Question 1

Which of the following trends had been happening in the banking industry even before the Financial Crisis of 2007-2008?

Accepted Answer

A) an expansion in the number of banks and thrifts 
B) a consolidation of services offered by financial institutions 
C) a decrease in the integration of global financial markets 
D) an increase in the amount of savings held by banks relative to other financial institutions 
A) an expansion in the number of banks and thrifts 
B) a consolidation of services offered by financial institutions 
C) a decrease in the integration of global financial markets 
D) an increase in the amount of savings held by banks relative to other financial institutions

Question 2

Unlike banks, thrifts are not subject to monetary control by the Fed, and thus they (thrifts) do not have to hold reserves against their checkable deposits.

Accepted Answer

A) True 
 B)False

Question 3

Currency held in bank vaults Which of the following are considered to be near monies?

Accepted Answer

A) items 2, 5, 8, and 9 
B) all items except for 3 
C) items 2, 4, 7, and 8 
D) items 1, 5, and 10 
A) items 2, 5, 8, and 9 
B) all items except for 3 
C) items 2, 4, 7, and 8 
D) items 1, 5, and 10

Question 4

If the purchasing power of the dollar is falling, then it follows that

Accepted Answer

A) the price index is falling. 
B) the price index is rising. 
C) nominal incomes are falling. 
D) interest rates are rising. 
A) the price index is falling. 
B) the price index is rising. 
C) nominal incomes are falling. 
D) interest rates are rising.

Question 5

In the U.S.economy, the money supply is controlled by the

Accepted Answer

A) U.S.Treasury. 
B) Federal Reserve System. 
C) Senate Committee on Banking and Finance. 
D) Congress. 
A) U.S.Treasury. 
B) Federal Reserve System. 
C) Senate Committee on Banking and Finance. 
D) Congress.

Question 6

Members of the Federal Reserve Board of Governors are

Accepted Answer

A) appointed by Congress to staggered 14-year terms. 
B) selected by the Federal Open Market Committee for 4-year terms. 
C) appointed by the president to staggered 14-year terms. 
D) selected by each of the Federal Reserve banks for 4-year terms. 
A) appointed by Congress to staggered 14-year terms. 
B) selected by the Federal Open Market Committee for 4-year terms. 
C) appointed by the president to staggered 14-year terms. 
D) selected by each of the Federal Reserve banks for 4-year terms.

Question 7

An asset's liquidity refers to its ability to be

Accepted Answer

A) bought and stored. 
B) increasing in value over time. 
C) used and enjoyed. 
D) a means of payment. 
A) bought and stored. 
B) increasing in value over time. 
C) used and enjoyed. 
D) a means of payment.

Question 8

The Federal Reserve System

Accepted Answer

A) has the same status as the Supreme Court. 
B) is basically an independent agency. 
C) has the status of a congressional committee. 
D) is an agency of the executive branch of the federal government. 
A) has the same status as the Supreme Court. 
B) is basically an independent agency. 
C) has the status of a congressional committee. 
D) is an agency of the executive branch of the federal government.

Question 9

Checkable deposits are included in

Accepted Answer

A) M1 but not in M2. 
B) M2 but not in M1. 
C) both M1 and M2. 
D) neither M1 nor M2. 
A) M1 but not in M2. 
B) M2 but not in M1. 
C) both M1 and M2. 
D) neither M1 nor M2.

Question 10

The Federal Reserve System is an

Accepted Answer

A) agency that is controlled by Congress. 
B) agency that is under the direction of the president. 
C) independent agency of government. 
D) agency run by popularly elected officials. 
A) agency that is controlled by Congress. 
B) agency that is under the direction of the president. 
C) independent agency of government. 
D) agency run by popularly elected officials.

Question 11

How much did the U.S.Congress allocate to the Troubled Asset Relief Program in 2008?

Accepted Answer

A) $170 billion 
B) $700 billion 
C) $787 billion 
D) $885 billion 
A) $170 billion 
B) $700 billion 
C) $787 billion 
D) $885 billion

Question 12

Which of the following is not true about the use of a credit card?

Accepted Answer

A) It is a means of deferring payment for a short period of time. 
B) It allows people to "economize" on the use of money. 
C) Credit card balances are part of M2 but not part of M1. 
D) A credit card transaction is not the same as a debit card transaction. 
A) It is a means of deferring payment for a short period of time. 
B) It allows people to "economize" on the use of money. 
C) Credit card balances are part of M2 but not part of M1. 
D) A credit card transaction is not the same as a debit card transaction.

