Question 1

Which of the following is incorrect regarding financial intermediaries?

Accepted Answer

A)  They link savers and borrowers. 
B)  They earn profits by loaning money. 
C)  They offer lower interest rates on savings than they charge on loans. 
D)  They print money. 
E)  They accept deposits. 
A)  They link savers and borrowers. 
B)  They earn profits by loaning money. 
C)  They offer lower interest rates on savings than they charge on loans. 
D)  They print money. 
E)  They accept deposits.

Question 2

Barter is the exchange of goods and services without the use of money.

Accepted Answer

A) True 
 B)False

Question 3

Between 2006 and the middle of 2008, U.S. home prices plunged _____ on average.

Accepted Answer

A)  5 percent 
B)  10 percent 
C)  17 percent 
D)  22 percent 
E)  50 percent 
A)  5 percent 
B)  10 percent 
C)  17 percent 
D)  22 percent 
E)  50 percent

Question 4

Goldsmiths are considered to be the forerunners of modern banks because they _____

Accepted Answer

A)  had safes to keep gold secure. 
B)  issued gold coins. 
C)  created money by lending out gold reserves. 
D)  created legal tender. 
E)  verified the quality of money. 
A)  had safes to keep gold secure. 
B)  issued gold coins. 
C)  created money by lending out gold reserves. 
D)  created legal tender. 
E)  verified the quality of money.

Question 5

The only money that can be used as a standard of value is fiat money.

Accepted Answer

A) True 
 B)False

Question 6

The members of the Board of Governors of the Fed are _____

Accepted Answer

A)  elected by the member banks. 
B)  chosen by the state governors. 
C)  elected for seven-year terms. 
D)  all replaced after each presidential election. 
E)  appointed by the president with the approval of the Senate. 
A)  elected by the member banks. 
B)  chosen by the state governors. 
C)  elected for seven-year terms. 
D)  all replaced after each presidential election. 
E)  appointed by the president with the approval of the Senate.

Question 7

Monetary policy is _____

Accepted Answer

A)  controlled by the president, who appoints the members of the Board of Governors. 
B)  controlled by the president, who appoints the members of the Open Market Committee. 
C)  insulated from politics since the term of only two members of the Board of Governors expires during the tenure of any modern president of the United States. 
D)  insulated from politics because the Federal Reserve Board is the bankers' bank. 
E)  controlled by the Department of Finance of the United States. 
A)  controlled by the president, who appoints the members of the Board of Governors. 
B)  controlled by the president, who appoints the members of the Open Market Committee. 
C)  insulated from politics since the term of only two members of the Board of Governors expires during the tenure of any modern president of the United States. 
D)  insulated from politics because the Federal Reserve Board is the bankers' bank. 
E)  controlled by the Department of Finance of the United States.

Question 8

Which of the following statements is correct regarding the Fed?

Accepted Answer

A)  Under the Federal Reserve System, there is one Federal Reserve Bank, located in Washington D.C. 
B)  Under the Federal Reserve System, there is one Federal Reserve Bank whose location changes every 14 years. 
C)  Under the Federal Reserve System, there is a Federal Reserve Bank in each Congressional district. 
D)  Under the Federal Reserve System, there is a Federal Reserve Bank in each state. 
E)  Under the Federal Reserve System, there are 12 Federal Reserve banks, one in each of the 12 Federal Reserve districts. 
A)  Under the Federal Reserve System, there is one Federal Reserve Bank, located in Washington D.C. 
B)  Under the Federal Reserve System, there is one Federal Reserve Bank whose location changes every 14 years. 
C)  Under the Federal Reserve System, there is a Federal Reserve Bank in each Congressional district. 
D)  Under the Federal Reserve System, there is a Federal Reserve Bank in each state. 
E)  Under the Federal Reserve System, there are 12 Federal Reserve banks, one in each of the 12 Federal Reserve districts.

Question 9

Thrift institutions encountered serious difficulties in the 1970s because _____

Accepted Answer

A)  money market mutual funds became serious competitors for their deposits. 
B)  the U.S. Treasury deposited larger sums of money than the thrift institutions could effectively manage. 
C)  the interest rates they had to pay on deposits began to fall. 
D)  each of the largest banks increased the pressure on the thrifts by building a nationwide network of branch banks. 
E)  the FDIC increased the reserve requirement for thrifts. 
A)  money market mutual funds became serious competitors for their deposits. 
B)  the U.S. Treasury deposited larger sums of money than the thrift institutions could effectively manage. 
C)  the interest rates they had to pay on deposits began to fall. 
D)  each of the largest banks increased the pressure on the thrifts by building a nationwide network of branch banks. 
E)  the FDIC increased the reserve requirement for thrifts.

