Question 1

(Last Word) The Glass-Steagall Act of 1933:

Accepted Answer

A)  encouraged the creation of large, interconnected ﬁnancial services ﬁrms. 
B)  was a primary cause of the 2007-2008 ﬁnancial crisis and subsequent recession. 
C)  created banks "too big to fail" and "too big to jail." 
D)  separated high-risk and low-risk ﬁnancial activities across different ﬁrms. 
A)  encouraged the creation of large, interconnected ﬁnancial services ﬁrms. 
B)  was a primary cause of the 2007-2008 ﬁnancial crisis and subsequent recession. 
C)  created banks "too big to fail" and "too big to jail." 
D)  separated high-risk and low-risk ﬁnancial activities across different ﬁrms. D

Question 2

Which of the following institutions does not provide checkable-deposit services to the general public?

Accepted Answer

A)  commercial banks 
B)  savings and loan associations 
C)  U.S. Treasury 
D)  credit unions 
A)  commercial banks 
B)  savings and loan associations 
C)  U.S. Treasury 
D)  credit unions C

Question 3

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. C

Question 4

The programs enacted to bail out the ﬁnancial system from crisis in 2007 and 2008 helped alleviate the moral hazard
problem in the ﬁnancial industry.

Accepted Answer

A) True 
 B)False

Question 5

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 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

If the price index rises from 100 to 130, then the purchasing power of the dollar will fall by about

Accepted Answer

A)  15 percent. 
B)  19 percent. 
C)  23 percent. 
D)  30 percent. 
A)  15 percent. 
B)  19 percent. 
C)  23 percent. 
D)  30 percent.

Question 8

To say "money is what money does" 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 9

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 10

Money in the U.S. is essentially debt of

Accepted Answer

A)  businesses and the banks. 
B)  the Federal Reserve System and the banks. 
C)  the national and local governments. 
D)  businesses and the Federal Reserve System. 
A)  businesses and the banks. 
B)  the Federal Reserve System and the banks. 
C)  the national and local governments. 
D)  businesses and the Federal Reserve System.

Question 11

Assuming no other changes, if checkable deposits decrease by $40 billion and balances in money market mutual funds increase by $40 billion, the

Accepted Answer

A)  M1 money supply will decline and the M2 money supply will remain unchanged. 
B)  M1 and M2 money supplies will not change. 
C)  M1 money supply will increase and the M2 money supply will remain unchanged. 
D)  M1 and M2 money supplies will both decline. 
A)  M1 money supply will decline and the M2 money supply will remain unchanged. 
B)  M1 and M2 money supplies will not change. 
C)  M1 money supply will increase and the M2 money supply will remain unchanged. 
D)  M1 and M2 money supplies will both decline.

Question 12

As it relates to Federal Reserve activities, the acronym FOMC describes the

Accepted Answer

A)  Federal Open Market Committee. 
B)  Federal Options Market Committee. 
C)  Federal Organization for Monetary Control. 
D)  Federal Organization for Money Creation. 
A)  Federal Open Market Committee. 
B)  Federal Options Market Committee. 
C)  Federal Organization for Monetary Control. 
D)  Federal Organization for Money Creation.

Question 13

Holding the money deposits of businesses and households and making loans to the public are the basic functions of

Accepted Answer

A)  the district banks of the Federal Reserve System. 
B)  commercial banks and thrift institutions. 
C)  the Federal Open Market Committee and the Board of Governors. 
D)  the Federal Deposit Insurance Corporation and the Federal Savings and Loan Insurance Corporation. 
A)  the district banks of the Federal Reserve System. 
B)  commercial banks and thrift institutions. 
C)  the Federal Open Market Committee and the Board of Governors. 
D)  the Federal Deposit Insurance Corporation and the Federal Savings and Loan Insurance Corporation.

Question 14

$$\begin{array} { | l | c | } 
\hline  { \text { Item } } & \text { Billions of Dollars } \
\hline \text { Checkable Deposits } & \$ 597 \
\hline \text { Small Time Deposits } & 818 \
\hline \text { Currency } & 639 \
\hline \text { Money-Market Mutual Funds Held by Businesses } & 1,045 \
\hline \text { Savings Deposits, Including Money-Market Deposit Accounts } & 2,866 \
\hline \text { Money-Market Mutual Funds Held by Individuals } & 979 \
\hline
\end{array}$$ Refer to the accompanying table. The size of the M1 money supply is

Accepted Answer

A)  $979 billion. 
B)  $1,236 billion. 
C)  $1,415 billion. 
D)  $1,618 billion. 
A)  $979 billion. 
B)  $1,236 billion. 
C)  $1,415 billion. 
D)  $1,618 billion.

