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.   universal standards for the purity and weight of gold coins.
B.   neighborhood banking.
C.   fractional reserve banking
D.   paper money that is fully backed by gold.
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.   insures most bank deposits for up to $250,000.
C.   all of these
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.   medium of exchange
B.   store of value
C.   unit of account
D.   commodity value
Question #5
The fractional reserve system of banking evolved because
A.   goldsmiths knew that they would not be prosecuted for lending out money that they did not have.
B.   goldsmiths knew that on any given day, only a few depositors would come to claim their deposits.
C.   their was always a dire need for additional money.
D.   goldsmiths did not have safes large enough to hold all of their gold deposits.
Question #6
The government banking regulation that places an upper limit on the money supply is
A.   deposit insurance by the FDIC.
B.   periodic bank examinations and audits.
C.   reserve requirements on bank deposits.
D.   limitations on the types of assets that a bank may own.
Question #7
If Depositors become worried about the safety of their deposit accounts, they may trigger a
A.   required reserve increase.
B.   bank run.
C.   fiscal policy crisis.
D.   deposit surplus.
Question #8
Money is an imperfect store of value when
A.   the unemployment rate is high.
B.   the rate of inflation is very high.
C.   gold can be purchased at bargain prices.
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 easily handled.
C.   To be useful, money must be of uniform quality.
D.   To be useful, money must be storable and durable.

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