Question

25a.

In the modern economy, _________ typically serve for small transactions, whereas _________ are used for larger transactions.

paper currency; debit cards

electronic transfers; paper checks

coin; paper currency

debit cards; electronic transfers

b.

When members of the public deposit currency into their bank accounts, what happens to the monetary base?

It does not change.

It increases.

It decreases.

It may increase, decrease, or not change, depending on how banks adjust their assets.

c.

When are bank deposits created?

When commercial banks make loans

When the government printing office receives an order for new paper currency or coins from the Treasury

When consumers write checks to pay for purchases

When businesses pay wages and salaries to employees

d.

Which of the following represents a part of the U.S. money stock (M2)?

Both A and B

A quarter received by a child for doing the dishes

A corporation’s deposit of $1 billion in Bank of America

One trillion dollars worth of U.S. government securities held by the Fed

e.

Which of the following items is included in M2, but not in M1?

Savings deposits

Currency

Travelers checks

Treasury bills (T-bills)

Answer 1