Question 1

Currency held by 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 2

Items 1. Money market mutual funds held by individuals
2) Savings deposits, including money market deposit accounts
3) Money market mutual funds held by businesses
4) Currency held by the public
5) Small time deposits
6) Checkable deposits
Refer to the accompanying list. The M1 money supply is composed of items

Accepted Answer

A)  5 and 6. 
B)  4 and 6. 
C)  6 and 7. 
D)  1 and 4. 
A)  5 and 6. 
B)  4 and 6. 
C)  6 and 7. 
D)  1 and 4.

Question 3

The Federal Reserve System

Accepted Answer

A)  has the same status as the Supreme Court. 
B)  is basically an independent agency. 
C)  has the status of a congressional committee. 
D)  is an agency of the executive branch of the federal government. 
A)  has the same status as the Supreme Court. 
B)  is basically an independent agency. 
C)  has the status of a congressional committee. 
D)  is an agency of the executive branch of the federal government.

Question 4

Which one of the following is considered to be a "stock" rather than a "ﬂow" variable?

Accepted Answer

A)  income 
B)  money 
C)  wages 
D)  proﬁts 
A)  income 
B)  money 
C)  wages 
D)  proﬁts

Question 5

The 12 Federal Reserve Banks can best be characterized as

Accepted Answer

A)  central banks, bankers' banks, and quasi-public banks. 
B)  regional banks, public banks, and member banks. 
C)  investment banks, bankers' banks, and public banks. 
D)  national banks, quasi-public banks, and investment banks. 
A)  central banks, bankers' banks, and quasi-public banks. 
B)  regional banks, public banks, and member banks. 
C)  investment banks, bankers' banks, and public banks. 
D)  national banks, quasi-public banks, and investment banks.

Question 6

Economic studies suggest there is

Accepted Answer

A)  a positive relationship between the degree of independence of the central bank and the size of the average annual rate of inﬂation. 
B)  an inverse relationship between the degree of independence of the central bank and the size of the average annual rate of inﬂation. 
C)  no relationship between the degree of independence of the central bank and the size of the average annual rate of inﬂation. 
D)  a positive relationship between the degree of independence of the central bank and the size of the central bank. 
A)  a positive relationship between the degree of independence of the central bank and the size of the average annual rate of inﬂation. 
B)  an inverse relationship between the degree of independence of the central bank and the size of the average annual rate of inﬂation. 
C)  no relationship between the degree of independence of the central bank and the size of the average annual rate of inﬂation. 
D)  a positive relationship between the degree of independence of the central bank and the size of the central bank.

Question 7

What "backs" the money supply of the United States?

Accepted Answer

A)  the U.S. government's ability to keep the value of money relatively stable 
B)  the amount of gold the U.S. government has on deposit at its banks 
C)  the fact that currency is issued by the Federal Reserve System 
D)  the fact that the intrinsic value of coins in circulation is greater than their face value 
A)  the U.S. government's ability to keep the value of money relatively stable 
B)  the amount of gold the U.S. government has on deposit at its banks 
C)  the fact that currency is issued by the Federal Reserve System 
D)  the fact that the intrinsic value of coins in circulation is greater than their face value

Question 8

If the price index rises from 200 to 250, the purchasing power value of the dollar

Accepted Answer

A)  may either rise or fall. 
B)  will rise by 25 percent. 
C)  will fall by 25 percent. 
D)  will fall by 20 percent. 
A)  may either rise or fall. 
B)  will rise by 25 percent. 
C)  will fall by 25 percent. 
D)  will fall by 20 percent.

Question 9

Which of the following "backs" the value of money in the United States?

Accepted Answer

A)  the gold stored in the Federal Reserve Bank of New York 
B)  the acceptability of it as a medium of exchange 
C)  the willingness of foreign governments to hold U.S. dollars 
D)  the size of the budget surplus in the U.S. government 
A)  the gold stored in the Federal Reserve Bank of New York 
B)  the acceptability of it as a medium of exchange 
C)  the willingness of foreign governments to hold U.S. dollars 
D)  the size of the budget surplus in the U.S. government

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
The M2 deﬁnition of money includes

Accepted Answer

A)  items 2, 3, 4, 6, 7, 8, and 10. 
B)  items 3, 4, 5, and 6. 
C)  items 2, 3, 4, 6, 7, and 8. 
D)  all of the items listed. 
A)  items 2, 3, 4, 6, 7, 8, and 10. 
B)  items 3, 4, 5, and 6. 
C)  items 2, 3, 4, 6, 7, and 8. 
D)  all of the items listed.

Question 11

If the price index rises from 100 to 120, the purchasing power value of the dollar

Accepted Answer

A)  may either rise or fall. 
B)  will rise by one-sixth. 
C)  will fall by one-sixth. 
D)  will rise by 20 percent. 
A)  may either rise or fall. 
B)  will rise by one-sixth. 
C)  will fall by one-sixth. 
D)  will rise by 20 percent.

