Question 1

When a banker records how many dollars each of his borrowers owes the bank, money is serving as

Accepted Answer

A) a store of value. 
B) a unit of account. 
C) a medium of exchange. 
D) legal tender. 
A) a store of value. 
B) a unit of account. 
C) a medium of exchange. 
D) legal tender.

Question 2

To keep high inflation from eroding the value of money, monetary authorities in the United States

Accepted Answer

A) create token money that is less than its intrinsic value. 
B) make paper money legal tender for the payment of debt. 
C) establish insurance on checkable deposit accounts. 
D) control the supply of money in the economy. 
A) create token money that is less than its intrinsic value. 
B) make paper money legal tender for the payment of debt. 
C) establish insurance on checkable deposit accounts. 
D) control the supply of money in the economy.

Question 3

Purchasing groceries using a debit card best exemplifies money serving as a

Accepted Answer

A) store of value. 
B) unit of account. 
C) medium of exchange. 
D) index of satisfaction. 
A) store of value. 
B) unit of account. 
C) medium of exchange. 
D) index of satisfaction.

Question 4

To say money is socially defined means that

Accepted Answer

A) money has been defined in a Constitutional amendment. 
B) whatever performs the functions of money extremely well is considered to be money. 
C) the money supply includes all public and private securities purchased by society. 
D) society, acting through Congress, specifies what shall be included in the money supply. 
A) money has been defined in a Constitutional amendment. 
B) whatever performs the functions of money extremely well is considered to be money. 
C) the money supply includes all public and private securities purchased by society. 
D) society, acting through Congress, specifies what shall be included in the money supply.

Question 5

Debit card balances are part of money supply M1, but credit card balances are not.

Accepted Answer

A) True 
 B)False

Question 6

New York Life, Prudential, and Hartford are all primarily

Accepted Answer

A) commercial banks. 
B) mutual fund companies. 
C) insurance companies. 
D) securities firms. 
A) commercial banks. 
B) mutual fund companies. 
C) insurance companies. 
D) securities firms.

Question 7

Stock market price quotations best exemplify money serving as a

Accepted Answer

A) store of value. 
B) unit of account. 
C) medium of exchange. 
D) index of satisfaction. 
A) store of value. 
B) unit of account. 
C) medium of exchange. 
D) index of satisfaction.

Question 8

The major wave of defaults on home mortgages in 2007 destabilized

Accepted Answer

A) only the banks that directly made the mortgage loans. 
B) only the mortgage brokers, not the commercial banks. 
C) many banks, including those that made the loans indirectly. 
D) mostly large banks, but not too many small ones. 
A) only the banks that directly made the mortgage loans. 
B) only the mortgage brokers, not the commercial banks. 
C) many banks, including those that made the loans indirectly. 
D) mostly large banks, but not too many small ones.

Question 9

Subprime mortgage loans are so named because the rates charged are below the prime interest rate.

Accepted Answer

A) True 
 B)False

Question 10

Currency (paper money plus coins) constitutes about

Accepted Answer

A) 25 percent of the U.S.M1 money supply. 
B) 43 percent of the U.S.M1 money supply. 
C) 57 percent of the U.S.M1 money supply. 
D) 66 percent of the U.S.M1 money supply. 
A) 25 percent of the U.S.M1 money supply. 
B) 43 percent of the U.S.M1 money supply. 
C) 57 percent of the U.S.M1 money supply. 
D) 66 percent of the U.S.M1 money supply.

Question 11

Which of the following functions of money enables society to gain the benefits of geographic and labor specialization?

Accepted Answer

A) unit of account 
B) store of value 
C) medium of exchange 
D) medium of deferred payment 
A) unit of account 
B) store of value 
C) medium of exchange 
D) medium of deferred payment

Question 12

As of March 2009, the federal government and the Federal Reserve had spent $170 billion to keep AIG financially afloat.

Accepted Answer

A) True 
 B)False

Question 13

During a financial crisis, the Fed and other central banks always adopt a strict policy of lending only to financial firms that are solvent but illiquid.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements best describes the 12 Federal Reserve Banks?

