Question 1

If the price index rises from 100 to 115, then the purchasing power of the dollar will fall by about

Accepted Answer

A)  13 percent. 
B)  10 percent. 
C)  23 percent. 
D)  15 percent. 
E)  100 percent. 
A)  13 percent. 
B)  10 percent. 
C)  23 percent. 
D)  15 percent. 
E)  100 percent.

Question 2

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 3

A checking account entry is money because it

Accepted Answer

A)  is ensured by the Federal Deposit Insurance Corporation. 
B)  has been declared as such by the federal government. 
C)  performs the functions of money. 
D)  can be sold for currency. 
A)  is ensured by the Federal Deposit Insurance Corporation. 
B)  has been declared as such by the federal government. 
C)  performs the functions of money. 
D)  can be sold for currency.

Question 4

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 5

What is the difference between the M1 and M2 deﬁnitions of the money supply?

Accepted Answer

M1 is the most liquid form of money and

Question 6

The so-called moral hazard problem refers to one's tendency to

Accepted Answer

A)  buy less of something if one does not have good information about it. 
B)  avoid something that is considered risky or hazardous. 
C)  get insurance against some possible hazard or danger. 
D)  take on greater risk if one is at least partly insured against losses. 
A)  buy less of something if one does not have good information about it. 
B)  avoid something that is considered risky or hazardous. 
C)  get insurance against some possible hazard or danger. 
D)  take on greater risk if one is at least partly insured against losses.

Question 7

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 8

What function is money serving when you deposit money in a savings account?

Accepted Answer

A)  a store of value 
B)  a unit of account 
C)  a checkable deposit 
D)  a medium of exchange 
A)  a store of value 
B)  a unit of account 
C)  a checkable deposit 
D)  a medium of exchange

Question 9

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 10

Refer to the given list of assets. 1. Large-denominated ($100,000 and over) time deposits
2) Savings deposits
3) Currency (coins and paper money) in circulation
4) Small-denominated (under $100,000) time deposits
5) Stock certiﬁcates
6) Checkable deposits
7) Money market deposit accounts
8) Money market mutual fund balances held by individuals
9) Money market mutual fund balances held by businesses
10) Currency held in bank vaults
Which of the following are considered to be near monies?

Accepted Answer

A)  items 2, 5, 8, and 9 
B)  all items except for 3 
C)  items 2, 4, 7, and 8 
D)  items 1, 5, and 10 
A)  items 2, 5, 8, and 9 
B)  all items except for 3 
C)  items 2, 4, 7, and 8 
D)  items 1, 5, and 10

Question 11

As of March 2019, more than half of the money supply (M1) was in the form of

Accepted Answer

A)  currency. 
B)  checkable deposits. 
C)  gold coins and bars. 
D)  savings deposits. 
A)  currency. 
B)  checkable deposits. 
C)  gold coins and bars. 
D)  savings deposits.

Question 12

The money supply is backed

Accepted Answer

A)  by the government's ability to control the supply of money and therefore to keep its value relatively stable. 
B)  by government bonds. 
C)  dollar-for-dollar by gold and silver. 
D)  by gold reserves representing a fraction of the total value of dollars in circulation. 
A)  by the government's ability to control the supply of money and therefore to keep its value relatively stable. 
B)  by government bonds. 
C)  dollar-for-dollar by gold and silver. 
D)  by gold reserves representing a fraction of the total value of dollars in circulation.

Question 13

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 14

The near-money components of M2 are

Accepted Answer

A)  equally liquid as the M1 components of M2. 
B)  more liquid than the M1 components of M2. 
C)  less liquid than the M1 components of M2. 
D)  highly illiquid. 
A)  equally liquid as the M1 components of M2. 
B)  more liquid than the M1 components of M2. 
C)  less liquid than the M1 components of M2. 
D)  highly illiquid.

Question 15

The main function of the Federal Reserve System is to

Accepted Answer

A)  serve as the ﬁscal agent for the federal government. 
B)  set reserve requirements of banks. 
C)  clear checks from member banks. 
D)  control the money supply. 
A)  serve as the ﬁscal agent for the federal government. 
B)  set reserve requirements of banks. 
C)  clear checks from member banks. 
D)  control the money supply.

Question 16

$$\begin{array} { | l | c | } 
\hline { \text { Item } } & \text { Billions of Dollars } \
\hline \text { Checkable Deposits } & \$ 597 \
\hline \text { Small Time Deposits } & 818 \
\hline \text { Currency } & 639 \
\hline \text { Money-Market Mutual Funds Held by Businesses } & 1,045 \
\hline \text { Savings Deposits, Including Money-Market Deposit Accounts } & 2,866 \
\hline \text { Money-Market Mutual Funds Held by Individuals } & 979 \
\hline
\end{array}$$ Refer to the accompanying table. The value of the money included in M2 but not counted in M1 is

Accepted Answer

A)  $1,457 billion. 
B)  $4,442 billion. 
C)  $2,886 billion. 
D)  $4,663 billion. 
A)  $1,457 billion. 
B)  $4,442 billion. 
C)  $2,886 billion. 
D)  $4,663 billion.

Question 17

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 18

Small-denominated time deposits, by deﬁnition

Accepted Answer

A)  mature in one month or less. 
B)  mature in one year or less. 
C)  are less than $100,000. 
D)  are held by state and local banks only. 
A)  mature in one month or less. 
B)  mature in one year or less. 
C)  are less than $100,000. 
D)  are held by state and local banks only.

Question 19

"Thrifts" refers to the following institutions except

Accepted Answer

A)  commercial banks. 
B)  credit unions. 
C)  mutual savings banks. 
D)  savings and loan associations. 
A)  commercial banks. 
B)  credit unions. 
C)  mutual savings banks. 
D)  savings and loan associations.

Question 20

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

If the price index rises from 100 to 115, then the purchasing power of the dollar will fall by about

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

A checking account entry is money because it

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

What is the difference between the M1 and M2 deﬁnitions of the money supply?

The so-called moral hazard problem refers to one's tendency to

Banks lost money during the mortgage default crisis because

What function is money serving when you deposit money in a savings account?

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.

As of March 2019, more than half of the money supply (M1) was in the form of

The money supply is backed

The Federal Reserve System consists of which of the following?

The near-money components of M2 are

The main function of the Federal Reserve System is to

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

Small-denominated time deposits, by deﬁnition

"Thrifts" refers to the following institutions except

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

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

If the price index rises from 100 to 115, then the purchasing power of the dollar will fall by about

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

A checking account entry is money because it

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

What is the difference between the M1 and M2 deﬁnitions of the money supply?

The so-called moral hazard problem refers to one's tendency to

Banks lost money during the mortgage default crisis because

What function is money serving when you deposit money in a savings account?

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.

As of March 2019, more than half of the money supply (M1) was in the form of

The money supply is backed

The Federal Reserve System consists of which of the following?

The near-money components of M2 are

The main function of the Federal Reserve System is to

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

Small-denominated time deposits, by deﬁnition

"Thrifts" refers to the following institutions except

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

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