Question 12

The seven members of the Board of Governors of the Federal Reserve System are

Accepted Answer

A)  appointed by the president with the conﬁrmation of the Senate. 
B)  elected by Congress from a slate of nominees provided by the president. 
C)  appointed by the Senate Finance Committee. 
D)  appointed by the presidents of the 12 Federal Reserve Banks. 
A)  appointed by the president with the conﬁrmation of the Senate. 
B)  elected by Congress from a slate of nominees provided by the president. 
C)  appointed by the Senate Finance Committee. 
D)  appointed by the presidents of the 12 Federal Reserve Banks.

Question 13

Currency and coins held by banks are part of the M1 deﬁnition of money supply.

Accepted Answer

A) True 
 B)False

Question 14

The value (or purchasing power) of money increases when the price level increases.

Accepted Answer

A) True 
 B)False

Question 15

If P equals the price level expressed as an index number and $\$ V$ equals the value of the dollar, then

Accepted Answer

A)  $P = \$ V - 1$ 
B)  $\$ V = 1 / P$ 
C)  $1 = \$ V / P$ 
D)  $\$ V = P - 1 .$ 
A)  $P = \$ V - 1$ 
B)  $\$ V = 1 / P$ 
C)  $1 = \$ V / P$ 
D)  $\$ V = P - 1 .$

Question 16

The destabilizing effects of defaulting mortgages quickly spread throughout the ﬁnancial system because those mortgages were involved in widespread

Accepted Answer

A)  diversiﬁcation. 
B)  securitization. 
C)  multiplier effects. 
D)  real-balance effects. 
A)  diversiﬁcation. 
B)  securitization. 
C)  multiplier effects. 
D)  real-balance effects.

Question 17

$$\begin{array} { | l | c | } 
\hline { \text { Item } } & \text { Billions of Dollars } \
\hline \text { Checkable Deposits } & \$ 597 \
\hline \text { Small Time Deposits } & 818 \
\hline \text { Currency } & 639 \
\hline \text { Money-Market Mutual Funds Held by Businesses } & 1,045 \
\hline \text { Savings Deposits, Including Money-Market Deposit Accounts } & 2,866 \
\hline \text { Money-Market Mutual Funds Held by Individuals } & 965 \
\hline
\end{array}$$ Refer to the accompanying table. The value of the money included in M2 but not counted in M1 is

Accepted Answer

A)  $4,649 billion. 
B)  $818 billion. 
C)  $2,866 billion. 
D)  $5,694 billion. 
A)  $4,649 billion. 
B)  $818 billion. 
C)  $2,866 billion. 
D)  $5,694 billion.

Question 18

When economists say that money serves as a unit of account, they mean that it is

Accepted Answer

A)  a way to keep wealth in a readily spendable form for future use. 
B)  a means of payment. 
C)  a monetary unit for measuring and comparing the relative values of goods. 
D)  declared as legal tender by the government. 
A)  a way to keep wealth in a readily spendable form for future use. 
B)  a means of payment. 
C)  a monetary unit for measuring and comparing the relative values of goods. 
D)  declared as legal tender by the government.

Question 19

(Consider This) Credit cards are deﬁned as money because they facilitate transactions.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Currency held by banks is part of

The Federal Reserve System

Which one of the following is considered to be a "stock" rather than a "ﬂow" variable?

The 12 Federal Reserve Banks can best be characterized as

Economic studies suggest there is

What "backs" the money supply of the United States?

If the price index rises from 200 to 250, the purchasing power value of the dollar

Which of the following "backs" the value of money in the United States?

If the price index rises from 100 to 120, the purchasing power value of the dollar

The seven members of the Board of Governors of the Federal Reserve System are

Currency and coins held by banks are part of the M1 deﬁnition of money supply.

The value (or purchasing power) of money increases when the price level increases.

If P equals the price level expressed as an index number and $\$ V$ equals the value of the dollar, then

The destabilizing effects of defaulting mortgages quickly spread throughout the ﬁnancial system because those mortgages were involved in widespread

When economists say that money serves as a unit of account, they mean that it is

(Consider This) Credit cards are deﬁned as money because they facilitate transactions.

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

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

Currency held by banks is part of

The Federal Reserve System

Which one of the following is considered to be a "stock" rather than a "ﬂow" variable?

The 12 Federal Reserve Banks can best be characterized as

Economic studies suggest there is

What "backs" the money supply of the United States?

If the price index rises from 200 to 250, the purchasing power value of the dollar

Which of the following "backs" the value of money in the United States?

If the price index rises from 100 to 120, the purchasing power value of the dollar

The seven members of the Board of Governors of the Federal Reserve System are

Currency and coins held by banks are part of the M1 deﬁnition of money supply.

The value (or purchasing power) of money increases when the price level increases.

If P equals the price level expressed as an index number and $V\$ V$V equals the value of the dollar, then

The destabilizing effects of defaulting mortgages quickly spread throughout the ﬁnancial system because those mortgages were involved in widespread

When economists say that money serves as a unit of account, they mean that it is

(Consider This) Credit cards are deﬁned as money because they facilitate transactions.

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

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

If P equals the price level expressed as an index number and $\$ V$ equals the value of the dollar, then