Raymond Hayden Economics

Multiple Choice Questions Sjs

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1. Money as a measure of value provides (a) its holder with perfect liquidity,

(,b) a common denominator for measuring value,

(c) a mechanism for allocating resources and distributing output,

(.d) a medium for exchanging final output.

2. In the United States, paper currency issued by the Federal Reserve

(a) is backed by gold but is not convertible into gold,

(b) has no intrinsic value but is backed by gold,

(c) has no intrinsic value,

(d) has no value in exchange.

3. In the United States, the M1 money supply consists of

(a) paper currency and coins,

(b) paper currency, coins, and check-writing deposits,

(c) paper currency, coins, check-writing deposits, and savings deposits, id) paper currency, coins, check-writing deposits, savings deposits, and certificates of deposit.

4. Reserve requirements are imposed on banks

(a) to control the amount of check-writing deposits in the economy,

(,b) to regulate bank profits,

(c) to encourage the use of check-writing deposits,

(d) to discourage the use of check-writing deposits.

5. When the banking system receives $400 in additional reserves and the reserve requirement is 0.20, maximum check-writing deposit expansion is

6. Which of the following is not a good store of nominal value?

(a) Checking deposit,

(b) Savings deposit,

7. When a bank makes a loan to a customer, the bank's

(a) asset account loans increases and its asset account currency decreases,

(b) asset account loans decreases and its asset account currency increases,

(c) asset account loans increases and its liability account checking deposit increases,

(d) asset account loans increases and its liability account checking deposit decreases.

8. A bank's net worth is $2000 when it has

(a) reserves of $1000, check-writing deposits of $10,000, loans $8000,

(b) reserves of $1000, check-writing deposits of $10,000, loans $12,000,

(c) reserves of $4000, check-writing deposits of $10,000, loans $8000,

(d) reserves of $ 1000, check-writing deposits of $10,000, loans $8000.

9. Whenc = 0.05 and r = 0.20, a $100 increase in the monetary base will result in a maximum increase in the M1 money supply of

10. Which of the following financial assets is not included in the M2 money supply?

(a) Savings deposits,

(b) Large-denomination CDs,

(c) Check-writing deposits,

(d) Overnight repurchase agreements (RPs).

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