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.   gold in Ft. Knox.
D.   willingness to accept it as payment.
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.   fractional reserve banking
D.   universal standards for the purity and weight of gold coins.
Question #3
The FDIC
A.   all of these
B.   insures most bank deposits for up to $250,000.
C.   has been credited with the pronounced decline in bank failures after 1933, when the FDIC was established.
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.   goldsmiths knew that they would not be prosecuted for lending out money that they did not have.
C.   goldsmiths knew that on any given day, only a few depositors would come to claim their deposits.
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.   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.   bank run.
B.   required reserve increase.
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.   banks are failing at an abnormally high rate.
D.   gold can be purchased at bargain prices.
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 easily handled.
C.   To be useful, money must be of uniform quality.
D.   To be useful, money must be indivisible.

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