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.   gold in Ft. Knox.
B.   Federal Reserve notes in banks.
C.   willingness to accept it as payment.
D.   silver in government vaults.
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.   paper money that is fully backed by gold.
D.   fractional reserve banking
Question #3
The FDIC
A.   has been credited with the pronounced decline in bank failures after 1933, when the FDIC was established.
B.   insures most bank deposits for up to $250,000.
C.   all of these
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.   unit of account
C.   commodity value
D.   medium of exchange
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.   limitations on the types of assets that a bank may own.
B.   reserve requirements on bank deposits.
C.   periodic bank examinations and audits.
D.   deposit insurance by the FDIC.
Question #7
If Depositors become worried about the safety of their deposit accounts, they may trigger a
A.   required reserve increase.
B.   deposit surplus.
C.   fiscal policy crisis.
D.   bank run.
Question #8
Money is an imperfect store of value when
A.   gold can be purchased at bargain prices.
B.   the rate of inflation is very high.
C.   banks are failing at an abnormally high rate.
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 storable and durable.
B.   To be useful, money must be of uniform quality.
C.   To be useful, money must be indivisible.
D.   To be useful, money must be easily handled.

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