01
Choose one
1 point
Which situation best illustrates money serving as a unit of account?
Free Practice Quiz Question List
Money and the Financial System Online Quiz Questions
Use this free practice quiz with 20 questions to review Money and the Financial System, test your knowledge, and prepare for your next test or exam.
20 questions
02
Choose one
1 point
Which statement correctly distinguishes a stock from a bond?
- A
A stock represents partial ownership of a corporation, whereas a bond represents a loan to a corporation or government.
- B
A stock is a form of currency, whereas a bond is a bank deposit used for everyday payments.
- C
A stock is a loan made by a corporation, whereas a bond represents partial ownership of that corporation.
- D
A stock and a bond are both reserve balances held by depository institutions.
03
Choose one
1 point
Which statement correctly describes the relationship between M1 and M2?
- A
M1 includes M2 plus stocks.
- B
M2 excludes all bank deposits used for payments.
- C
M1 is broader than M2 because it includes real estate.
- D
M2 includes M1 plus selected less-liquid assets such as small-denomination time deposits.
04
True or false
1 point
When a bank approves a loan and credits the borrower's checking account, the bank's balance sheet records both a new asset and a new liability.
- A
True
- B
False
05
True or false
1 point
The Federal Reserve currently requires U.S. depository institutions to hold a positive reserve ratio under the traditional AP reserve-requirement rule.
- A
True
- B
False
06
Written response
1 point
A bank has $8,000 in deposits and a required reserve ratio of 25%. What percentage of deposits must it hold as required reserves? Enter the answer in percentage points.
07
Written response
1 point
What is the name of the central bank of the United States?
08
Fill in the blank
1 point
On a bank's balance sheet, customer deposits are recorded as because the bank owes those funds to its customers.
09
Fill in the blank
1 point
When money allows a person to transfer purchasing power from the present into the future, it is serving as a .
10
Choose all
1 point
Which two are roles of the Federal Reserve? Select all correct choices.
- A
Conducting monetary policy
- B
Pooling risks by collecting insurance premiums
- C
Providing payment and settlement services
- D
Making ordinary consumer loans as its primary direct relationship with households
11
Choose all
1 point
Which two statements correctly distinguish money from wealth? Select all correct choices.
- A
A stock can be part of wealth without being counted as money.
- B
Money and wealth are identical concepts.
- C
Money includes certain highly liquid bank deposits.
- D
Every valuable asset is generally accepted as payment.
12
Open ended
1 point
Using the traditional AP Macroeconomics reserve model, a bank has $10,000 in deposits, a required reserve ratio of 20%, and actual reserves of $3,000. Calculate the bank's required reserves and excess reserves, then state how much it could lend in the simplified model.
13
Written response
1 point
In the simplified money-multiplier model, what is the simple money multiplier when the required reserve ratio is 20%? Enter the multiplier as a whole number.
14
Choose one
1 point
Which change would most directly cause actual deposit expansion to fall below the simple multiplier's theoretical maximum?
- A
The reserve ratio is positive in the simplified model.
- B
Households withdraw some loan proceeds as currency rather than redepositing them.
- C
The initial reserve injection is counted in total deposit expansion.
- D
The simple multiplier is calculated as the reciprocal of the reserve ratio.
15
Choose one
1 point
A student buys a sandwich with dollars, and the restaurant accepts the dollars even though it does not want any service from the student. Which function of money is illustrated most directly?
- A
The dollars allow the student to compare the values of the sandwich and tutoring.
- B
The dollars are accepted as payment for the sandwich.
- C
The dollars preserve the student's purchasing power for a future purchase.
- D
The dollars represent a partial ownership claim on the restaurant.
16
Choose one
1 point
Which asset would generally be included in a person's wealth but not counted as money because it is not generally accepted as payment for everyday purchases?
- A
A checking-account deposit
- B
Currency held by the public
- C
A stock representing ownership of a corporation
- D
A transaction deposit at a depository institution
17
True or false
1 point
True or false: In the current United States, the Federal Reserve's reserve-requirement ratio for depository institutions is zero percent, even though a positive required reserve ratio is still used in the traditional AP banking model.
- A
True
- B
False
18
Choose one
1 point
A bank approves a $1,000 loan and credits the borrower's checking account by $1,000. What is the immediate balance-sheet effect for the bank?
- A
The bank's assets decrease while its liabilities increase.
- B
The bank's assets and liabilities both decrease.
- C
The bank's assets and liabilities both increase by the loan amount.
- D
The bank's liabilities decrease while its assets increase.
19
Written response
1 point
In the traditional simplified banking model, what is the simple money multiplier when the required reserve ratio is 20%? Enter the multiplier as a number; no rounding tolerance is allowed.
20
Choose one
1 point
Which expression correctly describes M2 under the definitions presented?
- A
M1 plus stocks and corporate bonds
- B
M1 plus small-denomination time deposits and retail money market funds
- C
Currency plus bank reserves held at the Federal Reserve
- D
M1 minus transaction deposits plus stocks