Question 1

What are "mortgage-backed securities"?

Accepted Answer

A)  company stock shares for ﬁnancial institutions that lend to home buyers 
B)  bonds backed by mortgage payments 
C)  Treasury bills and savings bonds that banks sold to maintain liquidity during the mortgage default crisis 
D)  insurance against mortgage loan defaults 
A)  company stock shares for ﬁnancial institutions that lend to home buyers 
B)  bonds backed by mortgage payments 
C)  Treasury bills and savings bonds that banks sold to maintain liquidity during the mortgage default crisis 
D)  insurance against mortgage loan defaults

Question 2

$$\begin{array} { | l | c | } 
\hline \text { Money Market Mutual Fund Balances Held by Businesses } & \
\hline \text { Money Market Mutual Fund Balances Held by individuals } & \$ 100 \
\hline \text { Currency in Banks } & 220 \
\hline \text { Currency in Circulation } & 10 \
\hline \text { Savings Deposits, Including Money Market Deposit Accounts } & 40 \
\hline \text { Large-denominated ( } \$ 100,000 \text { or more) Time Deposits } & 50 \
\hline \text { Small-denominated (\$100,000 or less) Time Deposits } & 180 \
\hline \text { Checkable Deposits } & 70 \
\hline
\end{array}$$ Refer to the table. Money supply M1 for this economy is

Accepted Answer

A)  $110. 
B)  $40. 
C)  $70. 
D)  $120. 
A)  $110. 
B)  $40. 
C)  $70. 
D)  $120.

Question 3

Currency in circulation is part of

Accepted Answer

A)  M1 only. 
B)  M2 only. 
C)  neither M1 nor M2. 
D)  both M1 and M2. 
A)  M1 only. 
B)  M2 only. 
C)  neither M1 nor M2. 
D)  both M1 and M2.

Question 4

A $20 bill is a

Accepted Answer

A)  gold certiﬁcate. 
B)  Treasury note. 
C)  Treasury bill. 
D)  Federal Reserve note. 
A)  gold certiﬁcate. 
B)  Treasury note. 
C)  Treasury bill. 
D)  Federal Reserve note.

Question 5

Currency (paper money plus coins) constitutes about

Accepted Answer

A)  25 percent of the U.S. M1 money supply. 
B)  43 percent of the U.S. M1 money supply. 
C)  57 percent of the U.S. M1 money supply. 
D)  66 percent of the U.S. M1 money supply. 
A)  25 percent of the U.S. M1 money supply. 
B)  43 percent of the U.S. M1 money supply. 
C)  57 percent of the U.S. M1 money supply. 
D)  66 percent of the U.S. M1 money supply.

Question 6

The purchasing power of the dollar would fall by 20 percent if the price index rises by

Accepted Answer

A)  10 percent. 
B)  12.5 percent. 
C)  25 percent. 
D)  44 percent. 
A)  10 percent. 
B)  12.5 percent. 
C)  25 percent. 
D)  44 percent.

Question 7

The Federal Reserve System was created in

Accepted Answer

A)  1926. 
B)  1946. 
C)  1895. 
D)  1913. 
A)  1926. 
B)  1946. 
C)  1895. 
D)  1913.

Question 8

Credit card balances are part of money supply M2.

Accepted Answer

A) True 
 B)False

Question 9

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 10

The federal backing for money in the United States comes from

Accepted Answer

A)  providing suﬃcient quantities of precious metals, such as gold and silver, to cover the amount of paper money in circulation. 
B)  pledging physical assets, such as land, natural resources, and public buildings, as collateral for outstanding currency. 
C)  controlling the money supply in order to keep the value of money relatively stable over time. 
D)  protecting checkable deposits at ﬁnancial institutions with deposit guarantees. 
A)  providing suﬃcient quantities of precious metals, such as gold and silver, to cover the amount of paper money in circulation. 
B)  pledging physical assets, such as land, natural resources, and public buildings, as collateral for outstanding currency. 
C)  controlling the money supply in order to keep the value of money relatively stable over time. 
D)  protecting checkable deposits at ﬁnancial institutions with deposit guarantees.

Question 11

Joe deposits $200 in currency into his checking account at a bank. This deposit is treated as

Accepted Answer

A)  a subtraction of $200 from the money supply because the $200 in currency is no longer in circulation. 
B)  an addition of $200 to the money supply because of the creation of a checkable deposit of $200. 
C)  an addition of $200 to the money supply because the bank holds $200 in currency and the checking account has been increased by $200. 
D)  no change in the money supply because the $200 in currency has been converted to a $200 increase in checkable deposits. 
A)  a subtraction of $200 from the money supply because the $200 in currency is no longer in circulation. 
B)  an addition of $200 to the money supply because of the creation of a checkable deposit of $200. 
C)  an addition of $200 to the money supply because the bank holds $200 in currency and the checking account has been increased by $200. 
D)  no change in the money supply because the $200 in currency has been converted to a $200 increase in checkable deposits.

