Question 1

What does it mean when economists say that home buyers are "underwater" on their mortgages?

Accepted Answer

A)  Buyers owe more on their mortgage than the properties are worth. 
B)  Buyers are ﬁnancially incapable of repaying their mortgages and bankruptcy is inevitable. 
C)  Buyers are purchasing homes on ﬂood plains and are highly susceptible to ﬁnancial losses. 
D)  Buyers are paying interest rates substantially higher than current market interest rates, creating interest payments that create ﬁnancial hardship. 
A)  Buyers owe more on their mortgage than the properties are worth. 
B)  Buyers are ﬁnancially incapable of repaying their mortgages and bankruptcy is inevitable. 
C)  Buyers are purchasing homes on ﬂood plains and are highly susceptible to ﬁnancial losses. 
D)  Buyers are paying interest rates substantially higher than current market interest rates, creating interest payments that create ﬁnancial hardship.

Question 2

In the United States, all money is essentially the debt of the Fed, commercial banks, and thrift institutions.

Accepted Answer

A) True 
 B)False

Question 3

The Federal Deposit Insurance Corporation (FDIC) insures deposits in

Accepted Answer

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

Question 4

The Federal Reserve System is the institution that issues the U.S. paper currency or dollar bills.

Accepted Answer

A) True 
 B)False

Question 5

The Federal Reserve System is a bankers' bank and thereby acts as a "lender of last resort" to banks.

Accepted Answer

A) True 
 B)False

Question 6

$$\begin{array} { | l | c | } 
\hline \text { Money Market Mutual Fund Balances Held by Businesses } & \$ 100 \
\hline \text { Money Market Mutual Fund Balances Held by Individuals } & 220 \
\hline \text { Currency in Banks } & 10 \
\hline \text { Currency in Circulation } & 60 \
\hline \text { Savings Deposits, Including Money Market Deposit Accounts } & 50 \
\hline \text { Large-denominated ( } \$ 100,000 \text { or more) Time Deposits } & 180 \
\hline \text { Small-denominated (\$100,000 or less) Time Deposits } & 80 \
\hline \text { Checkable Deposits } & 70\
\hline
\end{array}$$ Refer to the table. The value of the near monies that are part of M2 is

Accepted Answer

A)  $480. 
B)  $630. 
C)  $350. 
D)  $530. 
A)  $480. 
B)  $630. 
C)  $350. 
D)  $530.

Question 7

Approximately how many commercial banks are now operating in the United States?

Accepted Answer

A)  about 7,300 
B)  about 4,600 
C)  about 8,500 
D)  about 6,800 
A)  about 7,300 
B)  about 4,600 
C)  about 8,500 
D)  about 6,800

Question 8

$$\begin{array} { | l | c | } 
\hline { \text { Item } } & \text { Billlons of Dollars } \
\hline \text { Checkable Deposits } & \$ 597 \
\hline \text { Small Time Deposits } & 818 \
\hline \text { Currency } & 639 \
\hline \text { Money-Market Mutual Funds Held by Businesses } & 1,045 \
\hline \text { Savings Deposits, Including Money-Market Deposit Accounts } & 2,866 \
\hline \text { Money-Market Mutual Funds Held by Individuals } & 979 \
\hline
\end{array}$$ Refer to the accompanying table. The size of the M2 money supply is

Accepted Answer

A)  $2,054 billion. 
B)  $2,696 billion. 
C)  $5,899 billion. 
D)  $6,792 billion. 
A)  $2,054 billion. 
B)  $2,696 billion. 
C)  $5,899 billion. 
D)  $6,792 billion.

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

The Federal Reserve Banks are owned by the

Accepted Answer

A)  federal government. 
B)  Board of Governors. 
C)  United States Treasury. 
D)  private commercial banks within each district. 
A)  federal government. 
B)  Board of Governors. 
C)  United States Treasury. 
D)  private commercial banks within each district.

Question 11

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 12

Checkable deposits are included in

Accepted Answer

A)  M1 but not in M2. 
B)  M2 but not in M1. 
C)  both M1 and M2. 
D)  neither M1 nor M2. 
A)  M1 but not in M2. 
B)  M2 but not in M1. 
C)  both M1 and M2. 
D)  neither M1 nor M2.

Question 13

What were the main factors that led to the mortgage default crisis?

Accepted Answer

There were many factors that led to the

Question 14

Explain the difference between a money-market deposit account and a money-market mutual fund.

Accepted Answer

A money-market deposit account (MMDA) is

Question 15

The M1 money supply is composed of currency, checkable deposits, and savings deposits.

Accepted Answer

A) True 
 B)False

Question 16

How do high rates of inﬂation affect the acceptability of a nation's currency?

Accepted Answer

High rates of inﬂation reduce the purcha

Question 17

Currency held in the vault of First National Bank is

Accepted Answer

A)  counted as part of M1. 
B)  counted as part of M2 but not M1. 
C)  only counted as part of M1 if it was deposited into a checking account. 
D)  not counted as part of the money supply. 
A)  counted as part of M1. 
B)  counted as part of M2 but not M1. 
C)  only counted as part of M1 if it was deposited into a checking account. 
D)  not counted as part of the money supply.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

With token money, the face value is greater than the intrinsic value.

Accepted Answer

A) True 
 B)False

Question 20

Gold backs the U.S. money supply.

Accepted Answer

A) True 
 B)False

What does it mean when economists say that home buyers are "underwater" on their mortgages?

In the United States, all money is essentially the debt of the Fed, commercial banks, and thrift institutions.

The Federal Deposit Insurance Corporation (FDIC) insures deposits in

The Federal Reserve System is the institution that issues the U.S. paper currency or dollar bills.

The Federal Reserve System is a bankers' bank and thereby acts as a "lender of last resort" to banks.

Approximately how many commercial banks are now operating in the United States?

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

The Federal Reserve Banks are owned by the

Coins in people's pockets and purses are

Checkable deposits are included in

What were the main factors that led to the mortgage default crisis?

Explain the difference between a money-market deposit account and a money-market mutual fund.

The M1 money supply is composed of currency, checkable deposits, and savings deposits.

How do high rates of inﬂation affect the acceptability of a nation's currency?

Currency held in the vault of First National Bank is

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

With token money, the face value is greater than the intrinsic value.

Gold backs the U.S. money supply.

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

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Exam 14: Money, Banking, and Financial Institutions

What does it mean when economists say that home buyers are "underwater" on their mortgages?

In the United States, all money is essentially the debt of the Fed, commercial banks, and thrift institutions.

The Federal Deposit Insurance Corporation (FDIC) insures deposits in

The Federal Reserve System is the institution that issues the U.S. paper currency or dollar bills.

The Federal Reserve System is a bankers' bank and thereby acts as a "lender of last resort" to banks.

Approximately how many commercial banks are now operating in the United States?

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

The Federal Reserve Banks are owned by the

Coins in people's pockets and purses are

Checkable deposits are included in

What were the main factors that led to the mortgage default crisis?

Explain the difference between a money-market deposit account and a money-market mutual fund.

The M1 money supply is composed of currency, checkable deposits, and savings deposits.

How do high rates of inﬂation affect the acceptability of a nation's currency?

Currency held in the vault of First National Bank is

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

With token money, the face value is greater than the intrinsic value.

Gold backs the U.S. money supply.

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