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

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