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Chapter 34 Money, Banking, and Financial Institutions Answer Key
Multiple Choice Questions
1. To say money is socially defined means that
2. Money functions as
3. If you are estimating your total expenses for school next semester, you are using money
primarily as
34-2
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Difficulty: 01 Easy
Learning Objective: 34-01 Identify and explain the functions of money.
Test Bank: I
Topi c: The Functions of Money
4. If you place a part of your summer earnings in a savings account, you are using money
primarily as a
5. If you write a check on a bank to purchase a used Honda Civic, you are using money
primarily as
6. A $70 price tag on a sweater in a department store window is an example of money
functioning as a
34-3
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Remember
Difficulty: 01 Easy
Learning Objective: 34-01 Identify and explain the functions of money.
Test Bank: I
Topi c: The Functions of Money
7. Stock market price quotations best exemplify money serving as a
8. Purchasing groceries using a debit card best exemplifies money serving as a
9. When economists say that money serves as a medium of exchange, they mean that it is
34-4
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D. declared as legal tender by the government.
AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Remember
Difficulty: 01 Easy
Learning Objective: 34-01 Identify and explain the functions of money.
Test Bank: I
Topi c: The Functions of Money
10. When economists say that money serves as a unit of account, they mean that it is
11. When economists say that money serves as a store of value, they mean that it is
12. The paper money used in the United States is
34-5
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
C. United States notes.
D. Federal Reserve notes.
AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Remember
Difficulty: 01 Easy
Learning Objective: 34-02 List and describe the components of the U.S. money supply.
Test Bank: I
Topi c: The Components of the Money Supply
13. In the United States, the money supply (M1) includes
14. Currency held in the vault of First National Bank is
15. Checkable deposits are classified as money because
34-6
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B. banks hold currency equal to the value of their checkable deposits.
C. they are ultimately the obligations of the Treasury.
D. they earn interest income for the depositor.
AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Remember
Difficulty: 01 Easy
Learning Objective: 34-02 List and describe the components of the U.S. money supply.
Test Bank: I
Topi c: The Components of the Money Supply
16. Currency (paper money plus coins) constitutes about
17. As of February 2016, the supply of money (M1) in the United States was about
18. To say that coins are "token money" means that
34-7
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A. their face value is less than their intrinsic value.
B. their face value is greater than their intrinsic value.
C. their face value is equal to their intrinsic value.
D. they are not legal tender.
AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Remember
Difficulty: 01 Easy
Learning Objective: 34-02 List and describe the components of the U.S. money supply.
Test Bank: I
Topi c: The Components of the Money Supply
19. In defining money as M1, economists exclude time deposits because
20. Which of the following is not part of the M2 money supply?
21. The M2 money supply includes
22. A checking account entry is money because it
23. Currency in circulation is part of
24. Money market deposit accounts are included in
25. Checkable deposits are
26. The amount of money reported as M2
34-10
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Topi c: The Components of the Money Supply
27. The largest component of the money supply (M1) is
28. Paper money (currency) in the United States is issued by the
29. A $20 bill is a
34-11
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Test Bank: I
Topi c: The Components of the Money Supply
30. Coins in people's pockets and purses are
31. Coins held in commercial bank vaults are
32. Checkable deposits include
34-12
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 34-02 List and describe the components of the U.S. money supply.
Test Bank: I
Topi c: The Components of the Money Supply
33. The difference between M1 and M2 is that
34. Assuming no other changes, if checkable deposits increase by $40 billion and currency in
circulation decreases by $40 billion, the
35. Assuming no other changes, if checkable deposits decrease by $40 billion and balances in
money market mutual funds increase by $40 billion, the
34-13
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Remember
Difficulty: 01 Easy
Learning Objective: 34-02 List and describe the components of the U.S. money supply.
Test Bank: I
Topi c: The Components of the Money Supply
36. "Near monies" are included in
37. Assuming no other changes, if balances in money market deposit accounts increase by $50
billion and small-denominated time deposits decrease by $50 billion, the
38. Small-denominated time deposits, by definition
34-14
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D. are held by state and local banks only.
AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Remember
Difficulty: 01 Easy
Learning Objective: 34-02 List and describe the components of the U.S. money supply.
Test Bank: I
Topi c: The Components of the Money Supply
39. The near-money components of M2 are
40. Near monies
41.
Money Market Mutual Fund Balances Held By Businesses
$100
Money Market Mutual Fund Balances Held By Individuals
220
Currency In Banks
10
Currency In Circulation
60
Savings Deposits, Including Money Market Deposit Accounts
50
Large-denominated ($100,000 or more) Time Deposits
180
Small-denominated ($100,000 or less) Time Deposits
80
Checkable Deposits
70
Refer to the table. Money supply M1 for this economy is
42.
Money Market Mutual Fund Balances Held By Businesses
$100
Money Market Mutual Fund Balances Held By Individuals
220
Currency In Banks
10
Currency In Circulation
60
Savings Deposits, Including Money Market Deposit Accounts
50
Large-denominated ($100,000 or more) Time Deposits
180
Small-denominated ($100,000 or less) Time Deposits
80
Checkable Deposits
70
Refer to the table. Money supply M2 for this economy is
34-16
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B. $130.
C. $490.
D. $630.
AACSB: Knowledge Application
Blooms: Remember
Difficulty: 01 Easy
Learning Objective: 34-02 List and describe the components of the U.S. money supply.
Test Bank: I
Topi c: The Components of the Money Supply
Type: Table
43.
Money Market Mutual Fund Balances Held By Businesses
$100
Money Market Mutual Fund Balances Held By Individuals
220
Currency In Banks
10
Currency In Circulation
60
Savings Deposits, Including Money Market Deposit Accounts
50
Large-denominated ($100,000 or more) Time Deposits
180
Small-denominated ($100,000 or less) Time Deposits
80
Checkable Deposits
70
Refer to the table. The value of the near monies that are part of M2 is
44. Refer to the given list of assets.
34-17
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written consent of McGraw-Hill Education.
1. Large-denominated ($100,000 and over) time deposits
2. Noncheckable savings deposits
3. Currency (coins and paper money) in circulation
4. Small-denominated (under $100,000) time deposits
5. Stock certificates
6. Checkable deposits
7. Money market deposit accounts
8. Money market mutual fund balances held by individuals
9. Money market mutual fund balances held by businesses
10. Currency held in bank vaults
The M1 definition of money includes item(s)
45. Refer to the given list of assets.
1. Large-denominated ($100,000 and over) time deposits
2. Noncheckable savings deposits
34-18
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written consent of McGraw-Hill Education.
3. Currency (coins and paper money) in circulation
4. Small-denominated (under $100,000) time deposits
5. Stock certificates
6. Checkable deposits
7. Money market deposit accounts
8. Money market mutual fund balances held by individuals
9. Money market mutual fund balances held by businesses
10. Currency held in bank vaults
The M2 definition of money includes
46. Refer to the given list of assets.
1. Large-denominated ($100,000 and over) time deposits
2. Noncheckable savings deposits
3. Currency (coins and paper money) in circulation
4. Small-denominated (under $100,000) time deposits
5. Stock certificates
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6. Checkable deposits
7. Money market deposit accounts
8. Money market mutual fund balances held by individuals
9. Money market mutual fund balances held by businesses
10. Currency held in bank vaults
The assets that are not included in either M1 or M2 are
47. Refer to the given list of assets.
1. Large-denominated ($100,000 and over) time deposits
2. Noncheckable savings deposits
3. Currency (coins and paper money) in circulation
4. Small-denominated (under $100,000) time deposits
5. Stock certificates
6. Checkable deposits
7. Money market deposit accounts
8. Money market mutual fund balances held by individuals
9. Money market mutual fund balances held by businesses
10. Currency held in bank vaults
Which of the following are considered to be near monies?
48. Time deposits of $100,000 or more are
49. Currency held within banks is part of