Question 10

If relative to the base period of 1982 through 1984, the consumer price index for 2015 was 238, then the purchasing power of a dollar in 2015, measured in 1982-1984 dollars, was _____

Accepted Answer

A)  $2.38. 
B)  $0.24. 
C)  $0.42. 
D)  $4.20. 
E)  $1. 
A)  $2.38. 
B)  $0.24. 
C)  $0.42. 
D)  $4.20. 
E)  $1.

Question 11

Which quality best defines money that can be easily carried?

Accepted Answer

A)  durable 
B)  portable 
C)  divisible 
D)  uniform quality 
E)  low opportunity cost 
A)  durable 
B)  portable 
C)  divisible 
D)  uniform quality 
E)  low opportunity cost

Question 12

Barter was more feasible in primitive societies than in modern societies because _____

Accepted Answer

A)  there was no inflation in primitive societies. 
B)  there were many goods available for trade in primitive societies, so people could always find the goods that they wanted. 
C)  specialization was limited, and thus there were few goods available for trade in primitive societies. 
D)  specialization was limited, and thus there were many goods available for trade in primitive societies. 
E)  people in primitive societies had limited wants. 
A)  there was no inflation in primitive societies. 
B)  there were many goods available for trade in primitive societies, so people could always find the goods that they wanted. 
C)  specialization was limited, and thus there were few goods available for trade in primitive societies. 
D)  specialization was limited, and thus there were many goods available for trade in primitive societies. 
E)  people in primitive societies had limited wants.

Question 13

Which of the following is true if a nation's official money fails to serve as a medium of exchange?

Accepted Answer

A)  Nothing will replace money to help facilitate exchange. 
B)  There will be an increase in economic efficiency. 
C)  Resources will divert from production to exchange. 
D)  Transaction costs of exchange will decrease. 
E)  Fewer barter exchanges will be completed. 
A)  Nothing will replace money to help facilitate exchange. 
B)  There will be an increase in economic efficiency. 
C)  Resources will divert from production to exchange. 
D)  Transaction costs of exchange will decrease. 
E)  Fewer barter exchanges will be completed.

Question 14

Compared to many other countries, the United States has _____

Accepted Answer

A)  fewer banks, with assets distributed more evenly. 
B)  fewer commercial banks, with assets concentrated in a few large banks. 
C)  more banks, with assets concentrated in a few large banks. 
D)  more commercial banks, with deposits widely distributed among the banks. 
E)  more commercial banks, with deposits concentrated in a few large banks. 
A)  fewer banks, with assets distributed more evenly. 
B)  fewer commercial banks, with assets concentrated in a few large banks. 
C)  more banks, with assets concentrated in a few large banks. 
D)  more commercial banks, with deposits widely distributed among the banks. 
E)  more commercial banks, with deposits concentrated in a few large banks.

Question 15

Which quality best defines money that should maintain its quality over time?

Accepted Answer

A)  durable 
B)  portable 
C)  divisible 
D)  uniform quality 
E)  low opportunity cost 
A)  durable 
B)  portable 
C)  divisible 
D)  uniform quality 
E)  low opportunity cost

Question 16

Between 2006 and the middle of 2008, many mortgages slipped "underwater." This means that _____

Accepted Answer

A)  borrowers owed more than the house was worth. 
B)  borrowers owed less than the house was worth. 
C)  borrowers owed nothing on their mortgages. 
D)  their basements flooded. 
E)  the area they lived in was flooded as a result of a hurricane. 
A)  borrowers owed more than the house was worth. 
B)  borrowers owed less than the house was worth. 
C)  borrowers owed nothing on their mortgages. 
D)  their basements flooded. 
E)  the area they lived in was flooded as a result of a hurricane.

Question 17

Barter may be the only alternative _____

Accepted Answer

A)  if there is an excess supply of money. 
B)  if the price system is not allowed to function properly. 
C)  if disinflation sets in. 
D)  if hyperinflation sets in. 
E)  if fiat money is discontinued. 
A)  if there is an excess supply of money. 
B)  if the price system is not allowed to function properly. 
C)  if disinflation sets in. 
D)  if hyperinflation sets in. 
E)  if fiat money is discontinued.

