Question 1

Money is

Accepted Answer

A)  an asset that is widely accepted as a means of payment in the economy 
B)  any asset that is convertible into cash 
C)  an asset that is backed by a precious metal such as gold or silver 
D)  any financial asset created and issued by government 
E)  anything used to pay for goods and services,including currency,checks,and credit cards 
A)  an asset that is widely accepted as a means of payment in the economy 
B)  any asset that is convertible into cash 
C)  an asset that is backed by a precious metal such as gold or silver 
D)  any financial asset created and issued by government 
E)  anything used to pay for goods and services,including currency,checks,and credit cards

Question 2

Which of the following is an open market purchase?

Accepted Answer

A)  When private individuals sell government bonds 
B)  When the Fed sells government bonds 
C)  When private individuals purchase government bonds 
D)  When bond dealers buy government bonds from the fed 
E)  When the Fed buys government bonds 
A)  When private individuals sell government bonds 
B)  When the Fed sells government bonds 
C)  When private individuals purchase government bonds 
D)  When bond dealers buy government bonds from the fed 
E)  When the Fed buys government bonds

Question 3

When banks create money,they

Accepted Answer

A)  increase wealth at a pace equal to the rate of money creation 
B)  destroy wealth at a pace equal to the rate of money creation 
C)  increase wealth at a rate exceeding the rate of money creation 
D)  increase wealth at a rate less than the rate of money creation 
E)  do not create wealth 
A)  increase wealth at a pace equal to the rate of money creation 
B)  destroy wealth at a pace equal to the rate of money creation 
C)  increase wealth at a rate exceeding the rate of money creation 
D)  increase wealth at a rate less than the rate of money creation 
E)  do not create wealth

Question 4

The Federal Reserve System

Accepted Answer

A)  is influenced by the executive and legislative branches through the appointment process 
B)  is under the jurisdiction of the executive branch 
C)  is under the control of the private banks that own it 
D)  is directed in its actions by the U.S.Congress 
E)  answers only to the judicial branch 
A)  is influenced by the executive and legislative branches through the appointment process 
B)  is under the jurisdiction of the executive branch 
C)  is under the control of the private banks that own it 
D)  is directed in its actions by the U.S.Congress 
E)  answers only to the judicial branch

Question 5

If this balance sheet depicts the only bank in the economy,how large is M1?

Accepted Answer

A)  $5 million 
B)  $10 million 
C)  $15 million 
D)  $60 million 
E)  $65 million 
A)  $5 million 
B)  $10 million 
C)  $15 million 
D)  $60 million 
E)  $65 million

Question 6

A credit union is an example of a financial intermediary.

Accepted Answer

A) True 
 B)False

Question 7

Given the balance sheet below and assuming a required reserve ratio of 20 percent,how much (in dollar terms)must the bank hold in required reserves?

Accepted Answer

A)  It is failing to meet its reserve requirement. 
B)  It is just meeting its reserve requirement,but has no excess reserves. 
C)  It is meeting its reserve requirement,and has $5 million in excess reserves. 
D)  It is meeting its reserve requirement,and has $10 million in excess reserves. 
E)  It is meeting its reserve requirement,and has $15 million in excess reserves. 
A)  It is failing to meet its reserve requirement. 
B)  It is just meeting its reserve requirement,but has no excess reserves. 
C)  It is meeting its reserve requirement,and has $5 million in excess reserves. 
D)  It is meeting its reserve requirement,and has $10 million in excess reserves. 
E)  It is meeting its reserve requirement,and has $15 million in excess reserves.

Question 8

Just as greater leverage multiplies a bank's potential profits,it also multiplies a bank's potential losses.

Accepted Answer

A) True 
 B)False

Question 9

A bank failure occurs when a bank

Accepted Answer

A)  cannot call in its loans 
B)  spends all of its reserves 
C)  is unable to meet its depositors' requests to withdraw funds 
D)  cannot make any more loans 
E)  makes bad loans 
A)  cannot call in its loans 
B)  spends all of its reserves 
C)  is unable to meet its depositors' requests to withdraw funds 
D)  cannot make any more loans 
E)  makes bad loans

Question 10

Gold,silver and furs,when used as money,are referred to as

Accepted Answer

A)  fiat money 
B)  precious money 
C)  paper currency 
D)  commodity money 
E)  exchange money 
A)  fiat money 
B)  precious money 
C)  paper currency 
D)  commodity money 
E)  exchange money

Question 11

Macro National Bank,a commercial bank,holds $1 million in vault cash,$15 million in government and corporate bonds,$40 million in demand deposits,$10 million on deposit with a Federal Reserve bank,and $8 million worth of property.What are Macro National Bank's total liabilities?

Accepted Answer

A)  $40 million 
B)  $48 million 
C)  $50 million 
D)  $51 million 
E)  $65 million 
A)  $40 million 
B)  $48 million 
C)  $50 million 
D)  $51 million 
E)  $65 million

Question 12

Commercial banks that are members of the Federal Reserve System actually choose some of the directors of the 12 Federal Reserve District banks.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is the most liquid category of assets?

Accepted Answer

A)  Large time deposits 
B)  Money market mutual fund balances 
C)  Small time deposits 
D)  Saving-type accounts 
E)  Demand deposits 
A)  Large time deposits 
B)  Money market mutual fund balances 
C)  Small time deposits 
D)  Saving-type accounts 
E)  Demand deposits

Question 14

Which of the following is not a responsibility of the Federal Reserve?

