Question 1

To say that money serves as a store of value is to say that money is a useful way to store wealth for future use.

Accepted Answer

A) True 
 B)False

Question 2

Each member of the Board of Governors of the Fed:

Accepted Answer

A) is from the minority of the FOMC. 
B) can have twelve presidential appointments. 
C) is authorized to set reserve requirements by the Bank Acts of 1933 and 1935. 
D) serves one nonrenewable term. 
E) is elected by the member banks which own the Federal Reserve. 
A) is from the minority of the FOMC. 
B) can have twelve presidential appointments. 
C) is authorized to set reserve requirements by the Bank Acts of 1933 and 1935. 
D) serves one nonrenewable term. 
E) is elected by the member banks which own the Federal Reserve.

Question 3

Insurance that protects individuals from the loss of their bank deposits:

Accepted Answer

A) makes bank officials especially careful about the loans and investments they make. 
B) makes it virtually impossible for a bank to fail. 
C) is so costly that few banks can afford it. 
D) makes depositors less concerned about the safety of their money than the interest rate it is earning. 
E) was introduced as a direct result of the financial problems of the 1970s and 1980s. 
A) makes bank officials especially careful about the loans and investments they make. 
B) makes it virtually impossible for a bank to fail. 
C) is so costly that few banks can afford it. 
D) makes depositors less concerned about the safety of their money than the interest rate it is earning. 
E) was introduced as a direct result of the financial problems of the 1970s and 1980s.

Question 4

The Federal Reserve provides gold in exchange for Federal Reserve notes.

Accepted Answer

A) True 
 B)False

Question 5

The tendency of bankers to take unwarranted risks in making loans because deposits were insured is an example of _____.

Accepted Answer

A) anchoring bias 
B) self-serving bias 
C) moral hazard 
D) hazard pay 
E) banker's lobbying 
A) anchoring bias 
B) self-serving bias 
C) moral hazard 
D) hazard pay 
E) banker's lobbying

Question 6

The Board of Governors of the Fed consists of:

Accepted Answer

A) seven elected members. 
B) seven members appointed by the president. 
C) a representative from each of the 12 district banks. 
D) 12 elected members. 
E) 12 members appointed by the president. 
A) seven elected members. 
B) seven members appointed by the president. 
C) a representative from each of the 12 district banks. 
D) 12 elected members. 
E) 12 members appointed by the president.

Question 7

Some financial institutions are classified as depository institutions based on:

Accepted Answer

A) the way they acquire funds. 
B) the number of customers they have. 
C) the number of loans they make. 
D) the size of the loans they make. 
E) the amount of reserves they hold. 
A) the way they acquire funds. 
B) the number of customers they have. 
C) the number of loans they make. 
D) the size of the loans they make. 
E) the amount of reserves they hold.

Question 8

Whatever functions as money must be _____.

Accepted Answer

A) authorized by the government 
B) accepted as deposit by banks 
C) backed by precious metals like gold or silver 
D) completely indestructible 
E) limited in supply 
A) authorized by the government 
B) accepted as deposit by banks 
C) backed by precious metals like gold or silver 
D) completely indestructible 
E) limited in supply

Question 9

Interest-rate ceilings on deposits:

Accepted Answer

A) meant banks were guaranteed "cheap money" from depositors. 
B) were imposed because without them,as was the case in the 1970s,banks couldn't be profitable. 
C) led to banks losing deposits whenever market rates went above the ceiling rates. 
D) are only effective when market rates are below the ceiling rates. 
E) were developed by money market mutual funds as a marketing device. 
A) meant banks were guaranteed "cheap money" from depositors. 
B) were imposed because without them,as was the case in the 1970s,banks couldn't be profitable. 
C) led to banks losing deposits whenever market rates went above the ceiling rates. 
D) are only effective when market rates are below the ceiling rates. 
E) were developed by money market mutual funds as a marketing device.

