Question 1

If something is a medium of exchange, then it:

Accepted Answer

A) serves as a yardstick for measuring the value of other goods. 
B) is a means of holding wealth for the future. 
C) has an absolute value in gold. 
D) is widely accepted as payment for purchases. 
A) serves as a yardstick for measuring the value of other goods. 
B) is a means of holding wealth for the future. 
C) has an absolute value in gold. 
D) is widely accepted as payment for purchases. D

Question 2

Describe the functions of the Federal Reserve System.

Accepted Answer

The Fed's functions include 
(1)controlling the money supply
(2)clearing checks
(3)supervising and regulating banks (4)maintaining and circulating currency, (5)protecting consumers
(6)maintaining federal government checking accounts and gold reserves.

Question 3

A majority of the commercial banks in the United States are not members of the Fed.

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following defines the "unit of account" function of money?

Accepted Answer

A) A common measurement of the relative value of different goods and services. 
B) The ability of money to hold value over time. 
C) The materials used to manufacture money are of medium grade or quality, so that people will not hoard money for its commodity value. 
D) Money is widely accepted in exchange for goods and services. 
A) A common measurement of the relative value of different goods and services. 
B) The ability of money to hold value over time. 
C) The materials used to manufacture money are of medium grade or quality, so that people will not hoard money for its commodity value. 
D) Money is widely accepted in exchange for goods and services.

Question 5

Which definition of the money supply includes credit cards?

Accepted Answer

A) M1. 
B) M2. 
C) M3. 
D) None of these includes credit card balances. 
A) M1. 
B) M2. 
C) M3. 
D) None of these includes credit card balances.

Question 6

Money is:

Accepted Answer

A) valuable because it is backed by gold. 
B) any items used in barter. 
C) an illiquid asset. 
D) none of these. 
A) valuable because it is backed by gold. 
B) any items used in barter. 
C) an illiquid asset. 
D) none of these.

Question 7

The characteristics that money should have include:

Accepted Answer

A) portability, durability, and flexibility. 
B) durability, flexibility and stability. 
C) durability, portability, and non-homogeneity. 
D) scarcity, portability, and divisibility. 
E) portability, homogeneity, and flexibility. 
A) portability, durability, and flexibility. 
B) durability, flexibility and stability. 
C) durability, portability, and non-homogeneity. 
D) scarcity, portability, and divisibility. 
E) portability, homogeneity, and flexibility.

Question 8

The M1 money supply is defined to be the sum of currency, traveler's checks, and:

Accepted Answer

A) checkable deposits. 
B) Treasury bonds. 
C) savings accounts. 
D) large time deposits. 
A) checkable deposits. 
B) Treasury bonds. 
C) savings accounts. 
D) large time deposits.

Question 9

The three functions of money are medium of exchange,

Accepted Answer

A) measure of value, and standard of value. 
B) measure of value, and store of value. 
C) standard of value, and store of value 
D) medium of value, and store of value. 
E) measure of value, and deferred value. 
A) measure of value, and standard of value. 
B) measure of value, and store of value. 
C) standard of value, and store of value 
D) medium of value, and store of value. 
E) measure of value, and deferred value.

Question 10

Buying a cup of coffee with a dollar bill represents the use of money as a:

Accepted Answer

A) medium of exchange. 
B) unit of account. 
C) store of value. 
D) all of these. 
A) medium of exchange. 
B) unit of account. 
C) store of value. 
D) all of these.

Question 11

The Monetary Control Act of 1980:

Accepted Answer

A) allowed savings and loan associations to offer checking accounts. 
B) allowed more institutions to offer checking account services. 
C) created greater competition among various financial institutions. 
D) all of the above. 
E) none of the above. 
A) allowed savings and loan associations to offer checking accounts. 
B) allowed more institutions to offer checking account services. 
C) created greater competition among various financial institutions. 
D) all of the above. 
E) none of the above.

Question 12

The Federal Reserve System is owned by:

Accepted Answer

A) federal government agencies such as the Treasury. 
B) the Congress of the United States. 
C) the banks that are members of the Federal Reserve System. 
D) anyone who buys stock over the counter. 
E) people who have deposits in member banks. 
A) federal government agencies such as the Treasury. 
B) the Congress of the United States. 
C) the banks that are members of the Federal Reserve System. 
D) anyone who buys stock over the counter. 
E) people who have deposits in member banks.

Question 13

Fiat money is money:

Accepted Answer

A) accepted by law regardless of its intrinsic value. 
B) that is not included as part of the M1 money supply. 
C) that is backed by gold or silver held on reserve by the government. 
D) such as coins that are made from metal. 
A) accepted by law regardless of its intrinsic value. 
B) that is not included as part of the M1 money supply. 
C) that is backed by gold or silver held on reserve by the government. 
D) such as coins that are made from metal.

Question 14

Which of the following laws increased competition among financial institutions and gave the Fed greater control over nonmember banks?

Accepted Answer

A) The Federal Reserve Act. 
B) The Equal Credit Opportunity Act. 
C) The Monetary Control Act. 
D) The Thrift Bailout Bill. 
A) The Federal Reserve Act. 
B) The Equal Credit Opportunity Act. 
C) The Monetary Control Act. 
D) The Thrift Bailout Bill.

Question 15

Which of the following is not an example of money used as a unit of account?

Accepted Answer

A) A British pound is worth $3.00. 
B) Auto repairs were $3,000 last year. 
C) Business travel totaled 12,000 miles. 
D) Gasoline sells for $1.20 per gallon and oil is $5.00 per quart. 
A) A British pound is worth $3.00. 
B) Auto repairs were $3,000 last year. 
C) Business travel totaled 12,000 miles. 
D) Gasoline sells for $1.20 per gallon and oil is $5.00 per quart.

Question 16

The Monetary Control Act of 1980 extended the Fed's authority to:

Accepted Answer

A) impose required-reserve ratios on all depository institutions. 
B) control the discount rate. 
C) control the federal funds rate. 
D) all of these. 
A) impose required-reserve ratios on all depository institutions. 
B) control the discount rate. 
C) control the federal funds rate. 
D) all of these.

Question 17

M1 refers to:

Accepted Answer

A) the most narrowly defined money supply definition. 
B) currency held by the public plus checking account balances. 
C) the smallest of the money-supply definitions. 
D) all of these. 
A) the most narrowly defined money supply definition. 
B) currency held by the public plus checking account balances. 
C) the smallest of the money-supply definitions. 
D) all of these.

Question 18

Suppose you transfer $1,000 from your checking account to your savings account. How does this action affect the M1 and M2 money supplies?

Accepted Answer

A) M1 and M2 are both unchanged. 
B) M1 falls by $1,000, and M2 rises by $1,000. 
C) M1 is unchanged, and M2 rises by $1,000. 
D) M1 falls by $1,000, and M2 is unchanged. 
A) M1 and M2 are both unchanged. 
B) M1 falls by $1,000, and M2 rises by $1,000. 
C) M1 is unchanged, and M2 rises by $1,000. 
D) M1 falls by $1,000, and M2 is unchanged.

Question 19

Which of the following is counted as part of M2?

Accepted Answer

A) Currency. 
B) Checkable deposits. 
C) Money-market mutual funds. 
D) All of these. 
A) Currency. 
B) Checkable deposits. 
C) Money-market mutual funds. 
D) All of these.

Question 20

Currency consists of:

Accepted Answer

A) coins and Eurodollars. 
B) paper money and checks. 
C) coins and paper money. 
D) paper money and Eurodollars. 
E) coins and checks. 
A) coins and Eurodollars. 
B) paper money and checks. 
C) coins and paper money. 
D) paper money and Eurodollars. 
E) coins and checks.

Exam 14: Money and the Federal Reserve System

If something is a medium of exchange, then it:

Describe the functions of the Federal Reserve System.

A majority of the commercial banks in the United States are not members of the Fed.

Which of the following defines the "unit of account" function of money?

Which definition of the money supply includes credit cards?

Money is:

The characteristics that money should have include:

The M1 money supply is defined to be the sum of currency, traveler's checks, and:

The three functions of money are medium of exchange,

Buying a cup of coffee with a dollar bill represents the use of money as a:

The Monetary Control Act of 1980:

The Federal Reserve System is owned by:

Fiat money is money:

Which of the following laws increased competition among financial institutions and gave the Fed greater control over nonmember banks?

Which of the following is not an example of money used as a unit of account?

The Monetary Control Act of 1980 extended the Fed's authority to:

M1 refers to:

Suppose you transfer $1,000 from your checking account to your savings account. How does this action affect the M1 and M2 money supplies?

Which of the following is counted as part of M2?

Currency consists of:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Applying Graphs to Economics

Consumer Surplus, Producer Surplus, and Market Efficiency

the Self-Correcting Aggregate Demand and Supply Model

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

Filters