Question 1

The Federal Funds Committee executes the purchases and sales of government securities decisions of the Federal Reserve.

Accepted Answer

A) True 
 B)False

Question 2

The conduct of monetary policy is the responsibility of:

Accepted Answer

A)  commercial banks. 
B)  the U.S. Treasury. 
C)  the Federal Reserve System. 
D)  the Congress and the president. 
A)  commercial banks. 
B)  the U.S. Treasury. 
C)  the Federal Reserve System. 
D)  the Congress and the president.

Question 3

The Monetary Control Act of 1980:

Accepted Answer

A)  extended the Fed's authority to impose required-reserve ratios on all depository institutions. 
B)  excluded the required-reserve ratios as an instrument of short-term policy. 
C)  provided the Fed with the authority to use open market operations. 
D)  all of the above. 
E)  none of the above. 
A)  extended the Fed's authority to impose required-reserve ratios on all depository institutions. 
B)  excluded the required-reserve ratios as an instrument of short-term policy. 
C)  provided the Fed with the authority to use open market operations. 
D)  all of the above. 
E)  none of the above.

Question 4

Money eliminates the need to barter.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following defines 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 materials used to manufacture money are of medium grade or quality, so that people will not hoard money for its commodity value. 
D)  Money is 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 materials used to manufacture money are of medium grade or quality, so that people will not hoard money for its commodity value. 
D)  Money is widely accepted in exchange for goods and services.

Question 6

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.

Question 7

Money is said to be liquid because it is immediately available to spend for goods.

Accepted Answer

A) True 
 B)False

Question 8

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 9

The Monetary Control Act of 1980 extended the Fed's authority to:

Accepted Answer

A)  impose required-reserve ratios on all depository institutions. 
B)  control the discount rate. 
C)  control the federal funds rate. 
D)  all of the above. 
A)  impose required-reserve ratios on all depository institutions. 
B)  control the discount rate. 
C)  control the federal funds rate. 
D)  all of the above.

Question 10

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 11

By functioning as a unit of account, money provides a common measurement of the relative value of goods and services.

Accepted Answer

A) True 
 B)False

Question 12

The ease with which an asset can be converted into a medium of exchange is:

Accepted Answer

A)  currency convertibility. 
B)  asset convertibility. 
C)  convertibility. 
D)  money convertibility. 
E)  liquidity. 
A)  currency convertibility. 
B)  asset convertibility. 
C)  convertibility. 
D)  money convertibility. 
E)  liquidity.

Question 13

The Monetary Control Act of 1980:

Accepted Answer

A)  required banks to make home loans. 
B)  eliminated many forms of competition among financial institutions. 
C)  created sharper distinctions among various financial institutions. 
D)  none of the above. 
A)  required banks to make home loans. 
B)  eliminated many forms of competition among financial institutions. 
C)  created sharper distinctions among various financial institutions. 
D)  none of the above.

Question 14

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 15

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 16

The Federal Reserve System is run by the President of the United States.

Accepted Answer

A) True 
 B)False

Question 17

The Federal Reserve's most important function is to change the money supply in order to smooth out the business cycle.

Accepted Answer

A) True 
 B)False

Question 18

The government agency that provides insurance for all checkable deposits up to $250,000 in banks choosing its protection is the:

Accepted Answer

A)  Federal Deposit Insurance Corporation. 
B)  Federal Reserve. 
C)  Office of Management and Budget. 
D)  Treasury. 
E)  Securities and Exchange Commission. 
A)  Federal Deposit Insurance Corporation. 
B)  Federal Reserve. 
C)  Office of Management and Budget. 
D)  Treasury. 
E)  Securities and Exchange Commission.

Question 19

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 20

In its function of controlling the money supply, the Fed does which one of the following?

Accepted Answer

A)  Controls the money supply. 
B)  Clears checks. 
C)  Regulates banks. 
D)  Holds gold belonging to foreign governments. 
E)  All of the above are true. 
A)  Controls the money supply. 
B)  Clears checks. 
C)  Regulates banks. 
D)  Holds gold belonging to foreign governments. 
E)  All of the above are true.

Exam 18: Money and the Federal Reserve System

The Federal Funds Committee executes the purchases and sales of government securities decisions of the Federal Reserve.

The conduct of monetary policy is the responsibility of:

The Monetary Control Act of 1980:

Money eliminates the need to barter.

Which of the following defines the "unit of account" function of money?

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

Money is said to be liquid because it is immediately available to spend for goods.

M2 is equal to M1 plus:

The Monetary Control Act of 1980 extended the Fed's authority to:

A barter economy is one in which:

By functioning as a unit of account, money provides a common measurement of the relative value of goods and services.

The ease with which an asset can be converted into a medium of exchange is:

The Monetary Control Act of 1980:

Barter is the:

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

The Federal Reserve System is run by the President of the United States.

The Federal Reserve's most important function is to change the money supply in order to smooth out the business cycle.

The government agency that provides insurance for all checkable deposits up to $250,000 in banks choosing its protection is the:

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

In its function of controlling the money supply, the Fed does which one of the following?

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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