Question 1

As a result of the Monetary Control Act of 1980:

Accepted Answer

A)  there was less competition among various financial institutions. 
B)  fewer institutions were permitted to offer checking account services. 
C)  savings and loan associations were restricted to offering long-term loans. 
D)  savings and loans paid higher interest rates on short-term deposits to compete for customers. 
A)  there was less competition among various financial institutions. 
B)  fewer institutions were permitted to offer checking account services. 
C)  savings and loan associations were restricted to offering long-term loans. 
D)  savings and loans paid higher interest rates on short-term deposits to compete for customers.

Question 2

In the United States, the money supply (M1) consists of:

Accepted Answer

A)  paper currency and coins. 
B)  coins, paper currency, checkable deposits, and traveler's checks. 
C)  paper currency, coins, checkable deposits, and savings deposits. 
D)  government bonds, currency, checkable deposits, and traveler's checks. 
A)  paper currency and coins. 
B)  coins, paper currency, checkable deposits, and traveler's checks. 
C)  paper currency, coins, checkable deposits, and savings deposits. 
D)  government bonds, currency, checkable deposits, and traveler's checks.

Question 3

A barter economy is one in which:

Accepted Answer

A)  money serves as a medium of exchange. 
B)  only precious metals are accepted as money. 
C)  goods are traded directly for other goods. 
D)  paper money is backed by gold. 
A)  money serves as a medium of exchange. 
B)  only precious metals are accepted as money. 
C)  goods are traded directly for other goods. 
D)  paper money is backed by gold.

Question 4

Which of the following is the most liquid store of purchasing power?

Accepted Answer

A)  a dollar bill 
B)  common stock 
C)  gold 
D)  real estate 
A)  a dollar bill 
B)  common stock 
C)  gold 
D)  real estate

Question 5

Who runs the Federal Reserve System? Describe the organizational structure of the Fed.

Accepted Answer

The Fed is run by the Board of Governors

Question 6

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. 
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.

Question 7

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

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

Which of the following is the most important protection against fears of bank collapse?

Accepted Answer

A)  the Federal Reserve 
B)  the Federal Reserve Open Market Committee 
C)  the Federal Deposit Insurance Corporation 
D)  the gold and silver that backs Federal Reserve notes 
A)  the Federal Reserve 
B)  the Federal Reserve Open Market Committee 
C)  the Federal Deposit Insurance Corporation 
D)  the gold and silver that backs Federal Reserve notes

Question 10

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 11

The Federal Reserve System was founded in:

Accepted Answer

A)  1913. 
B)  1929. 
C)  1933. 
D)  1935. 
A)  1913. 
B)  1929. 
C)  1933. 
D)  1935.

Question 12

With respect to controlling the money supply, the law requires the Fed to take orders from:

Accepted Answer

A)  the President. 
B)  the Speaker of the House. 
C)  the Secretary of the Treasury. 
D)  no one ⎯ the Fed is an independent agency. 
A)  the President. 
B)  the Speaker of the House. 
C)  the Secretary of the Treasury. 
D)  no one ⎯ the Fed is an independent agency.

Question 13

What is the "medium of exchange" 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 14

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 15

Prior to the 1980s, financial institutions called thrifts:

Accepted Answer

A)  included commercial banks. 
B)  were permitted to offer checking accounts and accept savings deposits, and could pay interest on both. 
C)  could not pay interest on checkable deposits. 
D)  were permitted to accept only savings deposits with no checking privileges. 
A)  included commercial banks. 
B)  were permitted to offer checking accounts and accept savings deposits, and could pay interest on both. 
C)  could not pay interest on checkable deposits. 
D)  were permitted to accept only savings deposits with no checking privileges.

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

Barter is the:

Accepted Answer

A)  direct exchange of goods and services. 
B)  exchange of goods, but not services. 
C)  system that does not depend on a coincidence of wants. 
D)  system used in advanced economies. 
A)  direct exchange of goods and services. 
B)  exchange of goods, but not services. 
C)  system that does not depend on a coincidence of wants. 
D)  system used in advanced economies.

Question 18

The currency of the United States is:

Accepted Answer

A)  backed dollar for dollar by gold. 
B)  backed by a gold cover of 50 percent. 
C)  not backed by any precious metal. 
D)  backed by the government's silver reserves. 
A)  backed dollar for dollar by gold. 
B)  backed by a gold cover of 50 percent. 
C)  not backed by any precious metal. 
D)  backed by the government's silver reserves.

Question 19

Which one of the following is part of the official money supply in the United States?

Accepted Answer

A)  Federal Reserve notes 
B)  gold bars 
C)  common stock 
D)  credit card balances 
A)  Federal Reserve notes 
B)  gold bars 
C)  common stock 
D)  credit card balances

Question 20

Which one of the following is the largest component of the money supply (M1) in the United States?

Accepted Answer

A)  checkable deposits 
B)  gold certificates 
C)  credit cards and traveler's checks 
D)  Federal Reserve notes 
A)  checkable deposits 
B)  gold certificates 
C)  credit cards and traveler's checks 
D)  Federal Reserve notes

Exam 24: Money and the Federal Reserve System

As a result of the Monetary Control Act of 1980:

In the United States, the money supply (M1) consists of:

A barter economy is one in which:

Which of the following is the most liquid store of purchasing power?

Who runs the Federal Reserve System? Describe the organizational structure of the Fed.

The Federal Reserve System:

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

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

Which of the following is the most important protection against fears of bank collapse?

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

The Federal Reserve System was founded in:

With respect to controlling the money supply, the law requires the Fed to take orders from:

What is the "medium of exchange" function of money?

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

Prior to the 1980s, financial institutions called thrifts:

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

Barter is the:

The currency of the United States is:

Which one of the following is part of the official money supply in the United States?

Which one of the following is the largest component of the money supply (M1) in the United States?

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

Filters