Money and Financial Institutions Chapter Exam

Exam Instructions:

Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck!

Page 1

Question 1 1. The fractional reserve system's ability to create money is reduced when

Question 2 2. How does an affiliate bank and a subsidiary bank differ?

Question 3 3. What is it called when you place a demand on money deposited in a bank and withdraw it at any time?

Question 4 4. The government issues a new two-dollar and fifty cent bill. What is the intrinsic value of the new currency?

Question 5 5. $10,000 gets deposited into the Ceelo First National Bank. As a result, excess reserves go up by $8,000. This means that the required reserve ratio must be:

Page 2

Question 6 6. A bank gets a demand deposit of $50,000. If the reserve requirement is 10%, what is the maximum the bank can loan out at this time?

Question 7 7. Which of the following is FALSE regarding the Federal Reserve?

Question 8 8. Gross private domestic investment is also referred to as:

Question 9 9. Assume that the Federal Reserve increases the monetary base by $1 billion when the reserve requirement is 10 percent. The money supply will increase by:

Question 10 10. The Fed is NOT responsible for:

Page 3

Question 11 11. How does high economic output lead to higher nominal interest rates?

Question 12 12. What effect describes how an increase in one economic activity leads to a much greater increase in economic output?

Question 13 13. Calvin notices that there is not enough money in his checking account to pay his electric bill this month, so he moves some money from his savings account to his checking account in order to pay the bill. We would call this:

Question 14 14. What illustrates the quantity of money supplied at a given interest rate?

Question 15 15. How does inflation prevent most of the money in use today from serving as a pure store of value?

Page 4

Question 16 16. What is wealth?

Question 17 17. Which of the following will decrease the quantity of money demanded by consumers and businesses?

Question 18 18. Assume that there are two parties to an exchange and that they value the goods they would receive as much as the goods they would give away. What do economists call this?

Question 19 19. What is anything that is widely accepted in exchange for goods and services?

Question 20 20. The system in which banks hold back a small fraction of their deposits in a reserve and loan out the rest of their deposits to borrowers is called:

Page 5

Question 21 21. When someone deposits money into a savings account, this demand deposit becomes _____ to the bank?

Question 22 22. Which of the following insures that the US dollar maintains its value?

Question 23 23. Which of the following is NOT true regarding the role of banks in the economy?

Question 24 24. What are some of the objectives of the Fed?

Question 25 25. What happens if the Federal Reserve sells a large amount of government securities in the open market?

Page 6

Question 26 26. When does investment demand increase?

Question 27 27. When GDP is rising, money demand will most likely

Question 28 28. The one thing that the Fed does not do:

Question 29 29. Money has four basic functions. Select the answer below that is not a function.

Question 30 30. Why is a negative balance of payment bad for a country?

Money and Financial Institutions Chapter Exam Instructions

Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck!

Business 100: Intro to Business  /  Business Courses
Support