Question 1

Which of the following statements is false ?

Accepted Answer

A)  Round stones with holes in the center can serve as money. 
B)  Money eases the process of exchanging goods and services in a modern economy. 
C)  Money serves as a measure of value only when it is backed by gold or silver. 
D)  Money is used as a measure of the relative value of goods and services in an economy. 
A)  Round stones with holes in the center can serve as money. 
B)  Money eases the process of exchanging goods and services in a modern economy. 
C)  Money serves as a measure of value only when it is backed by gold or silver. 
D)  Money is used as a measure of the relative value of goods and services in an economy.

Question 2

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 3

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 4

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. 
E)  To maintain and circulate currency. 
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. 
E)  To maintain and circulate currency.

Question 5

The Monetary Control Act of 1980:

Accepted Answer

A)  created less competition among various financial institutions. 
B)  allowed fewer institutions to offer checking account services. 
C)  restricted savings and loan associations to long-term loans. 
D)  all of the above. 
E)  none of the above. 
A)  created less competition among various financial institutions. 
B)  allowed fewer institutions to offer checking account services. 
C)  restricted savings and loan associations to long-term loans. 
D)  all of the above. 
E)  none of the above.

Question 6

The Fed is often considered the bankers' bank because it:

Accepted Answer

A)  demands much more currency than it has available. 
B)  no longer has a monopoly on printing paper currency. 
C)  lowers the discount rate in order to restrict the money supply. 
D)  holds bankers reserves, provides banks with currency and loans, and clears their checks. 
E)  refuses to uses its power of open market operations when a quorum of state-chartered bankers petitions it. 
A)  demands much more currency than it has available. 
B)  no longer has a monopoly on printing paper currency. 
C)  lowers the discount rate in order to restrict the money supply. 
D)  holds bankers reserves, provides banks with currency and loans, and clears their checks. 
E)  refuses to uses its power of open market operations when a quorum of state-chartered bankers petitions it.

Question 7

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

Question 8

Decisions to buy or sell securities at the Fed are made by the:

Accepted Answer

A)  Congress. 
B)  Federal Open Market Committee. 
C)  Federal Deposit Insurance Corporation. 
D)  President's Council of Economic Advisors. 
A)  Congress. 
B)  Federal Open Market Committee. 
C)  Federal Deposit Insurance Corporation. 
D)  President's Council of Economic Advisors.

Question 9

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. 
E)  back by the government's gold and 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. 
E)  back by the government's gold and silver reserves.

Question 10

Which one of the following items would be the most liquid?

Accepted Answer

A)  Pizza. 
B)  Ticket to next week's basketball game. 
C)  Stereo. 
D)  Dollar bill. 
E)  U.S. savings bond. 
A)  Pizza. 
B)  Ticket to next week's basketball game. 
C)  Stereo. 
D)  Dollar bill. 
E)  U.S. savings bond.

Question 11

Which of the following is not part of the Federal Reserve System?

Accepted Answer

A)  Council of Economic Advisors. 
B)  Board of Governors. 
C)  Federal Open Market Committee. 
D)  12 Federal Reserve District Banks. 
E)  Federal Advisory Council. 
A)  Council of Economic Advisors. 
B)  Board of Governors. 
C)  Federal Open Market Committee. 
D)  12 Federal Reserve District Banks. 
E)  Federal Advisory Council.

Question 12

Describe the functions of the Federal Reserve System.

Accepted Answer

The Fed's functions include (1) controll

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Which of the following institutions is responsible for supervising the banking system of the United States?

Accepted Answer

A)  The Federal Reserve System. 
B)  The Open Market Committee. 
C)  The U.S. Treasury. 
D)  The Federal Deposit Insurance Corporation. 
A)  The Federal Reserve System. 
B)  The Open Market Committee. 
C)  The U.S. Treasury. 
D)  The Federal Deposit Insurance Corporation.

Question 15

If something is a unit of account, then it:

Accepted Answer

A)  serves as a yardstick for measuring the relative value of other goods 
B)  is a means of holding wealth for the future 
C)  is fairly stable 
D)  is durable and portable 
E)  is accepted as payment for any purchase 
A)  serves as a yardstick for measuring the relative value of other goods 
B)  is a means of holding wealth for the future 
C)  is fairly stable 
D)  is durable and portable 
E)  is accepted as payment for any purchase

Question 16

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 17

M1 refers to:

Accepted Answer

A)  Federal Reserve Notes and gold certificates. 
B)  Currency held by the public plus checking account balances. 
C)  The largest of the money-supply definitions. 
D)  None of the above. 
A)  Federal Reserve Notes and gold certificates. 
B)  Currency held by the public plus checking account balances. 
C)  The largest of the money-supply definitions. 
D)  None of the above.

Question 18

An economy using money is more efficient that a barter economy because the use of money reduces the time spent searching for trading partners with a coincidence of wants and therefore more time can be spent producing goods and services.

Accepted Answer

A) True 
 B)False

Question 19

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 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 quality of money not to be hoarded because of its commodity value. 
D)  ​The function of money to be widely accepted in exchange for goods and services.

Question 20

Who owns the Fed?

Accepted Answer

A)  The federal government. 
B)  The states. 
C)  The District Federal Reserve Banks. 
D)  All banks. 
E)  Member banks. 
A)  The federal government. 
B)  The states. 
C)  The District Federal Reserve Banks. 
D)  All banks. 
E)  Member banks.

Exam 18: Money and the Federal Reserve System

Which of the following statements is false ?

The members of the Federal Reserve Board of Governors serve:

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 a function of the Federal Reserve System?

The Monetary Control Act of 1980:

The Fed is often considered the bankers' bank because it:

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

Decisions to buy or sell securities at the Fed are made by the:

The currency of the United States is:

Which one of the following items would be the most liquid?

Which of the following is not part of the Federal Reserve System?

Describe the functions of the Federal Reserve System.

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

Which of the following institutions is responsible for supervising the banking system of the United States?

If something is a unit of account, then it:

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

M1 refers to:

An economy using money is more efficient that a barter economy because the use of money reduces the time spent searching for trading partners with a coincidence of wants and therefore more time can be spent producing goods and services.

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

Who owns the Fed?

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money Creation

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

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters

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