Question 1

The Fed:

Accepted Answer

A) has little control over the money supply. 
B) serves as the central bank for the United States. 
C) often uses a mix of lower taxes in its fiscal policy. 
D) ensures commercial bank profitability. 
A) has little control over the money supply. 
B) serves as the central bank for the United States. 
C) often uses a mix of lower taxes in its fiscal policy. 
D) ensures commercial bank profitability.

Question 2

Which of the following is not part of M1?

Accepted Answer

A) Checking accounts. 
B) Coins. 
C) Credit cards. 
D) Paper currency. 
A) Checking accounts. 
B) Coins. 
C) Credit cards. 
D) Paper currency.

Question 3

M2 is equal to M1 plus:

Accepted Answer

A) savings deposits, money market deposit accounts, small time deposits, and eurodollars. 
B) savings deposits, money market deposit accounts, money market mutual funds, and eurodollars. 
C) small time deposits, money market deposit accounts, money market mutual funds, and eurodollars. 
D) savings deposits and small time deposits of less than $100,000. 
E) money market mutual funds, money market deposit accounts, savings deposits, large time deposits, and repurchase agreements. 
A) savings deposits, money market deposit accounts, small time deposits, and eurodollars. 
B) savings deposits, money market deposit accounts, money market mutual funds, and eurodollars. 
C) small time deposits, money market deposit accounts, money market mutual funds, and eurodollars. 
D) savings deposits and small time deposits of less than $100,000. 
E) money market mutual funds, money market deposit accounts, savings deposits, large time deposits, and repurchase agreements.

Question 4

The money supply known as M2:

Accepted Answer

A) includes large denomination time deposits. 
B) excludes interest-earning checking accounts in savings and loans. 
C) does not include money market mutual accounts. 
D) includes savings accounts and small denomination time deposits. 
E) includes large denomination repurchase agreements. 
A) includes large denomination time deposits. 
B) excludes interest-earning checking accounts in savings and loans. 
C) does not include money market mutual accounts. 
D) includes savings accounts and small denomination time deposits. 
E) includes large denomination repurchase agreements.

Question 5

Which of the following types of financial institutions is required to belong to the Federal Reserve System?

Accepted Answer

A) National banks. 
B) State-chartered banks. 
C) Savings and loan institutions. 
D) Credit unions. 
A) National banks. 
B) State-chartered banks. 
C) Savings and loan institutions. 
D) Credit unions.

Question 6

If every person is willing to accept money in payment, rather than goods and services, money serves as a:

Accepted Answer

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

Question 7

The Federal Reserve System:

Accepted Answer

A) was created by and is owned by the government. 
B) pursues independent fiscal policy at the behest of Congress. 
C) never acts to control inflation. 
D) pursues an independent monetary policy which can conflict with the government's economic policy. 
E) only acts to lower taxes and increase spending when there are recessionary tendencies in the economy. 
A) was created by and is owned by the government. 
B) pursues independent fiscal policy at the behest of Congress. 
C) never acts to control inflation. 
D) pursues an independent monetary policy which can conflict with the government's economic policy. 
E) only acts to lower taxes and increase spending when there are recessionary tendencies in the economy.

Question 8

M2 money includes all but which one of the following?

Accepted Answer

A) Checkable deposits. 
B) Savings accounts. 
C) Large repurchase agreements. 
D) Money market mutual accounts. 
E) Small time deposits. 
A) Checkable deposits. 
B) Savings accounts. 
C) Large repurchase agreements. 
D) Money market mutual accounts. 
E) Small time deposits.

Question 9

In order for barter to occur, traders must have a:

Accepted Answer

A) unit of account. 
B) coincidence of wants. 
C) medium of exchange. 
D) central banking facility. 
A) unit of account. 
B) coincidence of wants. 
C) medium of exchange. 
D) central banking facility.

Question 10

Which of the following assets is the most liquid?

Accepted Answer

A) Money. 
B) Gold. 
C) Land. 
D) Stocks. 
A) Money. 
B) Gold. 
C) Land. 
D) Stocks.

Question 11

What is money? What are the three definitions of money in the United States?

Accepted Answer

Money is anything that serves

Question 12

Which of the following items is included when computing M1?

Accepted Answer

A) Coins in circulation. 
B) Currency in circulation. 
C) Checking accounting entries. 
D) All of the above. 
E) None of the above 
A) Coins in circulation. 
B) Currency in circulation. 
C) Checking accounting entries. 
D) All of the above. 
E) None of the above

Question 13

Though many assets can be used as a store of value, money is a particularly attractive method to store value because:

Accepted Answer

A) it increases in value as prices rise. 
B) its purchasing power does not decline when prices rise. 
C) it is the most liquid of all assets. 
D) it is backed by gold. 
A) it increases in value as prices rise. 
B) its purchasing power does not decline when prices rise. 
C) it is the most liquid of all assets. 
D) it is backed by gold.

Question 14

All banks are required to join the Fed.

Accepted Answer

A) True 
 B)False

Question 15

Although it has considerable political independence, the Fed is legally a branch of the U.S. Treasury Department.

Accepted Answer

A) True 
 B)False

Question 16

Compared to a barter economy, using money increases efficiency by reducing:

Accepted Answer

A) transaction costs. 
B) the need to exchange goods. 
C) the need to specialize. 
D) inflation. 
A) transaction costs. 
B) the need to exchange goods. 
C) the need to specialize. 
D) inflation.

Question 17

Checkable deposits are not classified as money because they fail to provide a store of value.

Accepted Answer

A) True 
 B)False

Question 18

Barter requires:

Accepted Answer

A) that the exchanged goods be portable. 
B) that the exchanged goods be durable. 
C) a coincidence of wants. 
D) that the exchange medium be divisible. 
E) an effective middleman. 
A) that the exchanged goods be portable. 
B) that the exchanged goods be durable. 
C) a coincidence of wants. 
D) that the exchange medium be divisible. 
E) an effective middleman.

Question 19

The members of the Federal Reserve Board of Governors serve:

Accepted Answer

A) 6-year terms. 
B) 4-year terms. 
C) 10-year terms. 
D) 14-year terms. 
E) 2-year terms. 
A) 6-year terms. 
B) 4-year terms. 
C) 10-year terms. 
D) 14-year terms. 
E) 2-year terms.

Question 20

Which of the following is not one of the functions of the Federal Reserve?

Accepted Answer

A) Clearing checks. 
B) Printing currency. 
C) Supervising and regulating banks. 
D) Controlling the money supply. 
A) Clearing checks. 
B) Printing currency. 
C) Supervising and regulating banks. 
D) Controlling the money supply.

Exam 14: Money and the Federal Reserve System

The Fed:

Which of the following is not part of M1?

M2 is equal to M1 plus:

The money supply known as M2:

Which of the following types of financial institutions is required to belong to the Federal Reserve System?

If every person is willing to accept money in payment, rather than goods and services, money serves as a:

The Federal Reserve System:

M2 money includes all but which one of the following?

In order for barter to occur, traders must have a:

Which of the following assets is the most liquid?

What is money? What are the three definitions of money in the United States?

Which of the following items is included when computing M1?

Though many assets can be used as a store of value, money is a particularly attractive method to store value because:

All banks are required to join the Fed.

Although it has considerable political independence, the Fed is legally a branch of the U.S. Treasury Department.

Compared to a barter economy, using money increases efficiency by reducing:

Checkable deposits are not classified as money because they fail to provide a store of value.

Barter requires:

The members of the Federal Reserve Board of Governors serve:

Which of the following is not one of the functions of the Federal Reserve?

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

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