Question 1

Under which of the following circumstances would the Federal Reserve System want to decrease the money supply by increasing the reserve requirement?

Accepted Answer

A)  The economy is experiencing severe inflation, and market activity is very low. Yet the financial institutions have a great deal of M-1 resources at their disposal that they are not investing. 
B)  The economy is experiencing severe inflation, yet market activity has been extremely high and erratic. 
C)  The economy is experiencing severe deflation, and market activity is very low. Yet the financial institutions have a great deal of M-1 resources at their disposal that they are not investing. 
D)  The economy is experiencing severe deflation, yet market activity has been extremely high and erratic. 
E)  The economy is experiencing severe deflation, market activity is very low, and most financial institutions are low on M-1 resources. 
A)  The economy is experiencing severe inflation, and market activity is very low. Yet the financial institutions have a great deal of M-1 resources at their disposal that they are not investing. 
B)  The economy is experiencing severe inflation, yet market activity has been extremely high and erratic. 
C)  The economy is experiencing severe deflation, and market activity is very low. Yet the financial institutions have a great deal of M-1 resources at their disposal that they are not investing. 
D)  The economy is experiencing severe deflation, yet market activity has been extremely high and erratic. 
E)  The economy is experiencing severe deflation, market activity is very low, and most financial institutions are low on M-1 resources.

Question 2

What are the components of the M-1 money supply?

Accepted Answer

The M-1 money supply is made up of curre

Question 3

Gavin's committee is reviewing the current monetary policies of the Federal Reserve System, particularly with regard to a weak or strong U.S. dollar. The economy of Gavin's district is currently based primarily on manufacturing but is starting to see more and more factory closures due to international competition. Would a weak or strong dollar be in the best interests of Gavin's constituents? Explain.

Accepted Answer

In this case, a weaker dollar would be m

Question 4

As the government's bank, the Fed produces the nation's paper currency and lends money to the government.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following financial institutions is considered a thrift institution?

Accepted Answer

A)  pension fund 
B)  credit union 
C)  commercial bank 
D)  savings and loan association 
E)  securities investment firms 
A)  pension fund 
B)  credit union 
C)  commercial bank 
D)  savings and loan association 
E)  securities investment firms

Question 6

The Federal Deposit Insurance Corporation is the government agency that regulates American banks.

Accepted Answer

A) True 
 B)False

Question 7

Under which of the following circumstances would the Federal Reserve System want to increase the money supply by increasing the discount rate?

Accepted Answer

A)  The economy is experiencing severe inflation, and market activity is very low. Yet the financial institutions have a great deal of M-1 resources at their disposal that they are not investing. 
B)  The economy is experiencing severe inflation, and most financial institutions have low M-1 resources at their disposal. Yet there is a great deal of market activity. 
C)  The economy is experiencing severe deflation, and market activity is very low. Yet the financial institutions have a great deal of M-1 resources at their disposal that they are not investing. 
D)  The economy is experiencing severe deflation, and most financial institutions have low M-1 resources at their disposal. Yet there is a great deal of market activity. 
E)  The economy is experiencing wild fluctuations, and most financial institutions have low M-1 resources at their disposal. 
A)  The economy is experiencing severe inflation, and market activity is very low. Yet the financial institutions have a great deal of M-1 resources at their disposal that they are not investing. 
B)  The economy is experiencing severe inflation, and most financial institutions have low M-1 resources at their disposal. Yet there is a great deal of market activity. 
C)  The economy is experiencing severe deflation, and market activity is very low. Yet the financial institutions have a great deal of M-1 resources at their disposal that they are not investing. 
D)  The economy is experiencing severe deflation, and most financial institutions have low M-1 resources at their disposal. Yet there is a great deal of market activity. 
E)  The economy is experiencing wild fluctuations, and most financial institutions have low M-1 resources at their disposal.

Question 8

Which of the following best describes the stability characteristic of money?

Accepted Answer

A)  Units of money do not expire after a certain time limit. 
B)  Units of money of different nations are easily converted to other units of money. 
C)  Units of money can be matched with the value of goods. 
D)  Units of money allow people to measure the relative value of goods and services. 
E)  Units of money have relatively constant value. 
A)  Units of money do not expire after a certain time limit. 
B)  Units of money of different nations are easily converted to other units of money. 
C)  Units of money can be matched with the value of goods. 
D)  Units of money allow people to measure the relative value of goods and services. 
E)  Units of money have relatively constant value.

