Question 1

In the United States, all money is essentially the debt of the Fed, commercial banks, and thrift institutions.

Accepted Answer

A) True 
 B)False

Question 2

Checkable deposits held in savings and loan institutions, mutual savings banks, and credit unions are part of the M1 definition of the money supply.

Accepted Answer

A) True 
 B)False

Question 3

Which of these pairs of financial institutions are most alike in terms of their main lines of business?

Accepted Answer

A) commercial banks and thrifts 
B) insurance companies and mutual fund companies 
C) thrifts and securities firms 
D) pension fund companies and commercial banks 
A) commercial banks and thrifts 
B) insurance companies and mutual fund companies 
C) thrifts and securities firms 
D) pension fund companies and commercial banks

Question 4

Between September 2007 and September 2009,

Accepted Answer

A) the Fed oversaw the conversion of all thrifts into commercial banks. 
B) the FDIC closed more than 200 U.S.banks and shifted their deposits to other banks. 
C) the Fed increased capital requirements for larger financial institutions in an effort to reduce moral hazard. 
D) the FDIC paid out more than $500 billion to depositors who held money in failed banks. 
A) the Fed oversaw the conversion of all thrifts into commercial banks. 
B) the FDIC closed more than 200 U.S.banks and shifted their deposits to other banks. 
C) the Fed increased capital requirements for larger financial institutions in an effort to reduce moral hazard. 
D) the FDIC paid out more than $500 billion to depositors who held money in failed banks.

Question 5

The Board of Governors of the Federal Reserve has members.

Accepted Answer

A) 5 
B) 7 
C) 9 
D) 14 
A) 5 
B) 7 
C) 9 
D) 14

Question 6

Thrifts are known as "banker's banks" because they lend money to commercial banks.

Accepted Answer

A) True 
 B)False

Question 7

One reason that near monies are important is because

Accepted Answer

A) they simplify the definition of money and therefore the formulation of monetary policy. 
B) they can be easily converted into money or vice versa, and thereby can influence the stability of the economy. 
C) they do not reflect the level of consumer spending but they have a critical impact on saving and investment in the economy. 
D) credit cards synchronize one's expenditures and income, thereby reducing the cash and checkable deposits one must hold. 
A) they simplify the definition of money and therefore the formulation of monetary policy. 
B) they can be easily converted into money or vice versa, and thereby can influence the stability of the economy. 
C) they do not reflect the level of consumer spending but they have a critical impact on saving and investment in the economy. 
D) credit cards synchronize one's expenditures and income, thereby reducing the cash and checkable deposits one must hold.

Question 8

The Federal Reserve System was established by the Federal Reserve Act of

Accepted Answer

A) 1913. 
B) 1933. 
C) 1945. 
D) 1955. 
A) 1913. 
B) 1933. 
C) 1945. 
D) 1955.

Question 9

In defining money as M1, economists exclude time deposits because

Accepted Answer

A) the intrinsic value of time deposits is nil. 
B) the purchasing power of time deposits is much less stable than that of checkable deposits and currency. 
C) they are not directly or immediately a medium of exchange. 
D) they are not recognized by the federal government as legal tender. 
A) the intrinsic value of time deposits is nil. 
B) the purchasing power of time deposits is much less stable than that of checkable deposits and currency. 
C) they are not directly or immediately a medium of exchange. 
D) they are not recognized by the federal government as legal tender.

Question 10

Which one of the following is considered to be a "stock" rather than a "flow" variable?

Accepted Answer

A) income 
B) money 
C) wages 
D) profits 
A) income 
B) money 
C) wages 
D) profits

Question 11

If a firm possesses assets whose value exceeds the value of its debts, the firm is said to be

Accepted Answer

A) insolvent. 
B) illiquid. 
C) solvent. 
D) liquid. 
A) insolvent. 
B) illiquid. 
C) solvent. 
D) liquid.

