This preview has intentionally blurred parts. Sign up to view the full document

View Full Document

Unformatted Document Excerpt

Testbank 01 - Chapter 15 Money Creation-------------------------------------------------------------------------------- 1. The goldsmith's ability to create money was based on the fact that: A. withdrawals of gold tended to exceed deposits of gold in any given time period. B. consumers and merchants preferred to use gold for transactions, rather than paper money. C. the goldsmith was required to keep 100 percent gold reserves. D. paper money in the form of gold receipts was rarely redeemed for gold. Points Earned: 0/1 Correct Answer: D Your Response: 2. When the receipts given by goldsmiths to depositors were used to make purchases: A. the gold standard was created. B. existing banking laws were violated. C. the receipts became in effect paper money. D. a fractional reserve banking system was created. Points Earned: 0/1 Correct Answer: C Your Response: 3. Which one of the following is presently a major deterrent to bank panics in the United States? A. the legal reserve requirement B. the fractional reserve system C. the gold standard D. deposit insurance Points Earned: 0/1 Correct Answer: D Your Response: 4. Most modern banking systems are based on: A. money of intrinsic value. B. commodity money. C. 100 percent reserves. D. fractional reserves. Points Earned: 0/1 Correct Answer: D Your Response: 5. A fractional reserve banking system: A. is susceptible to bank panics. B. prevents money creation through the lending process. C. only tends to exist in developing economies. D. prevents the Federal Reserve from influencing the money supply. Points Earned: 0/1 Correct Answer: A Your Response: 6. In a fractional reserve banking system: A. bank panics cannot occur. B. the monetary system must be backed by gold. C. banks can create money through the lending process. D. the Federal Reserve has no control over the amount of money in circulation. Points Earned: 0/1 Correct Answer: C Your Response: 7. Bank panics: A. occur frequently in fractional reserve banking systems. B. are a risk of fractional reserve banking, but are unlikely when banks are highly regulated and lend prudently. C. cannot occur in a fractional reserve banking system. D. occur more frequently when the monetary system is backed by gold. Points Earned: 0/1 Correct Answer: B Your Response: 8. Which of the following statements is correct? A. The actual reserves of a commercial bank equal its excess reserves minus its required reserves. B. A bank's liabilities plus its net worth equal its assets. C. When borrowers repay bank loans, the supply of money increases. D. A single commercial bank can safely lend a multiple amount of its excess reserves. Points Earned: 0/1 Correct Answer: B Your Response: 9. A bank that has assets of $85 billion and a net worth of $10 billion must have: A. liabilities of $75 billion. ... View Full Document

End of Preview

Sign up now to access the rest of the document