Chapter 12 Economics Test Bank Questions And Answers 2025/2026

Chapter 12 Economics Test Bank Questions And Answers
2025/2026




. The Board of Governors of the Federal Reserve serves on a larger policy-making
group called the House Banking Committee.
a. True
b. False - CORRECT ANSWER-false


a. True - CORRECT ANSWER-


b. False - CORRECT ANSWER-


=false - CORRECT ANSWER-


To an economist, the terms "money" and "wealth" are synonyms. - CORRECT
ANSWER-false


Changing from a barter economy to a money economy can reduce transaction
costs. - CORRECT ANSWER-true


Money is an invention of government. - CORRECT ANSWER-false

,Credit cards are a widely accepted form of money. - CORRECT ANSWER-false


Small-denomination time deposits are part of M2, but not part of M1. - CORRECT
ANSWER-true


The Fed pays banks interest on bank deposits held on reserve at the Fed. -
CORRECT ANSWER-false


Required reserves are a set percentage of total reserves that must be held in cash
in a bank's vault or in the bank's reserve account at the Fed. - CORRECT ANSWER-
False


To a bank, checkable deposits are classified as a liability. - CORRECT ANSWER-true


Excess reserves are the amount by which total reserves exceed required reserves.
- CORRECT ANSWER-True


There was an economic depression in the U.S in 1893 that some people blamed
on the gold standard. - CORRECT ANSWER-true


The existence and use of the Internet has lowered the transaction costs of making
some exchanges. - CORRECT ANSWER-true


Bank capital equals assets minus liabilities. - CORRECT ANSWER-True

,The term federal reserve notes refers to coins minted by the U.S. Treasury. -
CORRECT ANSWER-false


The Federal Reserve began paying interest on reserves in 2008. - CORRECT
ANSWER-True


In direct finance, funds are loaned and borrowed through a financial intermediary.
- CORRECT ANSWER-false


A moral hazard problem occurs before a loan is made, and the adverse selection
problem occurs after a loan is made. - CORRECT ANSWER-false


Moral hazard occurs when the parties on once side of the market, who have
information not known to others, self select in a way that adversely affects the
parties on the other side of the market. - CORRECT ANSWER-false


A financial system is a means of bringing together savers and borrowers. -
CORRECT ANSWER-true


The Chinese government has prohibited anyone in China from dealing with bitcoin
exchanges. - CORRECT ANSWER-True


20. To an economist, money is a synonym for which of the following?
a. income
b. credit
c. wealth

, d. salary
e. none of the above - CORRECT ANSWER-E


. Barter is
a. the exchange of money for goods and then the exchange of those goods for
money.
b. the exchange of money for money, or the exchange of money for stocks and
bonds.
c. the exchange of goods and services for goods and services without the use of
money.
d. any exchange, with or without the use of money, in which the participants
negotiate (or barter) the price of the goods to be exchanged. - CORRECT ANSWER-
C


Which of the following illustrates a barter transaction?
a. A bushel of oranges is traded for a bushel of apples.
b. Someone buys a pizza for the special price of $4.
c. Someone buys a house for $100,000.
d. b and c
e. a, b, and c - CORRECT ANSWER-A


. Transaction costs are best defined as the
a. various costs of different goods and services.
b. cost of one good in terms of another; that is, the price of apples in terms of
oranges.