Question 1

Deﬁne liquidity. Provide an example of a highly liquid and highly illiquid asset.

Accepted Answer

Liquidity is the ease with which an asse

Question 2

Checkable deposits held in savings and loan institutions, mutual savings banks, and credit unions are part of the M1
deﬁnition of the money supply.

Accepted Answer

A) True 
 B)False

Question 3

The Federal Reserve System performs the following functions except

Accepted Answer

A)  issuing the paper currency in the economy. 
B)  providing banking services to the general public. 
C)  providing ﬁnancial services to the federal government. 
D)  lending money to banks and thrifts. 
A)  issuing the paper currency in the economy. 
B)  providing banking services to the general public. 
C)  providing ﬁnancial services to the federal government. 
D)  lending money to banks and thrifts.

Question 4

(Consider This) Credit cards are

Accepted Answer

A)  the fastest-growing component of the M1 money supply. 
B)  near monies that are part of the M2 money supply but not the M1 money supply. 
C)  not money, as oﬃcially deﬁned. 
D)  also known as time deposits. 
A)  the fastest-growing component of the M1 money supply. 
B)  near monies that are part of the M2 money supply but not the M1 money supply. 
C)  not money, as oﬃcially deﬁned. 
D)  also known as time deposits.

Question 5

In deﬁning money as M1, economists exclude time deposits because

Accepted Answer

A)  the intrinsic value of time deposits is nil. 
B)  the purchasing power of time deposits is much less stable than that of checkable deposits and currency. 
C)  they are not directly or immediately a medium of exchange. 
D)  they are not recognized by the federal government as legal tender. 
A)  the intrinsic value of time deposits is nil. 
B)  the purchasing power of time deposits is much less stable than that of checkable deposits and currency. 
C)  they are not directly or immediately a medium of exchange. 
D)  they are not recognized by the federal government as legal tender.

Question 6

The TARP loans and the Fed's lender-of-last-resort actions that bailed out large, failing ﬁnancial institutions helped
reduce the moral-hazard problem in ﬁnancial management.

Accepted Answer

A) True 
 B)False

Question 7

An important routine function of the Federal Reserve Bank is to

Accepted Answer

A)  supervise the liquidation of the assets of bankrupt state banks. 
B)  help large commercial banks develop correspondent relationships with smaller commercial banks. 
C)  advise commercial banks as to the most proﬁtable ways of reinvesting proﬁts. 
D)  provide facilities by which commercial banks and thrift institutions may collect checks. 
A)  supervise the liquidation of the assets of bankrupt state banks. 
B)  help large commercial banks develop correspondent relationships with smaller commercial banks. 
C)  advise commercial banks as to the most proﬁtable ways of reinvesting proﬁts. 
D)  provide facilities by which commercial banks and thrift institutions may collect checks.

Question 8

Paper money (currency) in the United States is issued by the

Accepted Answer

A)  U.S. Mint. 
B)  Federal Reserve Banks. 
C)  U.S. Treasury. 
D)  national banks. 
A)  U.S. Mint. 
B)  Federal Reserve Banks. 
C)  U.S. Treasury. 
D)  national banks.

Question 9

How do long terms for appointments beneﬁt the Federal Reserve's Board of Governors?

Accepted Answer

The long-term appointments pro

Question 10

One major advantage of money serving as a medium of exchange is that it allows society to

Accepted Answer

A)  transfer purchasing power from the present to the future. 
B)  measure the relative worth of products. 
C)  escape the complications of barter. 
D)  use credit cards instead of currency. 
A)  transfer purchasing power from the present to the future. 
B)  measure the relative worth of products. 
C)  escape the complications of barter. 
D)  use credit cards instead of currency.

Question 11

If you write a check on a bank to purchase a used Honda Civic, you are using money primarily as

Accepted Answer

A)  a medium of exchange. 
B)  a store of value. 
C)  a unit of account. 
D)  an economic investment. 
A)  a medium of exchange. 
B)  a store of value. 
C)  a unit of account. 
D)  an economic investment.

Question 12

If product prices were stated in terms of marbles, then marbles would be functioning primarily as

Accepted Answer

A)  ﬁat money. 
B)  legal tender. 
C)  a store of value. 
D)  a unit of account. 
A)  ﬁat money. 
B)  legal tender. 
C)  a store of value. 
D)  a unit of account.

Question 13

When economists say that money serves as a store of value, 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 14

$$\begin{array} { | l | c | } 
\hline \text { Money Market Mutual Fund Balances Held by Businesses } & \$ 100 \
\hline \text { Money Market Mutual Fund Balances Held by Individuals } & 230 \
\hline \text { Currency in Banks } & 10 \
\hline \text { Currency in Circulation } & 60 \
\hline \text { Savings Deposits, Including Money Market Deposit Accounts } & 60 \
\hline \text { Large-denominated (\$100,000 or more) Time Deposits } & 180 \
\hline \text { Small-denominated ( } \$ 100,000 \text { or less) Time Deposits } & 90 \
\hline \text { Checkable Deposits } & 70\
\hline
\end{array}$$ Refer to the table. The value of the near monies that are part of M2 is

Accepted Answer

A)  $380. 
B)  $230. 
C)  $60. 
D)  $390. 
A)  $380. 
B)  $230. 
C)  $60. 
D)  $390.

