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.   willingness to accept it as payment.
C.   gold in Ft. Knox.
D.   Federal Reserve notes in banks.
Question #2
The major contribution of the "goldsmith's principle" to modern banking is
A.   paper money that is fully backed by gold.
B.   neighborhood banking.
C.   universal standards for the purity and weight of gold coins.
D.   fractional reserve banking
Question #3
The FDIC
A.   all of these
B.   eliminates the motive for customers to rush to their bank just because they heard bad news about the bank's finances.
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.   unit of account
B.   medium of exchange
C.   store of value
D.   commodity value
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.   goldsmiths knew that they would not be prosecuted for lending out money that they did not have.
C.   their was always a dire need for additional money.
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.   reserve requirements on bank deposits.
B.   deposit insurance by the FDIC.
C.   periodic bank examinations and audits.
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.   deposit surplus.
B.   fiscal policy crisis.
C.   bank run.
D.   required reserve increase.
Question #8
Money is an imperfect store of value when
A.   the rate of inflation is very high.
B.   gold can be purchased at bargain prices.
C.   the unemployment rate is 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 of uniform quality.
B.   To be useful, money must be easily handled.
C.   To be useful, money must be indivisible.
D.   To be useful, money must be storable and durable.

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