Question 15

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 16

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

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 17

During the Great Recession, the bailout money given to the car companies GM and Chrysler under the TARP program
came from the Fed acting in its role as lender of last resort.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is not one of the causes of the skyrocketing mortgage default rates that triggered the ﬁnancial crisis in 2007-2008?

Accepted Answer

A)  Mortgage lending became very lax. 
B)  Many people took on mortgages that they were simply incapable of repaying. 
C)  Housing prices increased drastically. 
D)  Real estate values started declining after having risen for many years. 
A)  Mortgage lending became very lax. 
B)  Many people took on mortgages that they were simply incapable of repaying. 
C)  Housing prices increased drastically. 
D)  Real estate values started declining after having risen for many years.

Question 19

$$\begin{array} { | l | r | } 
\hline { \text { Item } } & \text { Billions of Dollars } \
\hline \text { Checkable Deposits } & \$ 2,000 \
\hline \text { Small Time Deposits } & 350 \
\hline \text { Currency Held by the Public } & 80 \
\hline \text { Savings Deposits, Including Money-Market Deposit Accounts } & 1,300 \
\hline \text { Money-Market Mutual Funds Held by Individuals } & 600 \
\hline \text { Money-Market Mutual Funds Held by Businesses } & 700\
\hline
\end{array}$$ The accompanying table contains hypothetical data for an economy. The size of the M2 money supply is

Accepted Answer

A)  $3,730 billion. 
B)  $3,980 billion. 
C)  $4,330 billion. 
D)  $4,470 billion. 
A)  $3,730 billion. 
B)  $3,980 billion. 
C)  $4,330 billion. 
D)  $4,470 billion.

Question 20

The Federal Open Market Committee (FOMC) regulates markets and enforces antitrust laws to keep markets open and
competitive.

Accepted Answer

A) True 
 B)False

(Last Word) The Glass-Steagall Act of 1933:

Which of the following institutions does not provide checkable-deposit services to the general public?

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

The programs enacted to bail out the ﬁnancial system from crisis in 2007 and 2008 helped alleviate the moral hazard problem in the ﬁnancial industry.

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

Near monies

If the price index rises from 100 to 130, then the purchasing power of the dollar will fall by about

To say "money is what money does" means that

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

Money in the U.S. is essentially debt of

Assuming no other changes, if checkable deposits decrease by $40 billion and balances in money market mutual funds increase by $40 billion, the

As it relates to Federal Reserve activities, the acronym FOMC describes the

Holding the money deposits of businesses and households and making loans to the public are the basic functions of

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

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

During the Great Recession, the bailout money given to the car companies GM and Chrysler under the TARP program came from the Fed acting in its role as lender of last resort.

Which of the following is not one of the causes of the skyrocketing mortgage default rates that triggered the ﬁnancial crisis in 2007-2008?

The Federal Open Market Committee (FOMC) regulates markets and enforces antitrust laws to keep markets open and competitive.

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

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

Exam 14: Money, Banking, and Financial Institutions

(Last Word) The Glass-Steagall Act of 1933:

Which of the following institutions does not provide checkable-deposit services to the general public?

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

The programs enacted to bail out the ﬁnancial system from crisis in 2007 and 2008 helped alleviate the moral hazard problem in the ﬁnancial industry.

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

Near monies

If the price index rises from 100 to 130, then the purchasing power of the dollar will fall by about

To say "money is what money does" means that

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

Money in the U.S. is essentially debt of

Assuming no other changes, if checkable deposits decrease by $40 billion and balances in money market mutual funds increase by $40 billion, the

As it relates to Federal Reserve activities, the acronym FOMC describes the

Holding the money deposits of businesses and households and making loans to the public are the basic functions of

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

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

During the Great Recession, the bailout money given to the car companies GM and Chrysler under the TARP program came from the Fed acting in its role as lender of last resort.

Which of the following is not one of the causes of the skyrocketing mortgage default rates that triggered the ﬁnancial crisis in 2007-2008?

The Federal Open Market Committee (FOMC) regulates markets and enforces antitrust laws to keep markets open and competitive.

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

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