Question 15

The reason for the Fed being set up as an independent agency of government is to

Accepted Answer

A)  protect it from political pressure. 
B)  allow it to earn proﬁts like private ﬁrms. 
C)  make it be managed and controlled by member banks. 
D)  let it be able to compete with other ﬁnancial institutions. 
A)  protect it from political pressure. 
B)  allow it to earn proﬁts like private ﬁrms. 
C)  make it be managed and controlled by member banks. 
D)  let it be able to compete with other ﬁnancial institutions.

Question 16

The Federal Reserve System of the United States is the country's

Accepted Answer

A)  ﬁnancial adviser. 
B)  comptroller or accountant. 
C)  central bank. 
D)  deposit insurance provider. 
A)  ﬁnancial adviser. 
B)  comptroller or accountant. 
C)  central bank. 
D)  deposit insurance provider.

Question 17

The members of the Federal Reserve Board

Accepted Answer

A)  serve seven-year terms. 
B)  are appointed by the American Economic Association. 
C)  are elected by votes of the 12 presidents of the Federal Reserve Banks. 
D)  are appointed for 14-year terms. 
A)  serve seven-year terms. 
B)  are appointed by the American Economic Association. 
C)  are elected by votes of the 12 presidents of the Federal Reserve Banks. 
D)  are appointed for 14-year terms.

Question 18

What are the seven functions of the Federal Reserve System? Which one is most important?

Accepted Answer

1. Issuing currency. 2. Setting reserve

Question 19

When the Fed acts as a "lender of last resort," as it did in the ﬁnancial crisis of 2007-2008, it is performing its role of

Accepted Answer

A)  controlling the money supply. 
B)  setting the reserve requirements. 
C)  being a bankers' bank. 
D)  providing for check clearing and collection. 
A)  controlling the money supply. 
B)  setting the reserve requirements. 
C)  being a bankers' bank. 
D)  providing for check clearing and collection.

Question 20

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 M1 deﬁnition of money includes item(s)

Accepted Answer

A)  6 only. 
B)  3, 4, and 6. 
C)  3 and 6. 
D)  3, 6, and 10. 
A)  6 only. 
B)  3, 4, and 6. 
C)  3 and 6. 
D)  3, 6, and 10.

Deﬁne liquidity. Provide an example of a highly liquid and highly illiquid asset.

Checkable deposits held in savings and loan institutions, mutual savings banks, and credit unions are part of the M1 deﬁnition of the money supply.

The Federal Reserve System performs the following functions except

(Consider This) Credit cards are

In deﬁning money as M1, economists exclude time deposits because

The TARP loans and the Fed's lender-of-last-resort actions that bailed out large, failing ﬁnancial institutions helped reduce the moral-hazard problem in ﬁnancial management.

An important routine function of the Federal Reserve Bank is to

Paper money (currency) in the United States is issued by the

How do long terms for appointments beneﬁt the Federal Reserve's Board of Governors?

One major advantage of money serving as a medium of exchange is that it allows society to

If you write a check on a bank to purchase a used Honda Civic, you are using money primarily as

If product prices were stated in terms of marbles, then marbles would be functioning primarily as

When economists say that money serves as a store of value, they mean that it is

The reason for the Fed being set up as an independent agency of government is to

The Federal Reserve System of the United States is the country's

The members of the Federal Reserve Board

What are the seven functions of the Federal Reserve System? Which one is most important?

When the Fed acts as a "lender of last resort," as it did in the ﬁnancial crisis of 2007-2008, it is performing its role of

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

Deﬁne liquidity. Provide an example of a highly liquid and highly illiquid asset.

Checkable deposits held in savings and loan institutions, mutual savings banks, and credit unions are part of the M1 deﬁnition of the money supply.

The Federal Reserve System performs the following functions except

(Consider This) Credit cards are

In deﬁning money as M1, economists exclude time deposits because

The TARP loans and the Fed's lender-of-last-resort actions that bailed out large, failing ﬁnancial institutions helped reduce the moral-hazard problem in ﬁnancial management.

An important routine function of the Federal Reserve Bank is to

Paper money (currency) in the United States is issued by the

How do long terms for appointments beneﬁt the Federal Reserve's Board of Governors?

One major advantage of money serving as a medium of exchange is that it allows society to

If you write a check on a bank to purchase a used Honda Civic, you are using money primarily as

If product prices were stated in terms of marbles, then marbles would be functioning primarily as

When economists say that money serves as a store of value, they mean that it is

The reason for the Fed being set up as an independent agency of government is to

The Federal Reserve System of the United States is the country's

The members of the Federal Reserve Board

What are the seven functions of the Federal Reserve System? Which one is most important?

When the Fed acts as a "lender of last resort," as it did in the ﬁnancial crisis of 2007-2008, it is performing its role of

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