Question 12

Coins held in commercial bank vaults 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)  not part of the nation's money supply. 
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)  not part of the nation's money supply.

Question 13

Stock market price quotations best exemplify 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 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

The paper money, or currency, in the United States essentially represents

Accepted Answer

A)  a debt of commercial banks and savings institutions. 
B)  a debt of the U.S. Treasury. 
C)  an asset of the Federal government. 
D)  a debt of the Federal Reserve System. 
A)  a debt of commercial banks and savings institutions. 
B)  a debt of the U.S. Treasury. 
C)  an asset of the Federal government. 
D)  a debt of the Federal Reserve System.

Question 16

Checkable deposits are

Accepted Answer

A)  included in M1. 
B)  not included in either Ml or M2. 
C)  considered to be a near money. 
D)  also called time deposits. 
A)  included in M1. 
B)  not included in either Ml or M2. 
C)  considered to be a near money. 
D)  also called time deposits.

Question 17

Stabilizing a nation's price level and the purchasing power of its money can be achieved

Accepted Answer

A)  only with ﬁscal policy. 
B)  only with monetary policy. 
C)  with both ﬁscal and monetary policy. 
D)  with neither ﬁscal nor monetary policy. 
A)  only with ﬁscal policy. 
B)  only with monetary policy. 
C)  with both ﬁscal and monetary policy. 
D)  with neither ﬁscal nor monetary policy.

Question 18

$$\begin{array} { | l | c | } 
\hline \text { Money Market Mutual Fund Balances Held by Businesses } & \$ 100 \
\hline \text { Money Market Mutual Fund Balances Held by Individuals } & 220 \
\hline \text { Currency in Banks } & 10 \
\hline \text { Currency in Circulation } & 60 \
\hline \text { Savings Deposits, Including Money Market Deposit Accounts } & 50 \
\hline \text { Large-denominated ( } \$ 100,000 \text { or more) Time Deposits } & 180 \
\hline \text { Small-denominated } ( \$ 100,000 \text { or less) Time Deposits } & 80 \
\hline \text { Checkable Deposits } & 70\
\hline
\end{array}$$ Refer to the table. Money supply M1 for this economy is

Accepted Answer

A)  $60. 
B)  $70. 
C)  $130. 
D)  $140. 
A)  $60. 
B)  $70. 
C)  $130. 
D)  $140.

Question 19

Which of the following statements best describes the 12 Federal Reserve Banks?

Accepted Answer

A)  They are privately owned and privately controlled central banks whose basic goal is to provide an ample and orderly market for U.S. Treasury securities. 
B)  They are privately owned and publicly controlled central banks whose basic function is to minimize the risks in commercial banking in order to make it a reasonably proﬁtable industry. 
C)  They are privately owned and publicly controlled central banks whose basic goal is to control the money supply and interest rates in promoting the general economic welfare. 
D)  They are privately owned and publicly controlled central banks whose basic goal is to earn proﬁts for their owners. 
A)  They are privately owned and privately controlled central banks whose basic goal is to provide an ample and orderly market for U.S. Treasury securities. 
B)  They are privately owned and publicly controlled central banks whose basic function is to minimize the risks in commercial banking in order to make it a reasonably proﬁtable industry. 
C)  They are privately owned and publicly controlled central banks whose basic goal is to control the money supply and interest rates in promoting the general economic welfare. 
D)  They are privately owned and publicly controlled central banks whose basic goal is to earn proﬁts for their owners.

Question 20

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

What are "mortgage-backed securities"?

Currency in circulation is part of

A $20 bill is a

Currency (paper money plus coins) constitutes about

The purchasing power of the dollar would fall by 20 percent if the price index rises by

The Federal Reserve System was created in

Credit card balances are part of money supply M2.

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

The federal backing for money in the United States comes from

Joe deposits $200 in currency into his checking account at a bank. This deposit is treated as

Coins held in commercial bank vaults are

Stock market price quotations best exemplify money serving as a

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

The paper money, or currency, in the United States essentially represents

Checkable deposits are

Stabilizing a nation's price level and the purchasing power of its money can be achieved

Which of the following statements best describes the 12 Federal Reserve Banks?

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.

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

What are "mortgage-backed securities"?

Currency in circulation is part of

A $20 bill is a

Currency (paper money plus coins) constitutes about

The purchasing power of the dollar would fall by 20 percent if the price index rises by

The Federal Reserve System was created in

Credit card balances are part of money supply M2.

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

The federal backing for money in the United States comes from

Joe deposits $200 in currency into his checking account at a bank. This deposit is treated as

Coins held in commercial bank vaults are

Stock market price quotations best exemplify money serving as a

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

The paper money, or currency, in the United States essentially represents

Checkable deposits are

Stabilizing a nation's price level and the purchasing power of its money can be achieved

Which of the following statements best describes the 12 Federal Reserve Banks?

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.

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