Question 1

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

Accepted Answer

A) suspended its role as lender of last resort so that the financial market could correct itself. 
B) acquired the assets of a number of bankrupt firms. 
C) served as a lender of last resort to solvent, but not insolvent, firms. 
D) served as a lender of last resort to both solvent and insolvent firms. 
A) suspended its role as lender of last resort so that the financial market could correct itself. 
B) acquired the assets of a number of bankrupt firms. 
C) served as a lender of last resort to solvent, but not insolvent, firms. 
D) served as a lender of last resort to both solvent and insolvent firms.

Question 2

What function is money serving when you use it when you go shopping?

Accepted Answer

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

Question 3

The Bureau of Consumer Financial Protection was created in 2010 to become part of the

Accepted Answer

A) U.S.Treasury Department. 
B) Federal Reserve System. 
C) Department of Commerce. 
D) Office of the President. 
A) U.S.Treasury Department. 
B) Federal Reserve System. 
C) Department of Commerce. 
D) Office of the President.

Question 4

The so-called moral-hazard problem in financial management refers to the fact that managers will tend to take on more risk if they know that they are somehow insured against some or all of their losses.

Accepted Answer

A) True 
 B)False

Question 5

Currency held within banks is part of

Accepted Answer

A) both the M1 and M2 definitions of the money supply. 
B) the M2 definition of the money supply only. 
C) the M1 definition of the money supply only. 
D) neither the M1 nor the M2 definition of the money supply. 
A) both the M1 and M2 definitions of the money supply. 
B) the M2 definition of the money supply only. 
C) the M1 definition of the money supply only. 
D) neither the M1 nor the M2 definition of the money supply.

Question 6

Checkable deposits are

Accepted Answer

A) debts of commercial banks and savings institutions. 
B) debts of the Federal government and government agencies. 
C) assets of the Federal government and government agencies. 
D) assets of commercial banks and savings institutions. 
A) debts of commercial banks and savings institutions. 
B) debts of the Federal government and government agencies. 
C) assets of the Federal government and government agencies. 
D) assets of commercial banks and savings institutions.

Question 7

The Financial Crisis of 2007-2008 was triggered by problems in the dot-com sector of the economy.

Accepted Answer

A) True 
 B)False

Question 8

The Financial Crisis of 2007-2008 halted the consolidation in the U.S.financial industry that had caused a declining number but increasing size of firms in the industry prior to the crisis.

Accepted Answer

A) True 
 B)False

Question 9

Which group aids the Board of Governors of the Federal Reserve System in conducting monetary policy?

Accepted Answer

A) U.S.Treasury 
B) U.S.Congress 
C) Federal Advisory Council 
D) Federal Open Market Committee 
A) U.S.Treasury 
B) U.S.Congress 
C) Federal Advisory Council 
D) Federal Open Market Committee

Question 10

Coins in people's pockets and purses are

Accepted Answer

A) included in M1 but not in M2. 
B) included both in M1 and in M2. 
C) included in M2 but not in M1. 
D) excluded from M1 and M2 because people can exchange them for Federal Reserve notes. 
A) included in M1 but not in M2. 
B) included both in M1 and in M2. 
C) included in M2 but not in M1. 
D) excluded from M1 and M2 because people can exchange them for Federal Reserve notes.

Question 11

Commercial banks and thrift institutions

Accepted Answer

A) differ because thrifts cannot make loans. 
B) differ because thrifts cannot offer checkable deposits. 
C) have become less similar in recent years. 
D) have become increasingly similar in recent years. 
A) differ because thrifts cannot make loans. 
B) differ because thrifts cannot offer checkable deposits. 
C) have become less similar in recent years. 
D) have become increasingly similar in recent years.

Question 12

Which of the following would be considered to be the most liquid?

Accepted Answer

A) checkable deposits 
B) small time deposits 
C) money market mutual funds 
D) savings deposits 
A) checkable deposits 
B) small time deposits 
C) money market mutual funds 
D) savings deposits

Question 13

Banks lost money during the mortgage default crisis because

Accepted Answer

A) of defaulted loans to investors in mortgage-backed securities. 
B) they held mortgage-backed securities they had purchased from investment firms. 
C) homebuyers defaulted on mortgages held by the banks. 
D) of all of these reasons. 
A) of defaulted loans to investors in mortgage-backed securities. 
B) they held mortgage-backed securities they had purchased from investment firms. 
C) homebuyers defaulted on mortgages held by the banks. 
D) of all of these reasons.