Question 9

How are the individual Federal Reserve Banks organized?

Accepted Answer

A)  by size of financial institution members-small, medium, large, etc. 
B)  by type of financial institution members-commercial banks, credit unions, etc. 
C)  by geographical region-Southeast, Northeast, West, etc. 
D)  by financial purpose-buying, lending, interest controlling, etc. 
E)  by legislative districts-10th District of Massachusetts, 1st District of Colorado, etc. 
A)  by size of financial institution members-small, medium, large, etc. 
B)  by type of financial institution members-commercial banks, credit unions, etc. 
C)  by geographical region-Southeast, Northeast, West, etc. 
D)  by financial purpose-buying, lending, interest controlling, etc. 
E)  by legislative districts-10th District of Massachusetts, 1st District of Colorado, etc.

Question 10

The prime rate of a particular bank is the average interest rate of the commercial loans currently being paid by borrowers from that bank.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is NOT a primary tool for controlling the money supply?

Accepted Answer

A)  taxation 
B)  reserve requirements 
C)  discount rate controls 
D)  credit controls 
E)  open-market operations 
A)  taxation 
B)  reserve requirements 
C)  discount rate controls 
D)  credit controls 
E)  open-market operations

Question 12

The statements above most strongly suggest that if all subprime loan borrowers had taken out the loan that was most appropriate for their needs, then what would have been the outcome?

Accepted Answer

A)  None of them would have taken out an adjustable loan. 
B)  None of them would have taken out a subprime loan. 
C)  Most of them would have paid less in interest. 
D)  Most of them would have taken out a conventional loan to cover any expenses not covered by a subprime loan. 
E)  Most of them would have paid money at the start of the loan in order to get a reduced interest rate over the life of the loan. 
A)  None of them would have taken out an adjustable loan. 
B)  None of them would have taken out a subprime loan. 
C)  Most of them would have paid less in interest. 
D)  Most of them would have taken out a conventional loan to cover any expenses not covered by a subprime loan. 
E)  Most of them would have paid money at the start of the loan in order to get a reduced interest rate over the life of the loan.

Question 13

The Federal Reserve System has been instrumental in providing interbank clearing of electronic payments for the nation's financial institutions.

Accepted Answer

A) True 
 B)False

Question 14

In which of the following financial institutions would all of the people who allow it to hold their funds be able to participate in major decision-making?

Accepted Answer

A)  commercial bank 
B)  savings and loan association 
C)  savings institutions 
D)  credit union 
E)  pension fund 
A)  commercial bank 
B)  savings and loan association 
C)  savings institutions 
D)  credit union 
E)  pension fund

Question 15

What is the difference between a credit card and a debit card?

Accepted Answer

Credit cards allow users to borrow money

Question 16

Which of the following statements best describes why a decrease in reserve requirements often results in an increase in the money supply?

Accepted Answer

A)  A decrease in reserve requirements gives banks more money to better determine their interest rates. 
B)  A decrease in reserve requirements gives banks more money to pay off their debts. 
C)  A decrease in reserve requirements gives banks more money to lend out. 
D)  A decrease in reserve requirements gives banks more money to offer in dividend payments to their clients. 
E)  A decrease in reserve requirements gives banks more money to reward their employees for meritorious financial ventures. 
A)  A decrease in reserve requirements gives banks more money to better determine their interest rates. 
B)  A decrease in reserve requirements gives banks more money to pay off their debts. 
C)  A decrease in reserve requirements gives banks more money to lend out. 
D)  A decrease in reserve requirements gives banks more money to offer in dividend payments to their clients. 
E)  A decrease in reserve requirements gives banks more money to reward their employees for meritorious financial ventures.

Question 17

Open-market operations is often a more effective method for the Federal Reserve System to expand the money supply than is minting more dollars and coins.

Accepted Answer

A) True 
 B)False

Question 18

Banks are subject to prosecution when they fail to maintain systems for identifying and reporting suspicious activities.

