Question 1

Wells Fargo, J.P.Morgan Chase, and Citibank 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 2

Economic studies conducted in industrially advanced countries suggest there is

Accepted Answer

A) a positive relationship between the degree of independence of the central bank and the size of the average annual rate of inflation. 
B) an inverse relationship between the degree of independence of the central bank and the size of the average annual rate of inflation. 
C) no relationship between the degree of independence of the central bank and the size of the average annual rate of inflation. 
D) a positive relationship between the degree of independence of the central bank and the size of the central bank. 
A) a positive relationship between the degree of independence of the central bank and the size of the average annual rate of inflation. 
B) an inverse relationship between the degree of independence of the central bank and the size of the average annual rate of inflation. 
C) no relationship between the degree of independence of the central bank and the size of the average annual rate of inflation. 
D) a positive relationship between the degree of independence of the central bank and the size of the central bank.

Question 3

People can generally get the following items at their commercial banks, except

Accepted Answer

A) money market deposit accounts. 
B) time deposits. 
C) certificates of deposit. 
D) money market mutual funds. 
A) money market deposit accounts. 
B) time deposits. 
C) certificates of deposit. 
D) money market mutual funds.

Question 4

Which of the following financial institutions declared bankruptcy as a result of the financial crisis of 2007 and 2008?

Accepted Answer

A) Merrill Lynch 
B) Lehman Brothers 
C) Goldman Sachs 
D) AIG 
A) Merrill Lynch 
B) Lehman Brothers 
C) Goldman Sachs 
D) AIG

Question 5

During the Financial Crisis of 2007-2008, Goldman Sachs, Morgan Stanley, and other financial firms with heavy exposure to the mortgage-related problems rushed to become bank holding companies in order to

Accepted Answer

A) follow the order of the U.S.Treasury. 
B) obtain bailout money from Congress. 
C) get massive loans from the Fed. 
D) acquire funds from the general public. 
A) follow the order of the U.S.Treasury. 
B) obtain bailout money from Congress. 
C) get massive loans from the Fed. 
D) acquire funds from the general public.

Question 6

Near monies

Accepted Answer

A) include all financial and real assets that can be easily converted into currency. 
B) are certain highly liquid financial assets that do not function directly as a medium of exchange but can be readily converted into M1. 
C) are excluded from M2 because they are highly liquid. 
D) are defined as monetary balances that are immediately available, at zero cost, for household and business transactions. 
A) include all financial and real assets that can be easily converted into currency. 
B) are certain highly liquid financial assets that do not function directly as a medium of exchange but can be readily converted into M1. 
C) are excluded from M2 because they are highly liquid. 
D) are defined as monetary balances that are immediately available, at zero cost, for household and business transactions.

Question 7

Which of the following is not part of the M2 money supply?

Accepted Answer

A) money market mutual fund balances 
B) money market deposit accounts 
C) currency 
D) large-denominated time deposits 
A) money market mutual fund balances 
B) money market deposit accounts 
C) currency 
D) large-denominated time deposits

Question 8

Money supply M1 does not include the currency held by

Accepted Answer

A) households in their wallets or purses. 
B) business firms. 
C) commercial banks. 
D) state and local governments. 
A) households in their wallets or purses. 
B) business firms. 
C) commercial banks. 
D) state and local governments.

Question 9

One major advantage of credit cards used for transactions is that they

Accepted Answer

A) offer discounts on most transactions. 
B) charge a lower interest rate than other means of payment. 
C) give consumers the lowest prices on products purchased. 
D) allow consumers to coordinate timing and payment for purchases. 
A) offer discounts on most transactions. 
B) charge a lower interest rate than other means of payment. 
C) give consumers the lowest prices on products purchased. 
D) allow consumers to coordinate timing and payment for purchases.

Question 10

If you place a part of your summer earnings in a savings account, you are using money primarily as a

Accepted Answer

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

Question 11

Currency held in bank vaults The M1 definition of money includes item(s)

Accepted Answer

A) 6 only. 
B) 3, 4, and 6. 
C) 3 and 6. 
D) 3, 6, and 10. 
A) 6 only. 
B) 3, 4, and 6. 
C) 3 and 6. 
D) 3, 6, and 10.

Question 12

The basic requirement for an item to function as money is that it be

Accepted Answer

A) backed by precious metals-gold or silver. 
B) authorized as legal tender by the central government. 
C) generally accepted as a medium of exchange. 
D) some form of debt or credit. 
A) backed by precious metals-gold or silver. 
B) authorized as legal tender by the central government. 
C) generally accepted as a medium of exchange. 
D) some form of debt or credit.

Question 13

Money functions as

Accepted Answer

A) a store of value. 
B) a unit of account. 
C) a medium of exchange. 
D) a store of value, a unit of account, and a medium of exchange. 
A) a store of value. 
B) a unit of account. 
C) a medium of exchange. 
D) a store of value, a unit of account, and a medium of exchange.