Question 14

Laws passed in the late 1990s restricted the activities of financial firms to narrowly defined services they could provide, prompting the financial crisis of 2007 and 2008.

Accepted Answer

A) True 
 B)False

Question 15

The so-called near monies have the following characteristics, except

Accepted Answer

A) highly liquid assets. 
B) not a means of payment. 
C) part of money supply M1. 
D) readily converted into cash. 
A) highly liquid assets. 
B) not a means of payment. 
C) part of money supply M1. 
D) readily converted into cash.

Question 16

To say that coins are "token money" means that

Accepted Answer

A) their face value is less than their intrinsic value. 
B) their face value is greater than their intrinsic value. 
C) their face value is equal to their intrinsic value. 
D) they are not legal tender. 
A) their face value is less than their intrinsic value. 
B) their face value is greater than their intrinsic value. 
C) their face value is equal to their intrinsic value. 
D) they are not legal tender.

Question 17

Securitization, the process of forming new securities by bundling or slicing up groups of securities like mortgages and bonds, is

Accepted Answer

A) a way of reducing risk through diversification. 
B) well understood by financial analysts and managers who engaged in it. 
C) considered shady by legitimate financial institutions. 
D) still only a minor portion of the modern financial system. 
A) a way of reducing risk through diversification. 
B) well understood by financial analysts and managers who engaged in it. 
C) considered shady by legitimate financial institutions. 
D) still only a minor portion of the modern financial system.

Question 18

The Federal Open Market Committee (FOMC) is made up of

Accepted Answer

A) the chair of the Board of Governors along with the 12 presidents of the Federal Reserve Banks. 
B) the seven members of the Board of Governors along with the president of the New York Federal Reserve Bank. 
C) the seven members of the Board of Governors of the Federal Reserve System along with the three members of the Council of Economic Advisers. 
D) the seven members of the Board of Governors of the Federal Reserve System along with the president of the New York Federal Reserve Bank and four other Federal Reserve Bank presidents on a rotating basis. 
A) the chair of the Board of Governors along with the 12 presidents of the Federal Reserve Banks. 
B) the seven members of the Board of Governors along with the president of the New York Federal Reserve Bank. 
C) the seven members of the Board of Governors of the Federal Reserve System along with the three members of the Council of Economic Advisers. 
D) the seven members of the Board of Governors of the Federal Reserve System along with the president of the New York Federal Reserve Bank and four other Federal Reserve Bank presidents on a rotating basis.

Question 19

The amount of money reported as M2

Accepted Answer

A) is smaller than the amount reported as M1. 
B) is larger than the amount reported as M1. 
C) excludes coins and currency. 
D) includes large ($100,000 or more) certificates of deposit. 
A) is smaller than the amount reported as M1. 
B) is larger than the amount reported as M1. 
C) excludes coins and currency. 
D) includes large ($100,000 or more) certificates of deposit.

Question 20

The central authority of the U.S.banking system is the

Accepted Answer

A) Federal Open Market Committee (FOM
C) . 
B) Board of Governors of the Federal Reserve. 
C) Federal Monetary Authority. 
D) Council of Economic Advisers. 
A) Federal Open Market Committee (FOM
C) . 
B) Board of Governors of the Federal Reserve. 
C) Federal Monetary Authority. 
D) Council of Economic Advisers.

Exam 34: Money, Banking, and Financial Institutions

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

What function is money serving when you use it when you go shopping?

The Bureau of Consumer Financial Protection was created in 2010 to become part of the

The so-called moral-hazard problem in financial management refers to the fact that managers will tend to take on more risk if they know that they are somehow insured against some or all of their losses.

Currency held within banks is part of

Checkable deposits are

The Financial Crisis of 2007-2008 was triggered by problems in the dot-com sector of the economy.

The Financial Crisis of 2007-2008 halted the consolidation in the U.S.financial industry that had caused a declining number but increasing size of firms in the industry prior to the crisis.

Which group aids the Board of Governors of the Federal Reserve System in conducting monetary policy?

Coins in people's pockets and purses are

Commercial banks and thrift institutions

Which of the following would be considered to be the most liquid?

Banks lost money during the mortgage default crisis because

Laws passed in the late 1990s restricted the activities of financial firms to narrowly defined services they could provide, prompting the financial crisis of 2007 and 2008.

The so-called near monies have the following characteristics, except

To say that coins are "token money" means that

Securitization, the process of forming new securities by bundling or slicing up groups of securities like mortgages and bonds, is

The Federal Open Market Committee (FOMC) is made up of

The amount of money reported as M2

The central authority of the U.S.banking system is the

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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