000.
B)$15,000.
C)$150,000.
D)$250,000.
9
If the required reserve ratio is 12 percent, the money multiplier is
A)5.
B)8.3.
C)9.
D)12.
10
If the Federal Reserve wants to increase commercial bank lending, it will
A)Require banks to lower interest rates on their loans.
B)Ask banks to sell assets.
C)Raise the required reserve ratio.
D)Lower the required reserve ratio.







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