Question 13

A $20 bill is a

Accepted Answer

A) gold certificate. 
B) Treasury note. 
C) Treasury bill. 
D) Federal Reserve note. 
A) gold certificate. 
B) Treasury note. 
C) Treasury bill. 
D) Federal Reserve note.

Question 14

Which of the following is not true about the Federal Reserve Banks?

Accepted Answer

A) They serve as bankers' banks. 
B) They are privately owned but government controlled. 
C) Unlike other banks, they are not motivated by profits. 
D) They compete with commercial banks in their basic functions. 
A) They serve as bankers' banks. 
B) They are privately owned but government controlled. 
C) Unlike other banks, they are not motivated by profits. 
D) They compete with commercial banks in their basic functions.

Question 15

Which group is responsible for the policy decision of changing the money supply?

Accepted Answer

A) Federal Open Market Committee 
B) Office of Management and Budget 
C) Thrift Advisory Council 
D) Federal Advisory Council 
A) Federal Open Market Committee 
B) Office of Management and Budget 
C) Thrift Advisory Council 
D) Federal Advisory Council

Question 16

(Last Word) The Federal Reserve policy of "extend and pretend"

Accepted Answer

A) meant that the Fed did not distinguish in its lender of last resort function between solvent and insolvent firms. 
B) was praised for preventing a financial meltdown in which many solvent and insolvent firms would have failed. 
C) is accurately described by all of the other answers. 
D) was criticized for increasing moral hazard in the financial system. 
A) meant that the Fed did not distinguish in its lender of last resort function between solvent and insolvent firms. 
B) was praised for preventing a financial meltdown in which many solvent and insolvent firms would have failed. 
C) is accurately described by all of the other answers. 
D) was criticized for increasing moral hazard in the financial system.

Question 17

Which of the following items are included in money supply M2 but not M1?

Accepted Answer

A) Federal Reserve notes 
B) coins 
C) savings deposits 
D) checkable deposits 
A) Federal Reserve notes 
B) coins 
C) savings deposits 
D) checkable deposits

Question 18

The paper money, or currency, in the United States essentially represents

Accepted Answer

A) a debt of commercial banks and savings institutions. 
B) a debt of the U.S.Treasury. 
C) an asset of the Federal government. 
D) a debt of the Federal Reserve System. 
A) a debt of commercial banks and savings institutions. 
B) a debt of the U.S.Treasury. 
C) an asset of the Federal government. 
D) a debt of the Federal Reserve System.

Question 19

As of February 2016, the supply of money (M1) in the United States was about

Accepted Answer

A) $2,472 billion. 
B) $3,105 billion. 
C) $1,359 billion. 
D) $12,479 billion. 
A) $2,472 billion. 
B) $3,105 billion. 
C) $1,359 billion. 
D) $12,479 billion.

Question 20

Traditionally, the Federal Reserve can give emergency loans only to

Accepted Answer

A) securities firms. 
B) commercial banks. 
C) investment banks. 
D) manufacturing firms. 
A) securities firms. 
B) commercial banks. 
C) investment banks. 
D) manufacturing firms.

Exam 34: Money, Banking, and Financial Institutions

Which of the following trends had been happening in the banking industry even before the Financial Crisis of 2007-2008?

Unlike banks, thrifts are not subject to monetary control by the Fed, and thus they (thrifts) do not have to hold reserves against their checkable deposits.

Currency held in bank vaults Which of the following are considered to be near monies?

If the purchasing power of the dollar is falling, then it follows that

In the U.S.economy, the money supply is controlled by the

Members of the Federal Reserve Board of Governors are

An asset's liquidity refers to its ability to be

The Federal Reserve System

Checkable deposits are included in

The Federal Reserve System is an

How much did the U.S.Congress allocate to the Troubled Asset Relief Program in 2008?

Which of the following is not true about the use of a credit card?

A $20 bill is a

Which of the following is not true about the Federal Reserve Banks?

Which group is responsible for the policy decision of changing the money supply?

(Last Word) The Federal Reserve policy of "extend and pretend"

Which of the following items are included in money supply M2 but not M1?

The paper money, or currency, in the United States essentially represents

As of February 2016, the supply of money (M1) in the United States was about

Traditionally, the Federal Reserve can give emergency loans only to

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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