Accepted Answer

A) They are privately owned and privately controlled central banks whose basic goal is to provide an ample and orderly market for U.S.Treasury securities. 
B) They are privately owned and publicly controlled central banks whose basic function is to minimize the risks in commercial banking in order to make it a reasonably profitable industry. 
C) They are privately owned and publicly controlled central banks whose basic goal is to control the money supply and interest rates in promoting the general economic welfare. 
D) They are privately owned and publicly controlled central banks whose basic goal is to earn profits for their owners. 
A) They are privately owned and privately controlled central banks whose basic goal is to provide an ample and orderly market for U.S.Treasury securities. 
B) They are privately owned and publicly controlled central banks whose basic function is to minimize the risks in commercial banking in order to make it a reasonably profitable industry. 
C) They are privately owned and publicly controlled central banks whose basic goal is to control the money supply and interest rates in promoting the general economic welfare. 
D) They are privately owned and publicly controlled central banks whose basic goal is to earn profits for their owners.

Question 15

United States currency has value primarily because it

Accepted Answer

A) is legal tender, is generally acceptable in exchange for goods or services, and is backed by the gold and silver of the Federal government. 
B) is generally acceptable in exchange for goods or services, is backed by the gold and silver of the Federal government, and facilitates trade. 
C) is relatively scarce, is legal tender, and is generally acceptable in exchange for goods and services. 
D) facilitates trade, is legal tender, and permits the use of credit cards and near monies. 
A) is legal tender, is generally acceptable in exchange for goods or services, and is backed by the gold and silver of the Federal government. 
B) is generally acceptable in exchange for goods or services, is backed by the gold and silver of the Federal government, and facilitates trade. 
C) is relatively scarce, is legal tender, and is generally acceptable in exchange for goods and services. 
D) facilitates trade, is legal tender, and permits the use of credit cards and near monies.

Question 16

Charter One, Pentagon Federal Credit Union, and Boeing Employees Credit Union are all primarily

Accepted Answer

A) commercial banks. 
B) thrifts. 
C) insurance companies. 
D) pension funds. 
A) commercial banks. 
B) thrifts. 
C) insurance companies. 
D) pension funds.

Question 17

Checkable deposits are money because they are

Accepted Answer

A) legal tender. 
B) fiat money. 
C) acceptable as payment. 
D) token money. 
A) legal tender. 
B) fiat money. 
C) acceptable as payment. 
D) token money.

Question 18

The value of money in the United States is based on the stock of gold and silver held by the United States government.

Accepted Answer

A) True 
 B)False

Question 19

TARP, created in 2008, stands for

Accepted Answer

A) Toxic Asset Relief Program. 
B) Troubled Asset Recovery Plan. 
C) Toxic Asset Reinvestment Policy. 
D) Troubled Asset Relief Program. 
A) Toxic Asset Relief Program. 
B) Troubled Asset Recovery Plan. 
C) Toxic Asset Reinvestment Policy. 
D) Troubled Asset Relief Program.

Question 20

In 2009, approximately how much of the money on deposit was held by the three largest U.S.banks?

Accepted Answer

A) 30 percent 
B) 50 percent 
C) 70 percent 
D) 90 percent 
A) 30 percent 
B) 50 percent 
C) 70 percent 
D) 90 percent

Exam 34: Money, Banking, and Financial Institutions

When a banker records how many dollars each of his borrowers owes the bank, money is serving as

To keep high inflation from eroding the value of money, monetary authorities in the United States

Purchasing groceries using a debit card best exemplifies money serving as a

To say money is socially defined means that

Debit card balances are part of money supply M1, but credit card balances are not.

New York Life, Prudential, and Hartford are all primarily

Stock market price quotations best exemplify money serving as a

The major wave of defaults on home mortgages in 2007 destabilized

Subprime mortgage loans are so named because the rates charged are below the prime interest rate.

Currency (paper money plus coins) constitutes about

Which of the following functions of money enables society to gain the benefits of geographic and labor specialization?

As of March 2009, the federal government and the Federal Reserve had spent $170 billion to keep AIG financially afloat.

During a financial crisis, the Fed and other central banks always adopt a strict policy of lending only to financial firms that are solvent but illiquid.

Which of the following statements best describes the 12 Federal Reserve Banks?

United States currency has value primarily because it

Charter One, Pentagon Federal Credit Union, and Boeing Employees Credit Union are all primarily

Checkable deposits are money because they are

The value of money in the United States is based on the stock of gold and silver held by the United States government.

TARP, created in 2008, stands for

In 2009, approximately how much of the money on deposit was held by the three largest U.S.banks?

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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