Econ 102 - Principles of Macroeconomics » Fall 2022 » Money and Banking Quiz

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Question #1
Currently in the U.S., money is backed by
A.   silver in government vaults.
B.   Federal Reserve notes in banks.
C.   willingness to accept it as payment.
D.   gold in Ft. Knox.
Question #2
The major contribution of the "goldsmith's principle" to modern banking is
A.   neighborhood banking.
B.   universal standards for the purity and weight of gold coins.
C.   paper money that is fully backed by gold.
D.   fractional reserve banking
Question #3
The FDIC
A.   all of these
B.   has been credited with the pronounced decline in bank failures after 1933, when the FDIC was established.
C.   insures most bank deposits for up to $250,000.
D.   eliminates the motive for customers to rush to their bank just because they heard bad news about the bank's finances.
Question #4
Money almost always is used to quote prices. This illustrates the function of money as a
A.   store of value
B.   medium of exchange
C.   commodity value
D.   unit of account
Question #5
The fractional reserve system of banking evolved because
A.   goldsmiths knew that on any given day, only a few depositors would come to claim their deposits.
B.   goldsmiths did not have safes large enough to hold all of their gold deposits.
C.   goldsmiths knew that they would not be prosecuted for lending out money that they did not have.
D.   their was always a dire need for additional money.
Question #6
The government banking regulation that places an upper limit on the money supply is
A.   periodic bank examinations and audits.
B.   limitations on the types of assets that a bank may own.
C.   reserve requirements on bank deposits.
D.   deposit insurance by the FDIC.
Question #7
If Depositors become worried about the safety of their deposit accounts, they may trigger a
A.   fiscal policy crisis.
B.   bank run.
C.   required reserve increase.
D.   deposit surplus.
Question #8
Money is an imperfect store of value when
A.   the unemployment rate is high.
B.   gold can be purchased at bargain prices.
C.   the rate of inflation is very high.
D.   banks are failing at an abnormally high rate.
Question #9
Which of the following is not a major problem with some commodity monies?
A.   To be useful, money must be indivisible.
B.   To be useful, money must be storable and durable.
C.   To be useful, money must be of uniform quality.
D.   To be useful, money must be easily handled.

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