Question 1 of 65 0 0 1 0 Points When a bank receives new deposits it can make new loans up to the amount of A the deposits received B the excess reserves generated by the deposits C the reserves generated by the deposits D the required reserves generated by the deposits Answer Key B Question 2 of 65 1 0 1 0 Points A bank is when its become s A solvent net worth negative B insolvent reserves negative C solvent excess reserves positive D insolvent net worth negative Answer Key D Question 3 of 65 1 0 1 0 Points A bank s reserves are A the minimum value of assets it must have B the amount of gold it is required to have as reserves against loans C the value of federal securities it is required to have as reserves against loans D deposits that banks have accepted from customers but have not loaned out Answer Key D Question 4 of 65 1 0 1 0 Points Which of the following decreases the demand for money A an increase in income B a decrease in real GDP C an increase in the price level D expectations of higher bond prices Answer Key B Question 5 of 65 0 0 1 0 Points A bond is A a debt instrument that is the issuer has taken out a loan B an equity instrument that is the buyer has purchased ownership in the issuer s firm C the same thing as a stock D a short term loan from the government Answer Key A Question 6 of 65 1 0 1 0 Points The Federal Depository Insurance Corporation FDIC has the power to close a bank when A the bank is insolvent B the bank is illiquid C the bank is leveraged D the bank has inadequate insurance Answer Key A Question 7 of 65 1 0 1 0 Points What happens in the money market when there is an increase in the supply of money A The equilibrium quantity of money increases and the equilibrium interest rate increases B The equilibrium quantity of money increases and the equilibrium interest rate decreases C The equilibrium quantity of money decreases and the equilibrium interest rate increases D The equilibrium quantity of money decreases and the equilibrium interest rate decreases Answer Key B Question 8 of 65 0 0 1 0 Points If bond prices rise A interest rates rise which in turn discourage investment B interest rates fall which in turn discourage investment C interest rates rise which in turn stimulate investment D interest rates fall which in turn stimulate investment Answer Key D Question 9 of 65 0 0 1 0 Points Which of the following is a store of value and a common medium of exchange A corporate bonds B stocks C checking account balances D Debit cards Answer Key C Question 10 of 65 1 0 1 0 Points Rank the following items in terms of most liquid to least liquid A checkable deposits cash an office building your father owns B cash credit card money market mutual funds checkable deposits C cash checkable deposits savings deposits an office building your father owns D cash Microsoft stock certificates you own checkable deposits Answer Key C Question 11 of 65 1 0 1 0 Points All else constant a decrease in the supply of money will lead to A an increase in interest rates B a decrease in interest rates C a rise in the price of bonds D no change in interest rates Answer Key A Question 12 of 65 1 0 1 0 Points Which of the following is NOT part of M1 A checking account balances B currency and coin C savings accounts D travelers checks Answer Key C Question 13 of 65 1 0 1 0 Points The principle of fractional reserve banking makes it possible for a A bank to make loans B bank to print currency C bank to avoid reserve requirements D bank to sell securities Answer Key A Question 14 of 65 1 0 1 0 Points The difference between M1 and M2 amounts to Components of the Money Supply Table 9 1 billion Currency Checkable deposits Traveler s checks Small denomination time deposits Savings deposits Money market mutual funds individuals Other liquid assets Large denomination time deposits A 325 billion B 350 billion C 450 billion D 1 275 billion 100 300 50 700 75 500 150 200 A True B False Answer Key D Question 15 of 65 0 0 1 0 Points The demand for money curve is negatively sloped because people tend to hold less money at lower interest rates Answer Key False Question 16 of 65 1 0 1 0 Points Gresham s Law A deals with the theory of regulatory forces in the economy B is the tendency for good money to drive bad money out of circulation C is the tendency for bad money to drive good money out of circulation D was passed in 1913 as part of the Federal Reserve Act Answer Key C Question 17 of 65 1 0 1 0 Points Which of the following is not an example of a financial intermediary A a pension fund B an insurance company C a commercial bank D the New York Stock Exchange Answer Key D Question 18 of 65 1 0 1 0 Points Separation of commercial and investment banking was accomplished in the great depression by which law A Dodd Frank B Glass Steagall C Volcker D McFadden Act Answer Key B Question 19 of 65 1 0 1 0 Points Commodity money is paper currency that may be redeemed for a specific commodity at a specified rate on the currency A True B False Answer Key False Question 20 of 65 1 0 1 0 Points The functions of money are A a conductor of economic activity a medium of exchange and a store of value B a medium of exchange a store of value and a factor of production C a store of value a medium of exchange and a determinant of investment D a store of value a unit of account and a medium of exchange Answer Key D Question 21 of 65 1 0 1 0 Points The supply curve of money shows all other things unchanged the A quantity of money supplied at each price of bonds B quantity of money supplied at each bond rate C quantity of money supplied at each interest rate D amount of money people supply at a specific interest rate Answer Key C Question 22 of 65 1 0 1 0 Points How does the Fed decide which monetary measure it should keep track of A The Fed would like to track a monetary measure that is most closely related to the market interest rate B The Fed would like to track a monetary measure that is most closely related to the quantity of money demanded by economic agents C The Fed would like to track a monetary measure that is most closely related to the level of real GDP and the price level D The Fed would …