Question 14

Money performs its function as a store of value very well, because it protects one against the erosion of purchasing power from inflation.

Accepted Answer

A) True 
 B)False

Question 15

During a financial crisis, the Fed and other central banks often adopt an "extend and pretend" policy in their emergency lending activities.Which of the following is not a consequence of this policy?

Accepted Answer

A) It limits the potential for insolvent banks to drag down the solvent ones as well. 
B) It enhances the moral-hazard problem going forward; banks will be more likely to engage in risky behavior. 
C) It allows many poorly managed firms that have become insolvent due to making bad investments to avoid well-deserved bankruptcies. 
D) It increases the chances of the Fed itself (or another central bank) being dragged into its own bankruptcy crisis. 
A) It limits the potential for insolvent banks to drag down the solvent ones as well. 
B) It enhances the moral-hazard problem going forward; banks will be more likely to engage in risky behavior. 
C) It allows many poorly managed firms that have become insolvent due to making bad investments to avoid well-deserved bankruptcies. 
D) It increases the chances of the Fed itself (or another central bank) being dragged into its own bankruptcy crisis.

Question 16

The Federal Reserve System consists of which of the following?

Accepted Answer

A) Federal Open Market Committee and Office of Thrift Supervision 
B) Federal Deposit Insurance Corporation and Controller of the Currency 
C) U.S.Treasury Department and Bureau of Engraving and Printing 
D) Board of Governors and the 12 Federal Reserve Banks 
A) Federal Open Market Committee and Office of Thrift Supervision 
B) Federal Deposit Insurance Corporation and Controller of the Currency 
C) U.S.Treasury Department and Bureau of Engraving and Printing 
D) Board of Governors and the 12 Federal Reserve Banks

Question 17

TARP and other lender-of-last-resort programs implemented by the Fed in response to the financial crisis of 2007 and 2008

Accepted Answer

A) severely depleted the assets of the Federal Reserve. 
B) have been little used and therefore are ineffective. 
C) increased the moral hazard problem by limiting losses from bad financial decisions. 
D) were designed to offset the moral hazard created by the TARP and other bailout programs. 
A) severely depleted the assets of the Federal Reserve. 
B) have been little used and therefore are ineffective. 
C) increased the moral hazard problem by limiting losses from bad financial decisions. 
D) were designed to offset the moral hazard created by the TARP and other bailout programs.

Question 18

Which of the following is not true about so-called mortgage-backed securities?

Accepted Answer

A) Before the crisis, they were believed by many banks to be a way of reducing loan risks. 
B) Before the crisis, they played a major role in broadening home ownership in America. 
C) They were links that spread instability across many financial institutions. 
D) Their use was strongly discouraged by the Federal government. 
A) Before the crisis, they were believed by many banks to be a way of reducing loan risks. 
B) Before the crisis, they played a major role in broadening home ownership in America. 
C) They were links that spread instability across many financial institutions. 
D) Their use was strongly discouraged by the Federal government.

Question 19

(Consider This) Credit cards are defined as money because they facilitate transactions.

Accepted Answer

A) True 
 B)False

Question 20

The use of a debit card is most similar to

Accepted Answer

A) paying with a check. 
B) using a stored-value card. 
C) using currency. 
D) obtaining a short-term loan. 
A) paying with a check. 
B) using a stored-value card. 
C) using currency. 
D) obtaining a short-term loan.

Exam 34: Money, Banking, and Financial Institutions

Wells Fargo, J.P.Morgan Chase, and Citibank are all primarily

Economic studies conducted in industrially advanced countries suggest there is

People can generally get the following items at their commercial banks, except

Which of the following financial institutions declared bankruptcy as a result of the financial crisis of 2007 and 2008?

During the Financial Crisis of 2007-2008, Goldman Sachs, Morgan Stanley, and other financial firms with heavy exposure to the mortgage-related problems rushed to become bank holding companies in order to

Near monies

Which of the following is not part of the M2 money supply?

Money supply M1 does not include the currency held by

One major advantage of credit cards used for transactions is that they

If you place a part of your summer earnings in a savings account, you are using money primarily as a

Currency held in bank vaults The M1 definition of money includes item(s)

The basic requirement for an item to function as money is that it be

Money functions as

Money performs its function as a store of value very well, because it protects one against the erosion of purchasing power from inflation.

During a financial crisis, the Fed and other central banks often adopt an "extend and pretend" policy in their emergency lending activities.Which of the following is not a consequence of this policy?

The Federal Reserve System consists of which of the following?

TARP and other lender-of-last-resort programs implemented by the Fed in response to the financial crisis of 2007 and 2008

Which of the following is not true about so-called mortgage-backed securities?

(Consider This) Credit cards are defined as money because they facilitate transactions.

The use of a debit card is most similar 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

Filters