Question 10

One purpose of interest-rate ceilings was to:

Accepted Answer

A) establish a ceiling on bank profits. 
B) establish a floor on bank profits. 
C) encourage competition in other areas. 
D) eliminate the need for the FDIC. 
E) reduce the chance of bank failures. 
A) establish a ceiling on bank profits. 
B) establish a floor on bank profits. 
C) encourage competition in other areas. 
D) eliminate the need for the FDIC. 
E) reduce the chance of bank failures.

Question 11

What activity does the Fed undertake when it carries out open-market operations?

Accepted Answer

A) It buys and sells the bonds,but not the notes,of leading U.S.corporations. 
B) It changes the legal reserve requirements for member banks. 
C) It changes the discount rate,which generally increases the amount of available credit. 
D) It provides funds so that healthy depository institutions can purchase weaker ones on the open market. 
E) It deals in the purchase and sale of U.S.government securities. 
A) It buys and sells the bonds,but not the notes,of leading U.S.corporations. 
B) It changes the legal reserve requirements for member banks. 
C) It changes the discount rate,which generally increases the amount of available credit. 
D) It provides funds so that healthy depository institutions can purchase weaker ones on the open market. 
E) It deals in the purchase and sale of U.S.government securities.

Question 12

Financial institutions are known as financial intermediaries because they serve as go-betweens,which link _____ and _____.

Accepted Answer

A) the government;the taxpayers through IRAs 
B) savers;borrowers 
C) employers;employees 
D) firms;the government 
E) firms;consumers 
A) the government;the taxpayers through IRAs 
B) savers;borrowers 
C) employers;employees 
D) firms;the government 
E) firms;consumers

Question 13

Banks earn a profit by offering loans at higher interest rates than they pay savers.

Accepted Answer

A) True 
 B)False

Question 14

The purpose of deregulating banks during the 1980s was to:

Accepted Answer

A) eliminate the risk that banks incurred. 
B) allow banks to compete with other financial institutions. 
C) allow U.S.banks to compete with foreign banks. 
D) help consumers earn more interest. 
E) decrease the cost of banking regulation. 
A) eliminate the risk that banks incurred. 
B) allow banks to compete with other financial institutions. 
C) allow U.S.banks to compete with foreign banks. 
D) help consumers earn more interest. 
E) decrease the cost of banking regulation.

Question 15

The Federal Open Market Committee (FOMC)consists of:

Accepted Answer

A) the Board of Governors and the Secretary of the Treasury. 
B) the presidents of the 12 Federal Reserve Banks. 
C) the Board of Governors and some of the Federal Reserve Bank presidents. 
D) the Comptroller of the Currency and seven Reserve Bank presidents. 
E) representatives from banks throughout the U.S. 
A) the Board of Governors and the Secretary of the Treasury. 
B) the presidents of the 12 Federal Reserve Banks. 
C) the Board of Governors and some of the Federal Reserve Bank presidents. 
D) the Comptroller of the Currency and seven Reserve Bank presidents. 
E) representatives from banks throughout the U.S.

Question 16

_____ were the first bankers.

Accepted Answer

A) Seigniors 
B) Governments 
C) Savings and loan institutions 
D) Farmers 
E) Goldsmiths 
A) Seigniors 
B) Governments 
C) Savings and loan institutions 
D) Farmers 
E) Goldsmiths

Question 17

Suppose an ocean liner sinks and the passengers are stranded on a lush tropical island.Which of the following could most likely be used as money in the economy that develops among the survivors?

Accepted Answer

A) The life jackets they put on when leaving the ship 
B) The beads from the necklaces that were given out as party favors on the night the ship sank 
C) The coconuts growing on the island 
D) The fish in the sea around the island 
E) The sand on the island's beaches 
A) The life jackets they put on when leaving the ship 
B) The beads from the necklaces that were given out as party favors on the night the ship sank 
C) The coconuts growing on the island 
D) The fish in the sea around the island 
E) The sand on the island's beaches

Question 18

Which of the following is incorrect regarding financial intermediaries?