Accepted Answer

A)  Controlling the money supply 
B)  Printing paper currency 
C)  Supervising banks 
D)  Acting as a bank for banks (e.g. ,lender of last resort) 
E)  Clearing checks 
A)  Controlling the money supply 
B)  Printing paper currency 
C)  Supervising banks 
D)  Acting as a bank for banks (e.g. ,lender of last resort) 
E)  Clearing checks

Question 15

When the Fed increases or decreases the money supply,these actions are called

Accepted Answer

A)  discounting 
B)  money printing 
C)  moral suasion 
D)  open market operations 
E)  interest payments 
A)  discounting 
B)  money printing 
C)  moral suasion 
D)  open market operations 
E)  interest payments

Question 16

The Federal Reserve tends to increase the money supply each year.

Accepted Answer

A) True 
 B)False

Question 17

Each Federal Reserve District has 9 directors.____ are appointed by the member banks in the district and ____ are appointed by the Board of Governors of the Federal Reserve .

Accepted Answer

A)  9;0. 
B)  0;9. 
C)  4;5. 
D)  6;3. 
E)  7;2. 
A)  9;0. 
B)  0;9. 
C)  4;5. 
D)  6;3. 
E)  7;2.

Question 18

One way to decrease leverage is increasing capital.

Accepted Answer

A) True 
 B)False

Question 19

Creating money is the same as creating wealth.

Accepted Answer

A) True 
 B)False

Question 20

The standard measure of the money stock,M1,refers to

Accepted Answer

A)  checking account balances,travelers' checks,and cash in the hands of the public 
B)  cash in the hands of the public,demand deposits,and small time deposits 
C)  cash in the hands of the public,savings-type account balances,and travelers' checks 
D)  savings-type account balances,small time deposits,and checking account deposits 
E)  the sum of the cash in the hands of the public 
A)  checking account balances,travelers' checks,and cash in the hands of the public 
B)  cash in the hands of the public,demand deposits,and small time deposits 
C)  cash in the hands of the public,savings-type account balances,and travelers' checks 
D)  savings-type account balances,small time deposits,and checking account deposits 
E)  the sum of the cash in the hands of the public

Money is

Which of the following is an open market purchase?

When banks create money,they

The Federal Reserve System

If this balance sheet depicts the only bank in the economy,how large is M1?

A credit union is an example of a financial intermediary.

Given the balance sheet below and assuming a required reserve ratio of 20 percent,how much (in dollar terms)must the bank hold in required reserves?

Just as greater leverage multiplies a bank's potential profits,it also multiplies a bank's potential losses.

A bank failure occurs when a bank

Gold,silver and furs,when used as money,are referred to as

Macro National Bank,a commercial bank,holds $1 million in vault cash,$15 million in government and corporate bonds,$40 million in demand deposits,$10 million on deposit with a Federal Reserve bank,and $8 million worth of property.What are Macro National Bank's total liabilities?

Commercial banks that are members of the Federal Reserve System actually choose some of the directors of the 12 Federal Reserve District banks.

Which of the following is the most liquid category of assets?

Which of the following is not a responsibility of the Federal Reserve?

When the Fed increases or decreases the money supply,these actions are called

The Federal Reserve tends to increase the money supply each year.

Each Federal Reserve District has 9 directors. are appointed by the member banks in the district and are appointed by the Board of Governors of the Federal Reserve .

One way to decrease leverage is increasing capital.

Creating money is the same as creating wealth.

The standard measure of the money stock,M1,refers to

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-run Macro Model

Fiscal Policy

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters

Exam 13: Money, Banks, and the Federal Reserve

Money is

Which of the following is an open market purchase?

When banks create money,they

The Federal Reserve System

If this balance sheet depicts the only bank in the economy,how large is M1?

A credit union is an example of a financial intermediary.

Given the balance sheet below and assuming a required reserve ratio of 20 percent,how much (in dollar terms)must the bank hold in required reserves?

Just as greater leverage multiplies a bank's potential profits,it also multiplies a bank's potential losses.

A bank failure occurs when a bank

Gold,silver and furs,when used as money,are referred to as

Macro National Bank,a commercial bank,holds $1 million in vault cash,$15 million in government and corporate bonds,$40 million in demand deposits,$10 million on deposit with a Federal Reserve bank,and $8 million worth of property.What are Macro National Bank's total liabilities?

Commercial banks that are members of the Federal Reserve System actually choose some of the directors of the 12 Federal Reserve District banks.

Which of the following is the most liquid category of assets?

Which of the following is not a responsibility of the Federal Reserve?

When the Fed increases or decreases the money supply,these actions are called

The Federal Reserve tends to increase the money supply each year.

Each Federal Reserve District has 9 directors.____ are appointed by the member banks in the district and ____ are appointed by the Board of Governors of the Federal Reserve .

One way to decrease leverage is increasing capital.

Creating money is the same as creating wealth.

The standard measure of the money stock,M1,refers to

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-run Macro Model

Fiscal Policy

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters

Each Federal Reserve District has 9 directors. are appointed by the member banks in the district and are appointed by the Board of Governors of the Federal Reserve .