Question 12

When a bank's loans are written off, it means that the bank's

Accepted Answer

A) reserves are reduced, while its debt increases. 
B) reserves rise along with its debt. 
C) reserves fall along with its debt. 
D) reserves shrink, whereas its debt remains the same. 
A) reserves are reduced, while its debt increases. 
B) reserves rise along with its debt. 
C) reserves fall along with its debt. 
D) reserves shrink, whereas its debt remains the same.

Question 13

The Federal Reserve System performs many functions, but its most important one is

Accepted Answer

A) issuing currency. 
B) controlling the money supply. 
C) providing for check clearing and collection. 
D) acting as fiscal agent for the U.S.government. 
A) issuing currency. 
B) controlling the money supply. 
C) providing for check clearing and collection. 
D) acting as fiscal agent for the U.S.government.

Question 14

Insurance companies mainly acquire householdsâ€™ savings by

Accepted Answer

A) selling stocks and bonds to them. 
B) offering checking and savings accounts. 
C) offering policies in return for periodic premiums. 
D) selling financial advice and related consulting services. 
A) selling stocks and bonds to them. 
B) offering checking and savings accounts. 
C) offering policies in return for periodic premiums. 
D) selling financial advice and related consulting services.

Question 15

One major advantage of money serving as a medium of exchange is that it allows society to

Accepted Answer

A) transfer purchasing power from the present to the future. 
B) measure the relative worth of products. 
C) escape the complications of barter. 
D) use credit cards instead of currency. 
A) transfer purchasing power from the present to the future. 
B) measure the relative worth of products. 
C) escape the complications of barter. 
D) use credit cards instead of currency.

Question 16

Money functions as a store of value if it allows you to

Accepted Answer

A) measure the value of goods in a reliable way. 
B) make exchanges in a more efficient manner. 
C) delay purchases until you want the goods. 
D) increase your confidence in money. 
A) measure the value of goods in a reliable way. 
B) make exchanges in a more efficient manner. 
C) delay purchases until you want the goods. 
D) increase your confidence in money.

Question 17

Money market deposit accounts are included in

Accepted Answer

A) M1 only. 
B) M2 only. 
C) neither M1 nor M2. 
D) both M1 and M2. 
A) M1 only. 
B) M2 only. 
C) neither M1 nor M2. 
D) both M1 and M2.

Question 18

The most important among the Federal Reserve district banks in conducting monetary policy is the

Accepted Answer

A) Boston bank. 
B) Chicago bank. 
C) New York bank. 
D) San Francisco bank. 
A) Boston bank. 
B) Chicago bank. 
C) New York bank. 
D) San Francisco bank.

Question 19

The Federal Reserve Banks are owned by the

Accepted Answer

A) federal government. 
B) Board of Governors. 
C) United States Treasury. 
D) member banks. 
A) federal government. 
B) Board of Governors. 
C) United States Treasury. 
D) member banks.

Question 20

The value (or purchasing power) of money increases when the price level increases.

Accepted Answer

A) True 
 B)False

Exam 34: Money, Banking, and Financial Institutions

In the United States, all money is essentially the debt of the Fed, commercial banks, and thrift institutions.

Checkable deposits held in savings and loan institutions, mutual savings banks, and credit unions are part of the M1 definition of the money supply.

Which of these pairs of financial institutions are most alike in terms of their main lines of business?

Between September 2007 and September 2009,

The Board of Governors of the Federal Reserve has members.

Thrifts are known as "banker's banks" because they lend money to commercial banks.

One reason that near monies are important is because

The Federal Reserve System was established by the Federal Reserve Act of

In defining money as M1, economists exclude time deposits because

Which one of the following is considered to be a "stock" rather than a "flow" variable?

If a firm possesses assets whose value exceeds the value of its debts, the firm is said to be

When a bank's loans are written off, it means that the bank's

The Federal Reserve System performs many functions, but its most important one is

Insurance companies mainly acquire householdsâ€™ savings by

One major advantage of money serving as a medium of exchange is that it allows society to

Money functions as a store of value if it allows you to

Money market deposit accounts are included in

The most important among the Federal Reserve district banks in conducting monetary policy is the

The Federal Reserve Banks are owned by the

The value (or purchasing power) of money increases when the price level increases.

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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