Question 18

Which of the following is true of the Federal Reserve System?

Accepted Answer

A)  It is one central bank located in Washington, D.C. 
B)  It was created just before World War II. 
C)  All Federal Reserve banks are required to also become state banks. 
D)  With the formation of the Fed, the power to issue banknotes was taken away from national banks and turned over to the state banks. 
E)  It was notably unsuccessful in averting the Great Depression. 
A)  It is one central bank located in Washington, D.C. 
B)  It was created just before World War II. 
C)  All Federal Reserve banks are required to also become state banks. 
D)  With the formation of the Fed, the power to issue banknotes was taken away from national banks and turned over to the state banks. 
E)  It was notably unsuccessful in averting the Great Depression.

Question 19

One problem with fiat money, as compared to commodity money, is that _____

Accepted Answer

A)  more resources are used to create fiat money. 
B)  there is frequently too little fiat money available. 
C)  there is a greater potential for inflation with fiat money. 
D)  fiat money must be turned in to the government to receive the commodity on which it is based. 
E)  fiat money is less divisible than commodity money. 
A)  more resources are used to create fiat money. 
B)  there is frequently too little fiat money available. 
C)  there is a greater potential for inflation with fiat money. 
D)  fiat money must be turned in to the government to receive the commodity on which it is based. 
E)  fiat money is less divisible than commodity money.

Question 20

The first checks were probably notes written to a goldsmith asking him to transfer ownership of some designated amount of gold from the writer of the note to its bearer.

Accepted Answer

A) True 
 B)False

Which of the following is incorrect regarding financial intermediaries?

Barter is the exchange of goods and services without the use of money.

Between 2006 and the middle of 2008, U.S. home prices plunged _____ on average.

Goldsmiths are considered to be the forerunners of modern banks because they _____

The only money that can be used as a standard of value is fiat money.

The members of the Board of Governors of the Fed are _____

Monetary policy is _____

Which of the following statements is correct regarding the Fed?

Thrift institutions encountered serious difficulties in the 1970s because _____

If relative to the base period of 1982 through 1984, the consumer price index for 2015 was 238, then the purchasing power of a dollar in 2015, measured in 1982-1984 dollars, was _____

Which quality best defines money that can be easily carried?

Barter was more feasible in primitive societies than in modern societies because _____

Which of the following is true if a nation's official money fails to serve as a medium of exchange?

Compared to many other countries, the United States has _____

Which quality best defines money that should maintain its quality over time?

Between 2006 and the middle of 2008, many mortgages slipped "underwater." This means that _____

Barter may be the only alternative _____

Which of the following is true of the Federal Reserve System?

One problem with fiat money, as compared to commodity money, is that _____

The first checks were probably notes written to a goldsmith asking him to transfer ownership of some designated amount of gold from the writer of the note to its bearer.

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Fiscal Policy.

Federal Budgets and Public Policy.

Banking and the Money Supply.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters

Exam 13: Money and the Financial System.

Which of the following is incorrect regarding financial intermediaries?

Barter is the exchange of goods and services without the use of money.

Between 2006 and the middle of 2008, U.S. home prices plunged _____ on average.

Goldsmiths are considered to be the forerunners of modern banks because they _____

The only money that can be used as a standard of value is fiat money.

The members of the Board of Governors of the Fed are _____

Monetary policy is _____

Which of the following statements is correct regarding the Fed?

Thrift institutions encountered serious difficulties in the 1970s because _____

If relative to the base period of 1982 through 1984, the consumer price index for 2015 was 238, then the purchasing power of a dollar in 2015, measured in 1982-1984 dollars, was _____

Which quality best defines money that can be easily carried?

Barter was more feasible in primitive societies than in modern societies because _____

Which of the following is true if a nation's official money fails to serve as a medium of exchange?

Compared to many other countries, the United States has _____

Which quality best defines money that should maintain its quality over time?

Between 2006 and the middle of 2008, many mortgages slipped "underwater." This means that _____

Barter may be the only alternative _____

Which of the following is true of the Federal Reserve System?

One problem with fiat money, as compared to commodity money, is that _____

The first checks were probably notes written to a goldsmith asking him to transfer ownership of some designated amount of gold from the writer of the note to its bearer.

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Fiscal Policy.

Federal Budgets and Public Policy.

Banking and the Money Supply.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters