Question 1

Which of the following defines the "medium of exchange" function of money?

Accepted Answer

A) To provide 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 manufacture money are of medium grade so that people will not hoard money for its commodity value. 
D) Money that is widely accepted in exchange for goods and services. 
A) To provide 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 manufacture money are of medium grade so that people will not hoard money for its commodity value. 
D) Money that is widely accepted in exchange for goods and services.

Question 2

Which of the following forms of money is the least liquid?

Accepted Answer

A) Dollars. 
B) Checking account deposits. 
C) Passbook savings. 
D) Certificates of deposit. 
A) Dollars. 
B) Checking account deposits. 
C) Passbook savings. 
D) Certificates of deposit.

Question 3

The Federal Reserve System is a branch of the Treasury Department.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following groups oversees and administers the Federal Reserve System?

Accepted Answer

A) The House of Representatives. 
B) The President's Council of Economic Advisors. 
C) The U.S. Treasury Department. 
D) None of these, the Fed is an independent agency. 
A) The House of Representatives. 
B) The President's Council of Economic Advisors. 
C) The U.S. Treasury Department. 
D) None of these, the Fed is an independent agency.

Question 5

The M1 definition of the money supply includes:

Accepted Answer

A) currency in circulation and checkable deposits. 
B) Federal Reserve Notes, gold certificates, and checkable deposits. 
C) Federal Reserve Notes and bank loans. 
D) None of these. 
A) currency in circulation and checkable deposits. 
B) Federal Reserve Notes, gold certificates, and checkable deposits. 
C) Federal Reserve Notes and bank loans. 
D) None of these.

Question 6

The Federal Reserve System was created by an act of Congress in 1933 in an effort to end a wave of bank failures brought on the Great Depression.

Accepted Answer

A) True 
 B)False

Question 7

Barter is a system of exchange that does not depend on a coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 8

Which one of the following is part of the M2 definition of the money supply, but not part of M1?

Accepted Answer

A) Checkable deposits. 
B) Currency held in banks. 
C) Currency in circulation. 
D) Small time deposits of less than $100,000. 
A) Checkable deposits. 
B) Currency held in banks. 
C) Currency in circulation. 
D) Small time deposits of less than $100,000.

Question 9

What is the length of the term of the members of the Board of Governors of the Federal Reserve System?

Accepted Answer

A) Four years. 
B) Six years. 
C) Fourteen years. 
D) Life or until the member resigns. 
A) Four years. 
B) Six years. 
C) Fourteen years. 
D) Life or until the member resigns.

Question 10

Which of the following is not a store of value?

Accepted Answer

A) Federal Reserve notes. 
B) Credit card. 
C) Debit card. 
D) Passbook savings deposit. 
A) Federal Reserve notes. 
B) Credit card. 
C) Debit card. 
D) Passbook savings deposit.

Question 11

By functioning as a unit of account, money provides a common measurement of the relative value of goods and services.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is not a component of the M1 money supply?

Accepted Answer

A) Demand deposits. 
B) Large-denomination (more than $100)bills. 
C) Interest-earning checking deposits. 
D) Outstanding balances on credit cards. 
A) Demand deposits. 
B) Large-denomination (more than $100)bills. 
C) Interest-earning checking deposits. 
D) Outstanding balances on credit cards.

Question 13

In the United States, currency in circulation is the largest component of the M1 money supply.

Accepted Answer

A) True 
 B)False

Question 14

The Federal Reserve Board of Governors consists of:

Accepted Answer

A) 50 members selected by state legislatures. 
B) 12 members, one from each Federal Reserve District. 
C) 12 members nominated by the President and confirmed by the Senate. 
D) seven members elected by Congress. 
E) seven members nominated by the President and confirmed by the Senate. 
A) 50 members selected by state legislatures. 
B) 12 members, one from each Federal Reserve District. 
C) 12 members nominated by the President and confirmed by the Senate. 
D) seven members elected by Congress. 
E) seven members nominated by the President and confirmed by the Senate.

Question 15

Any item can successfully serve as money.

Accepted Answer

A) True 
 B)False

Question 16

The Monetary Control Act of 1980:

Accepted Answer

A) required banks to make home loans. 
B) eliminated many forms of competition among financial institutions. 
C) created sharper distinctions among various financial institutions. 
D) none of these. 
A) required banks to make home loans. 
B) eliminated many forms of competition among financial institutions. 
C) created sharper distinctions among various financial institutions. 
D) none of these.

Question 17

The ease with which an asset can be converted into a medium of exchange is:

Accepted Answer

A) currency convertibility. 
B) asset convertibility. 
C) convertibility. 
D) money convertibility. 
E) liquidity. 
A) currency convertibility. 
B) asset convertibility. 
C) convertibility. 
D) money convertibility. 
E) liquidity.

Question 18

Which of the following items does not provide a store of value?

Accepted Answer

A) Currency. 
B) Checkable deposits. 
C) Credit cards. 
D) All of these are correct. 
A) Currency. 
B) Checkable deposits. 
C) Credit cards. 
D) All of these are correct.

Question 19

Which of the following provides the best explanation of why money is valuable?

Accepted Answer

A) Money is valuable because it is indivisible. 
B) Money is valuable because it is scarce. 
C) Money is valuable because it is backed by precious metals, primarily gold and silver. 
D) Money is valuable because it has intrinsic value, independent of its use as a means of exchange. 
A) Money is valuable because it is indivisible. 
B) Money is valuable because it is scarce. 
C) Money is valuable because it is backed by precious metals, primarily gold and silver. 
D) Money is valuable because it has intrinsic value, independent of its use as a means of exchange.

Question 20

Gold is a perfect medium of exchange and measure of value because of its:

Accepted Answer

A) divisibility, portability, and homogeneity. 
B) divisibility and durability. 
C) durability and relative scarcity. 
D) durability and homogeneity. 
E) divisibility, durability, and relative scarcity. 
A) divisibility, portability, and homogeneity. 
B) divisibility and durability. 
C) durability and relative scarcity. 
D) durability and homogeneity. 
E) divisibility, durability, and relative scarcity.

Exam 14: Money and the Federal Reserve System

Which of the following defines the "medium of exchange" function of money?

Which of the following forms of money is the least liquid?

The Federal Reserve System is a branch of the Treasury Department.

Which of the following groups oversees and administers the Federal Reserve System?

The M1 definition of the money supply includes:

The Federal Reserve System was created by an act of Congress in 1933 in an effort to end a wave of bank failures brought on the Great Depression.

Barter is a system of exchange that does not depend on a coincidence of wants.

Which one of the following is part of the M2 definition of the money supply, but not part of M1?

What is the length of the term of the members of the Board of Governors of the Federal Reserve System?

Which of the following is not a store of value?

By functioning as a unit of account, money provides a common measurement of the relative value of goods and services.

Which of the following is not a component of the M1 money supply?

In the United States, currency in circulation is the largest component of the M1 money supply.

The Federal Reserve Board of Governors consists of:

Any item can successfully serve as money.

The Monetary Control Act of 1980:

The ease with which an asset can be converted into a medium of exchange is:

Which of the following items does not provide a store of value?

Which of the following provides the best explanation of why money is valuable?

Gold is a perfect medium of exchange and measure of value because of its:

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