ADMS 2400 Study Guide - Bank Reserves, Debit Card, Reserve Requirement

Which of the following is the best definition of money?

a. Gold.

b. An obligation between the parties to a transaction.

c. Any medium of exchange.

d. Any commodity or token that is generally accepted as a means of payment.

1.The desired reserve ratio is 3 percent. Robert deposits $3,000 in Bank America. Bank America keeps its minimum desired reserves and lends the excess to Fredrica. How much does Bank America lend to Fredrica?

A. $2,910
B. $300
C. $2700
D. $3,000
E. $900

2. Suppose a price ceiling has no effect; this means that

A. people are finding a way to circumvent the law.
B. it has no legal enforcement mechanism.
C. the equilibrium price is below the price ceiling.
D. the equilibrium price is above the price ceiling.

3. An example of household production excluded from GDP is

A. plumbing work completed by Joe Fix-it.
B. household cleaning services provided by Merry Maids Incorporated.
C. child care provided by a certified nanny.
D. lawn care provided by a local lawn care company.
E. tree trimming you provide at your parents' home.

4.In the United States, between 1961 and 2011, there has been

i. a consistent , non-changing growth rate of potential GDP per person.
ii. an increase in the standard of living based on real GDP per person.
iii. fluctuations in real GDP per person around potential GDP per person.

A. ii only
B. ii and iii
C. i only
D. i and ii only
E. i, ii and iii

5. When goldsmiths issued receipts to gold owners, and those gold receipts circulated while gold stayed in the goldsmiths' safes,

A. the gold receipts were considered money because they were used as a means of payment.
B. an infant banking system developed in sixteenth century Europe.
C. money was invented.
D. fiat money was created.
E. Both A and B are correct.

6.The "double coincidence of wants" is B??

A. what is needed to use money.
B. eliminated when we barter instead of using money.
C. money's role as a unit of account.
D. how value is stored when we transact with money.
E. eliminated with the use of money.

7. The process of money creation by the banking system is limited, in part, by the

A. laws passed each year by the U.S. Congress.
B. number of banks.
C. number of depositors.
D. Comptroller of the Currency.
E. desired reserve ratio.

8. Which of the following is a policy tool of the Fed?

i. setting the required reserve ratios
ii. conducting open market operations
iii. quantitative easing

A. i, ii, and iii
B. Both i and ii
C. i only
D. ii only
E. iii only

1. Which of the following is NOT a tool the Fed uses to manage the money supply?

A) open market operations

B) discount policy

C) deposit insurance

D) reserve requirements 0.4 points

2. The problem with barter economies is:

A) less time and trouble to trade as compared with a money economy.

B) that there may be a double coincidence of wants.

C) a banking system for trade to occur.

D) that there be a single coincidence of wants. 

3. If banks do not loan out all their excess reserves, then the real world multiplier is

A) smaller than 1/RR.

B) larger than 1/RR.

C) equal to 1/RR.

D) not related to 1/RR. 

4. If the Federal Open Market Committee wants to increase the money supply through open market operations, it will

A) buy U.S. Treasury Securities.

B) sell U.S. Treasury Securities.

C) increase the discount rate.

D) decrease the discount rate. 

5. M1 includes

A) currency in circulation, checking account balances at banks, the value of traveler's checks.

B) currency in circulation, savings accounts, checking account balances at banks.

C) currency in circulation, savings accounts, checking account balances at banks, travelers.

D) coins, savings account balances at banks, traveler's checks. 

6. Using the quantity equation, if the velocity of money grows at 5 percent, the money supply grows at 10 percent, and real GDP grows at 4 percent, then the inflation rate will be

A) 19 percent.

B) 15 percent.

C) 11 percent.

D) 6 percent.

7. According to the quantity theory of money, the inflation rate equals

A) the money supply minus real output.

B) real output minus the money supply.

C) the growth rate of the money supply minus the growth rate of real output.

D) the growth rate of real output minus the growth rate of the money supply.

8. Suppose that you sold a basketball ticket for the SEC tournament for $750. Assuming that you deposit the entire $750 in your bank and that the RR = 10%, Answer the following questions while also using the same assumptions in the book/lecture slide. Correct answers contain no decimals. Please report them as they are.

a) What is the total change in checking account deposits?

b) How much new money is created? (or what is the change in money supply given the above state conditions?) The total change in the money supply is Blank 2.

c) The amount of new money created in this example would be higher or lower than in the real world. The amount of money created this way would be Bank 3 than in the real world.