Question

22. According to the authors of the text, money is a force multiplier in that it:

a. eliminated the disadvantage that arises from the double coincidence of wants.

b. reduces the number of prices.

c. provides valuable role for gold in a money economy.

d. All of the above.

e. Only A and B of the above

38. Carmen has $2000 in cash that she had been holding onto for a while and has decided to deposit this money into her checking account. As a result we can say that:

a. M1 has risen and M2 has risen.

b. M1 has risen and M2 had remained constant.

c. M1 has remained constant and M2 has risen.

d. M1 has fallen and M2 has remained constant.

e. M1 has remained constant and M2 has remained constant.

41. An example of a local currency cited in the lecture was the:

a. Flagstaff Neighborly Note.

b. Coconino Coupon.

c. Arizona Buck.

d. Deseret Deposit receipt.

e. Sonoran Reserve Money.

47. Since the last recession (2008), which money component has fallen?

a. Travelers’ checks.

b. Currency held by the public.

c. Demand deposits.

d. M1.

e. None of the above.

48. Details of the various types of financial assets that goes into the differing measures of money are summarized in the Federal Reserve’s:

a. Regulation A.

b. Regulation B.

c. Regulation C.

d. Regulation D.

e. Regulation X.

49. This account has no maturity date, may be transferred to another account and cannot be held by a business:

a. Demand deposit account.

b. Negotiable order of withdrawal.

c. Time deposit.

d. Savings deposit.

e. Money market deposit account.

50. Which of the following is true, according to Murphy?

a. Money represents a claim on goods and services.

b. Money is almost exactly like a bond.

c. Deflation does not eliminate the profitability of investment.

d. All of the above are true.

e. Only A and B of the above are true

69. When considering Bitcoin, we can say that it:

a. is neither money nor a medium of exchange.

b. is both money and a medium of exchange.

c. is money but is not a medium of exchange.

d. is not money but is a medium of exchange.

Consider that there is only one bank and its balance sheet is as follows Use it to answer the next 5 questions.

Assets

Liabilities

Reserves

$26,000

Demand Deposits

$160,000

Loans

$134,000

                              Let rrD = 10%, e= 5% and c=10%.

92. What is the value of this bank’s undesired excess reserves?

a. +$13,000

b. +$5,000

c. +$2,000

d. -$4,000

e.   -$15,000

93. What is the value of the money multiplier for this problem?

a. 10

b. 5.5

c. 5.0

d. 4.4

e. 4.0

94. At the outset of this problem, what is the level of the money supply (M1)?

a. $125,000

b. $160,000

c. $176,000

d. $242,000

e. $320,000

95. In order to reach a final equilibrium, the money supply will have to change by:

a. +$2,000

b. +$8,800

c. +$26,000

d. +$71,500

e. -$71,500

96. At the final equilibrium, the value of the undesired excess reserves will be:

a. +$2,000

b. +$1,000

c. -$2,000

d. -$8,000

e. None of the above.

114. From 2008 to 2014 for the U.S. banking sector, the currency ratio has ____, the excess reserve ratio has ____ and the money multiplier has ____.

a. risen, risen, risen

b. fallen, fallen, fallen

c. fallen, risen, fallen

d. risen, fallen, fallen

e. risen, fallen, risen

Exam 2

9. Rothbard argues that the Peel Act was largely ineffective because it did not recognize ___ as being part of the money supply.

a. currency

b. demand deposits

c. time deposits

d. short term loans

e. government securities

15. According to Rothbard, which of the following is true?

a. Demand deposits were historically used for large transactions.

b. Even before WWI, most people used demand deposits.

c. It is harder for a bank to create a demand deposit than to create a bank note.

d. The check written on a demand deposit is, in fact, money.

e. All of the above

20. O’Driscoll argues that a central bank is _____ for the development of a modern economy.

a. necessary but not sufficient

b. necessary and sufficient

c. effective and efficient

d. neither necessary nor sufficient

e. not necessary but sufficient

46. Following the reorganization of the Fed during the Great Depression:

a. the Treasury Secretary was no longer a member of the Board of Governors.

b. the Comptroller of the Currency was no longer a member of the Board of Governors.

c. The FOMC was created to conduct open market operations.

d. All of the above.

e. Only A and B of the above.

78. In the video, Peter Klein argues that during a recession the Fed should:

a. bail out all banks.

b. bail out only the largest 5-10 banks.

c. bail out most of the very large 20-30 banks.

d. take over ownership of the largest banks.

e. None of the above.

83. According to Christoff-Kurapouna, what effectively eliminated the gold standard?

a. President Roosevelt’s executive order of 1933 making the holding of gold illegal.

b. World War II.

c. World War I.

d. The Bretton Woods agreement.

e. The founding of the United Nations.

84. Which president eliminated the exchange of gold for dollars to foreign central banks?

a. Franklin Roosevelt.

b. Harry Truman.

c. John Kennedy.

d. Richard Nixon.

e. Jimmy Carter

111. What are the two main categories of profit making assets on a bank’s balance

sheet?

a. Loans and securities.

b. Reserves and loans.

c. Bonds and deposits.

d. Borrowings and deposits.

e. Loans and deposits.

118. As compared to 2008, at the end of 2014 among the major changes in the liability side of the balance sheet for commercial banks in the United States was:

a. total deposits rose to about 70% of the total.

b. borrowed funds fell by about 2% of the total.

c. equity rose to nearly 30% of the total.

d. All of the above.

e. Only B and C of the above

120. Until the Great Depression, banks tended to rely on this management strategy to raise their return with riskier loans but offset that with larger holdings of government securities:

a. Real bills doctrine.

b. Shiftability theory.

c. Anticipated income.

d. Conversion of funds.

e. Gap management.

Exam 3

45. As of 2012, the value of capital instruments in the U.S. outstanding was about ___ the value of money market instruments outstanding.

a. half

b. double

c. ten times

d. twenty-two times

e. one hundred times

49. If there were no secondary markets, we would likely see:

a. increased activity in primary markets.

b. holders of stock more willing to sell their shares.

c. increased activity in all financial markets.

d. an overall rise in investment, capital development and our standard of living.

e. None of the above.

55. Among the reasons cited for why Black Rock is pursuing a revival of the single-name credit default swap market include:

a. many years of low interest rates that have kept returns to investors low.

b. the lack of precision that characterize index CDS instruments.

c. the desire to create a more stable market given that there are other risky competitive derivatives available in the market.

d. All of the above.

e. None of the above

57. In critiquing AIG, Davidson notes that:

a. they typically only sold CDS instruments, while most banks both bought and sold them.

b. they had written CDS instruments to cover over $400 billion in bonds.

c. to improve their liquidity, they sold off profitable assets, weakening their stock price.

d. a decline in their bond rating automatically required them to boost their collateral as part of their guarantee on the CDS instruments that they sold.

e. All of the above.

Answer 1

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