Accepted Answer

A) True 
 B)False

Question 19

In mutual savings banks, all depositors are considered owners of the bank.

Accepted Answer

A) True 
 B)False

Question 20

Banks create money through contracts with the government to mint bills and coins.

Accepted Answer

A) True 
 B)False

Under which of the following circumstances would the Federal Reserve System want to decrease the money supply by increasing the reserve requirement?

What are the components of the M-1 money supply?

As the government's bank, the Fed produces the nation's paper currency and lends money to the government.

Which of the following financial institutions is considered a thrift institution?

The Federal Deposit Insurance Corporation is the government agency that regulates American banks.

Under which of the following circumstances would the Federal Reserve System want to increase the money supply by increasing the discount rate?

Which of the following best describes the stability characteristic of money?

How are the individual Federal Reserve Banks organized?

The prime rate of a particular bank is the average interest rate of the commercial loans currently being paid by borrowers from that bank.

Which of the following is NOT a primary tool for controlling the money supply?

The statements above most strongly suggest that if all subprime loan borrowers had taken out the loan that was most appropriate for their needs, then what would have been the outcome?

The Federal Reserve System has been instrumental in providing interbank clearing of electronic payments for the nation's financial institutions.

In which of the following financial institutions would all of the people who allow it to hold their funds be able to participate in major decision-making?

What is the difference between a credit card and a debit card?

Which of the following statements best describes why a decrease in reserve requirements often results in an increase in the money supply?

Open-market operations is often a more effective method for the Federal Reserve System to expand the money supply than is minting more dollars and coins.

Banks are subject to prosecution when they fail to maintain systems for identifying and reporting suspicious activities.

In mutual savings banks, all depositors are considered owners of the bank.

Banks create money through contracts with the government to mint bills and coins.

The Us Business Environment

Business Ethics and Social Responsibility

Entrepreneurship, New Ventures, and Business Ownership

The Global Context of Business

Business Management

Organizing the Business

Operations Management and Quality

Employee Behavior and Motivation

Leadership and Decision Making

Human Resource Management and Labor Relations

Marketing Processes and Consumer Behavior

Pricing, Distributing, and Promoting Products

Information Technology for Business

The Role of Accountants and Accounting Information

Managing Finances

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Exam 15: Money and Banking

Under which of the following circumstances would the Federal Reserve System want to decrease the money supply by increasing the reserve requirement?

What are the components of the M-1 money supply?

As the government's bank, the Fed produces the nation's paper currency and lends money to the government.

Which of the following financial institutions is considered a thrift institution?

The Federal Deposit Insurance Corporation is the government agency that regulates American banks.

Under which of the following circumstances would the Federal Reserve System want to increase the money supply by increasing the discount rate?

Which of the following best describes the stability characteristic of money?

How are the individual Federal Reserve Banks organized?

The prime rate of a particular bank is the average interest rate of the commercial loans currently being paid by borrowers from that bank.

Which of the following is NOT a primary tool for controlling the money supply?

The statements above most strongly suggest that if all subprime loan borrowers had taken out the loan that was most appropriate for their needs, then what would have been the outcome?

The Federal Reserve System has been instrumental in providing interbank clearing of electronic payments for the nation's financial institutions.

In which of the following financial institutions would all of the people who allow it to hold their funds be able to participate in major decision-making?

What is the difference between a credit card and a debit card?

Which of the following statements best describes why a decrease in reserve requirements often results in an increase in the money supply?

Open-market operations is often a more effective method for the Federal Reserve System to expand the money supply than is minting more dollars and coins.

Banks are subject to prosecution when they fail to maintain systems for identifying and reporting suspicious activities.

In mutual savings banks, all depositors are considered owners of the bank.

Banks create money through contracts with the government to mint bills and coins.

The Us Business Environment

Business Ethics and Social Responsibility

Entrepreneurship, New Ventures, and Business Ownership

The Global Context of Business

Business Management

Organizing the Business

Operations Management and Quality

Employee Behavior and Motivation

Leadership and Decision Making

Human Resource Management and Labor Relations

Marketing Processes and Consumer Behavior

Pricing, Distributing, and Promoting Products

Information Technology for Business

The Role of Accountants and Accounting Information

Managing Finances

Filters