Question 1

(Last Word) Solvent firms face the threat of bankruptcy during a financial crisis

Accepted Answer

A) because, by law, the Federal Reserve can only serve as lender of last resort to insolvent firms. 
B) because the value of their assets is less than the value of their debts. 
C) when many assets are illiquid, making it difficult to make timely payments on debt. 
D) because the Federal Reserve extends loans to these firms at high rates of interest. 
A) because, by law, the Federal Reserve can only serve as lender of last resort to insolvent firms. 
B) because the value of their assets is less than the value of their debts. 
C) when many assets are illiquid, making it difficult to make timely payments on debt. 
D) because the Federal Reserve extends loans to these firms at high rates of interest.

Question 2

Which of the following is included as part of the M1 money supply?

Accepted Answer

A) $200,000 balance in the checking account of Main Street Trading Corp. 
B) $200,000 in reserves held by Main Street Commercial Bank in its vaults 
C) $2 million balance in the checking account of the U.S.Treasury 
D) $200 million in the vaults of the Federal Reserve Banks 
A) $200,000 balance in the checking account of Main Street Trading Corp. 
B) $200,000 in reserves held by Main Street Commercial Bank in its vaults 
C) $2 million balance in the checking account of the U.S.Treasury 
D) $200 million in the vaults of the Federal Reserve Banks

Question 3

Paper money (currency) in the United States is issued by the

Accepted Answer

A) U.S.Mint. 
B) Federal Reserve Banks. 
C) U.S.Treasury. 
D) national banks. 
A) U.S.Mint. 
B) Federal Reserve Banks. 
C) U.S.Treasury. 
D) national banks.

Question 4

The currency, or money, of the United States, like those of other countries, is

Accepted Answer

A) commodity money. 
B) intrinsic money. 
C) token money. 
D) deposit money. 
A) commodity money. 
B) intrinsic money. 
C) token money. 
D) deposit money.

Question 5

Which of the following statements is true as a result of Federal Reserve efforts to rescue the financial industry from the financial crisis of 2007 and 2008?

Accepted Answer

A) From February 2008 to May 2009, the Fed oversaw the consolidation of 20 major financial institutions into fewer than a dozen. 
B) From March 2008 to February 2009, the Fed experienced a 50 percent decline in the value of assets held. 
C) From February 2008 to March 2009, Fed assets more than doubled to nearly $2 trillion. 
D) From February 2008 to March 2009, Fed lending caused the U.S.public debt to rise by over $1 trillion. 
A) From February 2008 to May 2009, the Fed oversaw the consolidation of 20 major financial institutions into fewer than a dozen. 
B) From March 2008 to February 2009, the Fed experienced a 50 percent decline in the value of assets held. 
C) From February 2008 to March 2009, Fed assets more than doubled to nearly $2 trillion. 
D) From February 2008 to March 2009, Fed lending caused the U.S.public debt to rise by over $1 trillion.

Question 6

Which definition(s) of the money supply include(s) only items that are directly and immediately usable as a medium of exchange?

Accepted Answer

A) M1 
B) M2 
C) neither M1 nor M2 
D) M1 and M2 
A) M1 
B) M2 
C) neither M1 nor M2 
D) M1 and M2

Question 7

Money in the U.S.is essentially debt of

Accepted Answer

A) businesses and the banks. 
B) the Federal Reserve System and the banks. 
C) the national and local governments. 
D) businesses and the Federal Reserve System. 
A) businesses and the banks. 
B) the Federal Reserve System and the banks. 
C) the national and local governments. 
D) businesses and the Federal Reserve System.

Question 8

The group that sets the Federal Reserve System's policy on buying and selling government securities (bills, notes, and bonds) is the

Accepted Answer

A) Federal Deposit Insurance Corporation (FDI
C) . 
B) Federal Bond Sale Authority. 
C) Council of Economic Advisers. 
D) Federal Open Market Committee (FOM
C) . 
A) Federal Deposit Insurance Corporation (FDI
C) . 
B) Federal Bond Sale Authority. 
C) Council of Economic Advisers. 
D) Federal Open Market Committee (FOM
C) .

Question 9

(Last Word) During the financial crisis of 2007-2008,

Accepted Answer

A) many solvent firms were in danger of bankruptcy because their assets were illiquid. 
B) the Federal Reserve took over and reorganized a number of insolvent firms. 
C) many large banks were insolvent and ultimately declared bankruptcy. 
D) the Federal Reserve served as lender of last resort to solvent firms, but let insolvent firms go bankrupt. 
A) many solvent firms were in danger of bankruptcy because their assets were illiquid. 
B) the Federal Reserve took over and reorganized a number of insolvent firms. 
C) many large banks were insolvent and ultimately declared bankruptcy. 
D) the Federal Reserve served as lender of last resort to solvent firms, but let insolvent firms go bankrupt.

Question 10

The M1 money supply is composed of currency, checkable deposits, and savings deposits.

