1. M1 includes:a. cash and travelers' checks.b. cash, checking account balances, and travelers' checks.c. cash, travelers checks', and bank depositsd. cash, checking account balances, and saving accountbalances.e. cash, bank deposits, and money market accounts.2. Money almost always serves as the standard unit for quotingprices. This is another way of saying money serves as a:a. medium of exchange.b. store of value.c. standard of value.d. commodity itself.e. all of the above are correct.3. Which of the following is the best definition of money?a. anything generally accepted as a payment for goods or repaymentof debtb. anything that is a liability of the federal governmentc. anything that is a liability of a commercial bankd. coins and currency in the hands of the public4. A gold standard is:a. a measurement of the importance of a good; it indicates highquality.b. the basis for monetary exchange internationally.c. an internationally recognized means for defining currencyexchange rates.d. a system where currency (e.g., the dollar) was defined asequivalent in value to a certainamount of gold.5. With the invention of banking, one important aspect of money wasthat:a. individuals have no discretion over the money supply.b. government lost all control over the money supply.c. banks have some discretion over the money supply.d. banks have full control over the money supply.e. money was out of control.6. Fractional reserve banking takes its name from the factthat:a. banks hold only a fraction of their reserves at the bankitself.b. banks keep only a fraction of total deposits on reserve.c. banks lend only a fraction of their total reserves tocustomers.d. banks reserve only a fraction of their activity for lending.e. banks reserve only a fraction of their cash for tellerusage.

Money is an economic unit that functions as a by and large perceived medium of exchange for…

MI includes: a. cash and travelers' checks. b. cash, checking account balances, and travelers' checks. c. cash, travelers checks', and bank deposits d. cash, checking account balances, and saving accountbalances. e. cash, bank deposits, and money market accounts.

MI includes: a. cash and travelers' checks. b. cash, checking account balances, and travelers' checks. c. cash, travelers checks', and bank deposits d. cash, checking account balances, and saving accountbalances. e. cash, bank deposits, and money market accounts.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Required Reserve and Excess Reserve Analysis

A required reserve is an amount of cash that banks must keep with themselves, which is certain percentage of the deposits made by their customers. Required reserve is a percentage of the bank's deposits that the respective bank must have on each overnight. The percentage rate is set and determined by the nation’s central bank. It is important to have such funds accumulated to meet its uncertain obligations, sudden liabilities and withdrawals. Required reserve is also known as reserve ratio. Reserve ratio is an important tool to control the money supply.

Question

1. M1 includes:
a. cash and travelers' checks.
b. cash, checking account balances, and travelers' checks.
c. cash, travelers checks', and bank deposits
d. cash, checking account balances, and saving accountbalances.
e. cash, bank deposits, and money market accounts.
2. Money almost always serves as the standard unit for quotingprices. This is another way of saying money serves as a:
a. medium of exchange.
b. store of value.
c. standard of value.
d. commodity itself.
e. all of the above are correct.
3. Which of the following is the best definition of money?
a. anything generally accepted as a payment for goods or repaymentof debt
b. anything that is a liability of the federal government
c. anything that is a liability of a commercial bank
d. coins and currency in the hands of the public
4. A gold standard is:
a. a measurement of the importance of a good; it indicates highquality.
b. the basis for monetary exchange internationally.
c. an internationally recognized means for defining currencyexchange rates.
d. a system where currency (e.g., the dollar) was defined asequivalent in value to a certain
amount of gold.
5. With the invention of banking, one important aspect of money wasthat:
a. individuals have no discretion over the money supply.
b. government lost all control over the money supply.
c. banks have some discretion over the money supply.
d. banks have full control over the money supply.
e. money was out of control.
6. Fractional reserve banking takes its name from the factthat:
a. banks hold only a fraction of their reserves at the bankitself.
b. banks keep only a fraction of total deposits on reserve.
c. banks lend only a fraction of their total reserves tocustomers.
d. banks reserve only a fraction of their activity for lending.
e. banks reserve only a fraction of their cash for tellerusage.

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Table: Statistics for a Small Economy Item Value (millions) $7 130 Money market mutual funds 18 Checkable deposits 36 Currency and total reserves at the Fed 12 Large-time deposits 20 Demand deposits 14 Cash held by public Small-time deposits The table shows some statistics for a small economy. Based on only the information provided, M2 in this country amounts to: $105 million. $121 million. $137 million. $129 million.
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