Question 1

Unused lines of credit on credit cards are part of M2.

Accepted Answer

A) True 
 B)False

Question 2

Anything can be money if it acts as a:

Accepted Answer

A)  unit of account. 
B)  store of value. 
C)  medium of exchange. 
D)  All of the above must be correct. 
A)  unit of account. 
B)  store of value. 
C)  medium of exchange. 
D)  All of the above must be correct.

Question 3

The M1 definition of the money supply includes currency,

Accepted Answer

A)  checkable deposits, and savings accounts. 
B)  checkable deposits, and credit cards. 
C)  checkable deposits, and debit cards. 
D)  and checkable deposits. 
A)  checkable deposits, and savings accounts. 
B)  checkable deposits, and credit cards. 
C)  checkable deposits, and debit cards. 
D)  and checkable deposits.

Question 4

Which of the following statements is true ?

Accepted Answer

A)  Money must be relatively "scarce" if it is to have value. 
B)  Money must be divisible and portable. 
C)  M1 is the narrowest definition of money. 
D)  All of the above. 
A)  Money must be relatively "scarce" if it is to have value. 
B)  Money must be divisible and portable. 
C)  M1 is the narrowest definition of money. 
D)  All of the above.

Question 5

M2 is actually a smaller amount than M1.

Accepted Answer

A) True 
 B)False

Question 6

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 7

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 8

Which of the following items is included when computing M1?

Accepted Answer

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

Question 9

The chairman of its Board of Governors is appointed by the president; the Fed operates without independence from the executive branch of the government.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is not an example of money used as a unit of account?

Accepted Answer

A)  A British pound is worth $3.00. 
B)  Auto repairs were $3,000 last year. 
C)  Business travel totaled 12,000 miles. 
D)  Gasoline sells for $1.20 per gallon and oil is $5.00 per quart. 
A)  A British pound is worth $3.00. 
B)  Auto repairs were $3,000 last year. 
C)  Business travel totaled 12,000 miles. 
D)  Gasoline sells for $1.20 per gallon and oil is $5.00 per quart.

Question 11

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 12

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 13

Which of the following compose the M2 money supply?

Accepted Answer

A)  Currency only. 
B)  Currency, checkable deposits, and traveler's checks. 
C)  M1 plus large denomination time deposits and Eurodollar deposits. 
D)  M1 plus savings deposits and small-denomination time deposits. 
A)  Currency only. 
B)  Currency, checkable deposits, and traveler's checks. 
C)  M1 plus large denomination time deposits and Eurodollar deposits. 
D)  M1 plus savings deposits and small-denomination time deposits.

Question 14

Are outstanding credit card balances counted as part of the money supply?

Accepted Answer

A)  Yes; they are used to purchase things, and therefore, they are included in the money supply figures. 
B)  No; money is an asset, while the credit card balances are a liability. Thus, they are not included in the money supply figures. 
C)  Partly; credit card balances of $100 or less are included in the M1 money supply, but the money supply figures do not include balances in excess of $100. 
D)  Partly; credit card balances are included in the M1 money supply, but not the M2 money supply. 
A)  Yes; they are used to purchase things, and therefore, they are included in the money supply figures. 
B)  No; money is an asset, while the credit card balances are a liability. Thus, they are not included in the money supply figures. 
C)  Partly; credit card balances of $100 or less are included in the M1 money supply, but the money supply figures do not include balances in excess of $100. 
D)  Partly; credit card balances are included in the M1 money supply, but not the M2 money supply.

Question 15

A direct exchange of fish for corn is an example of:

Accepted Answer

A)  storing value. 
B)  a modern exchange method. 
C)  barter. 
D)  a non-coincidence of wants. 
A)  storing value. 
B)  a modern exchange method. 
C)  barter. 
D)  a non-coincidence of wants.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

The statement that Computech'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.

Question 18

The President and the Congress jointly determine the nation's monetary policies, and the Fed is required by law to implement those policies.

Accepted Answer

A) True 
 B)False

Question 19

The largest component of the M1 definition of the money supply is:

Accepted Answer

A)  traveler's checks. 
B)  savings accounts. 
C)  money market accounts. 
D)  checkable deposits 
A)  traveler's checks. 
B)  savings accounts. 
C)  money market accounts. 
D)  checkable deposits

Question 20

The main purpose of the Fed is to:

Accepted Answer

A)  serve as the bankers' bank for member banks. 
B)  regulate interest rates. 
C)  print Federal Reserve Notes. 
D)  regulate financial institutions. 
E)  maintain the proper functioning of our money system. 
A)  serve as the bankers' bank for member banks. 
B)  regulate interest rates. 
C)  print Federal Reserve Notes. 
D)  regulate financial institutions. 
E)  maintain the proper functioning of our money system.

Exam 18: Money and the Federal Reserve System

Unused lines of credit on credit cards are part of M2.

Anything can be money if it acts as a:

The M1 definition of the money supply includes currency,

Which of the following statements is true ?

M2 is actually a smaller amount than M1.

The Fed:

Which of the following items is included when computing M1?

Which of the following items is included when computing M1?

The chairman of its Board of Governors is appointed by the president; the Fed operates without independence from the executive branch of the government.

Which of the following is not an example of money used as a unit of account?

Which of the following assets is the most liquid?

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

Which of the following compose the M2 money supply?

Are outstanding credit card balances counted as part of the money supply?

A direct exchange of fish for corn is an example of:

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

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

The President and the Congress jointly determine the nation's monetary policies, and the Fed is required by law to implement those policies.

The largest component of the M1 definition of the money supply is:

The main purpose of the Fed is 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

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

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