Accepted Answer

A) True 
 B)False

Question 11

During the Great Recession, the bailout money given to the car companies GM and Chrysler under the TARP program came from the Fed acting in its role as lender of last resort.Topic: The Policy Response to the Financial Crisis

Accepted Answer

A) True 
 B)False

Question 12

The difference between M1 and M2 is that

Accepted Answer

A) the former includes time deposits. 
B) the latter includes small-denominated time deposits, noncheckable savings accounts, money market deposit accounts, and money market mutual fund balances. 
C) the latter includes negotiable government bonds. 
D) the latter includes cash held by commercial banks and the U.S.Treasury. 
A) the former includes time deposits. 
B) the latter includes small-denominated time deposits, noncheckable savings accounts, money market deposit accounts, and money market mutual fund balances. 
C) the latter includes negotiable government bonds. 
D) the latter includes cash held by commercial banks and the U.S.Treasury.

Question 13

Which of the following financial institutions pool deposits of customers and use the money to buy a portfolio of stocks or bonds or both?

Accepted Answer

A) thrifts 
B) brokerage firms 
C) mutual funds 
D) investment banks 
A) thrifts 
B) brokerage firms 
C) mutual funds 
D) investment banks

Question 14

What "backs" the money supply of the United States?

Accepted Answer

A) the U.S.government's ability to keep the value of money relatively stable 
B) the amount of gold the U.S.government has on deposit at its banks 
C) the fact that currency is issued by the Federal Reserve System 
D) the fact that the intrinsic value of coins in circulation is greater than their face value 
A) the U.S.government's ability to keep the value of money relatively stable 
B) the amount of gold the U.S.government has on deposit at its banks 
C) the fact that currency is issued by the Federal Reserve System 
D) the fact that the intrinsic value of coins in circulation is greater than their face value

Question 15

The Federal Reserve System of the United States is the country's

Accepted Answer

A) financial adviser. 
B) comptroller or accountant. 
C) central bank. 
D) deposit insurance provider. 
A) financial adviser. 
B) comptroller or accountant. 
C) central bank. 
D) deposit insurance provider.

Question 16

The largest component of the money supply (M1) is

Accepted Answer

A) currency in bank vaults. 
B) currency in circulation. 
C) checkable deposits. 
D) stock certificates. 
A) currency in bank vaults. 
B) currency in circulation. 
C) checkable deposits. 
D) stock certificates.

Question 17

The "shadow banking system" refers to

Accepted Answer

A) the provision of credit through the underground economy when the financial crisis of 2007 and 2008 occurred. 
B) the process by which securities exchanges provide credit for personal and business needs apart from traditional bank lending. 
C) the series of illegal financial transactions that precipitated the financial crisis of 2007 and 2008. 
D) mortgage loans made to homebuyers who are poor credit risks. 
A) the provision of credit through the underground economy when the financial crisis of 2007 and 2008 occurred. 
B) the process by which securities exchanges provide credit for personal and business needs apart from traditional bank lending. 
C) the series of illegal financial transactions that precipitated the financial crisis of 2007 and 2008. 
D) mortgage loans made to homebuyers who are poor credit risks.

Question 18

If product prices were stated in terms of marbles, then marbles would be functioning primarily as

Accepted Answer

A) fiat money. 
B) legal tender. 
C) a store of value. 
D) a unit of account. 
A) fiat money. 
B) legal tender. 
C) a store of value. 
D) a unit of account.

Question 19

Credit card balances are part of money supply M2.

Accepted Answer

A) True 
 B)False

Question 20

With token money, the face value is greater than the intrinsic value.

Accepted Answer

A) True 
 B)False

Exam 34: Money, Banking, and Financial Institutions

(Last Word) Solvent firms face the threat of bankruptcy during a financial crisis

Which of the following is included as part of the M1 money supply?

Paper money (currency) in the United States is issued by the

The currency, or money, of the United States, like those of other countries, is

Which of the following statements is true as a result of Federal Reserve efforts to rescue the financial industry from the financial crisis of 2007 and 2008?

Which definition(s) of the money supply include(s) only items that are directly and immediately usable as a medium of exchange?

Money in the U.S.is essentially debt of

The group that sets the Federal Reserve System's policy on buying and selling government securities (bills, notes, and bonds) is the

(Last Word) During the financial crisis of 2007-2008,

The M1 money supply is composed of currency, checkable deposits, and savings deposits.

During the Great Recession, the bailout money given to the car companies GM and Chrysler under the TARP program came from the Fed acting in its role as lender of last resort.Topic: The Policy Response to the Financial Crisis

The difference between M1 and M2 is that

Which of the following financial institutions pool deposits of customers and use the money to buy a portfolio of stocks or bonds or both?

What "backs" the money supply of the United States?

The Federal Reserve System of the United States is the country's

The largest component of the money supply (M1) is

The "shadow banking system" refers to

If product prices were stated in terms of marbles, then marbles would be functioning primarily as

Credit card balances are part of money supply M2.

With token money, the face value is greater than the intrinsic value.

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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