Question 1

Which definition of the money supply includes credit cards?

Accepted Answer

A)  M1. 
B)  M2. 
C)  M3. 
D)  Credit card balances are not included in money supply. 
A)  M1. 
B)  M2. 
C)  M3. 
D)  Credit card balances are not included in money supply. D

Question 2

In the United States, the purchasing power of money is determined by:

Accepted Answer

A)  the underlying precious metals that back each unit of currency. 
B)  the value of U.S. treasury bonds that back each unit of currency. 
C)  its acceptability. 
D)  Congress, which controls the money supply. 
A)  the underlying precious metals that back each unit of currency. 
B)  the value of U.S. treasury bonds that back each unit of currency. 
C)  its acceptability. 
D)  Congress, which controls the money supply. C

Question 3

The statement that ABC Co.'s profits totaled $500 million last year represents the use of money as a:

Accepted Answer

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

Question 4

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

Question 5

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. 
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.

Question 6

What is 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 quality of money not to be hoarded because of its commodity value 
D)  the function of money to be widely accepted I 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 quality of money not to be hoarded because of its commodity value 
D)  the function of money to be widely accepted I exchange for goods and services

Question 7

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 8

The primary functions of money are:

Accepted Answer

A)  velocity, liquidity, and transactions. 
B)  speculative demand, measure of value, and precautionary demand. 
C)  a medium of exchange, a unit of account, and a store of value. 
D)  a store of value, heterogeneity, and a medium of exchange. 
A)  velocity, liquidity, and transactions. 
B)  speculative demand, measure of value, and precautionary demand. 
C)  a medium of exchange, a unit of account, and a store of value. 
D)  a store of value, heterogeneity, and a medium of exchange.

Question 9

The number of presidentially appointed members who sit on the Federal Reserve Board of Governors is:

Accepted Answer

A)  none. 
B)  seven. 
C)  nine. 
D)  twelve. 
A)  none. 
B)  seven. 
C)  nine. 
D)  twelve.

Question 10

M1 money includes all but which one of the following?

Accepted Answer

A)  checkable deposits 
B)  savings accounts 
C)  paper money 
D)  coins 
A)  checkable deposits 
B)  savings accounts 
C)  paper money 
D)  coins

Question 11

The difference between M1 and M2 is given by which of the following?

Accepted Answer

A)  M1 includes currency, coins, gold and silver, whereas M2 does not contain gold and silver. 
B)  M1 is made up of currency, traveler's checks, and money in checkable accounts, whereas M2 contains M1 plus savings deposits and time deposits. 
C)  M1 is limited to currency, whereas M2 contains M1 plus traveler's checks and money in checkable accounts. 
D)  M1 includes currency and traveler's checks, whereas M2 contains M1 plus money in checking accounts. 
A)  M1 includes currency, coins, gold and silver, whereas M2 does not contain gold and silver. 
B)  M1 is made up of currency, traveler's checks, and money in checkable accounts, whereas M2 contains M1 plus savings deposits and time deposits. 
C)  M1 is limited to currency, whereas M2 contains M1 plus traveler's checks and money in checkable accounts. 
D)  M1 includes currency and traveler's checks, whereas M2 contains M1 plus money in checking accounts.

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

Which of the following is not counted as part of M1?

Accepted Answer

A)  coins 
B)  Federal Reserve notes or " paper money" 
C)  passbook savings deposits 
D)  checkable deposits 
A)  coins 
B)  Federal Reserve notes or " paper money" 
C)  passbook savings deposits 
D)  checkable deposits

Question 14

The Federal Deposit Insurance Corporation:

Accepted Answer

A)  has eliminated bank failures. 
B)  insures all demand deposits without limit. 
C)  insures all demand deposits up to $100,000. 
D)  includes commercial banks and state-chartered banks as its members. 
A)  has eliminated bank failures. 
B)  insures all demand deposits without limit. 
C)  insures all demand deposits up to $100,000. 
D)  includes commercial banks and state-chartered banks as its members.

Question 15

Describe the functions of the Federal Reserve System.

Accepted Answer

The Fed's functions include 
(1) control

Question 16

The main purpose of the Fed is to:

Accepted Answer

A)  maintain the proper functioning of our money system. 
B)  regulate interest rates. 
C)  print Federal Reserve Notes. 
D)  regulate financial institutions. 
A)  maintain the proper functioning of our money system. 
B)  regulate interest rates. 
C)  print Federal Reserve Notes. 
D)  regulate financial institutions.

Question 17

Comparing how many dollars it takes to attend college each year to annual earnings on a job represents the use of money as a:

Accepted Answer

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

Question 18

Which of the following is not a function of the Federal Reserve System?

Accepted Answer

A)  to control the money supply 
B)  to print new money 
C)  to supervise and regulate banks 
D)  to aid in the check clearing process 
A)  to control the money supply 
B)  to print new money 
C)  to supervise and regulate banks 
D)  to aid in the check clearing process

Question 19

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 20

The seven members of the Board of Governors serve 14-year terms to:

Accepted Answer

A)  reduce political influence. 
B)  provide steady employment. 
C)  inhibit independent decisions. 
D)  prevent illegal appointments. 
A)  reduce political influence. 
B)  provide steady employment. 
C)  inhibit independent decisions. 
D)  prevent illegal appointments.

Exam 24: Money and the Federal Reserve System

Which definition of the money supply includes credit cards?

In the United States, the purchasing power of money is determined by:

The statement that ABC Co.'s profits totaled $500 million last year represents the use of money as a:

The characteristics that money should have include:

The Federal Reserve System is owned by:

What is the "unit of account" function of money?

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

The primary functions of money are:

The number of presidentially appointed members who sit on the Federal Reserve Board of Governors is:

M1 money includes all but which one of the following?

The difference between M1 and M2 is given by which of the following?

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

Which of the following is not counted as part of M1?

The Federal Deposit Insurance Corporation:

Describe the functions of the Federal Reserve System.

The main purpose of the Fed is to:

Comparing how many dollars it takes to attend college each year to annual earnings on a job represents the use of money as a:

Which of the following is not a function of the Federal Reserve System?

Fiat money is money:

The seven members of the Board of Governors serve 14-year terms to:

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Antitrust and Regulation

Environmental Economics

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

Understanding Direct and Inverse Relationships between Variables

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