Accepted Answer

A) They link savers and borrowers. 
B) They earn profits by loaning money. 
C) They offer lower interest rates on savings than they charge on loans. 
D) They print money. 
E) They accept deposits. 
A) They link savers and borrowers. 
B) They earn profits by loaning money. 
C) They offer lower interest rates on savings than they charge on loans. 
D) They print money. 
E) They accept deposits.

Question 19

Which of the following is true of the Federal Reserve System?

Accepted Answer

A) It is one central bank located in Washington,DC. 
B) It was created just before World War II. 
C) All Federal Reserve banks are required to also become state banks. 
D) With the formation of the Fed,the power to issue bank notes was taken away from national banks and turned over to the state banks. 
E) It was notably unsuccessful in averting the Great Depression. 
A) It is one central bank located in Washington,DC. 
B) It was created just before World War II. 
C) All Federal Reserve banks are required to also become state banks. 
D) With the formation of the Fed,the power to issue bank notes was taken away from national banks and turned over to the state banks. 
E) It was notably unsuccessful in averting the Great Depression.

Question 20

The powers of the Federal Reserve System do not include:

Accepted Answer

A) the ability to buy and sell U.S.government securities. 
B) the ability to extend loans to commercial banks. 
C) the ability to provide deposit insurance for customers of member banks. 
D) the ability to impose reserve requirements on both member and nonmember commercial banks. 
E) the authority to clear checks. 
A) the ability to buy and sell U.S.government securities. 
B) the ability to extend loans to commercial banks. 
C) the ability to provide deposit insurance for customers of member banks. 
D) the ability to impose reserve requirements on both member and nonmember commercial banks. 
E) the authority to clear checks.

To say that money serves as a store of value is to say that money is a useful way to store wealth for future use.

Each member of the Board of Governors of the Fed:

Insurance that protects individuals from the loss of their bank deposits:

The Federal Reserve provides gold in exchange for Federal Reserve notes.

The tendency of bankers to take unwarranted risks in making loans because deposits were insured is an example of _____.

The Board of Governors of the Fed consists of:

Some financial institutions are classified as depository institutions based on:

Whatever functions as money must be _____.

Interest-rate ceilings on deposits:

One purpose of interest-rate ceilings was to:

What activity does the Fed undertake when it carries out open-market operations?

Financial institutions are known as financial intermediaries because they serve as go-betweens,which link _ and _.

Banks earn a profit by offering loans at higher interest rates than they pay savers.

The purpose of deregulating banks during the 1980s was to:

The Federal Open Market Committee (FOMC)consists of:

_____ were the first bankers.

Suppose an ocean liner sinks and the passengers are stranded on a lush tropical island.Which of the following could most likely be used as money in the economy that develops among the survivors?

Which of the following is incorrect regarding financial intermediaries?

Which of the following is true of the Federal Reserve System?

The powers of the Federal Reserve System do not include:

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

Exam 13: Money and the Financial System

To say that money serves as a store of value is to say that money is a useful way to store wealth for future use.

Each member of the Board of Governors of the Fed:

Insurance that protects individuals from the loss of their bank deposits:

The Federal Reserve provides gold in exchange for Federal Reserve notes.

The tendency of bankers to take unwarranted risks in making loans because deposits were insured is an example of _____.

The Board of Governors of the Fed consists of:

Some financial institutions are classified as depository institutions based on:

Whatever functions as money must be _____.

Interest-rate ceilings on deposits:

One purpose of interest-rate ceilings was to:

What activity does the Fed undertake when it carries out open-market operations?

Financial institutions are known as financial intermediaries because they serve as go-betweens,which link _____ and _____.

Banks earn a profit by offering loans at higher interest rates than they pay savers.

The purpose of deregulating banks during the 1980s was to:

The Federal Open Market Committee (FOMC)consists of:

_____ were the first bankers.

Suppose an ocean liner sinks and the passengers are stranded on a lush tropical island.Which of the following could most likely be used as money in the economy that develops among the survivors?

Which of the following is incorrect regarding financial intermediaries?

Which of the following is true of the Federal Reserve System?

The powers of the Federal Reserve System do not include:

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

Financial institutions are known as financial intermediaries because they serve as go-betweens,which link _ and _.