Question 1

If the Fed purchases $100,000 in government bonds from a bank, then the

Accepted Answer

A) liabilities of the bank rise by $100,000. 
B) reserves of the bank fall by $100,000. 
C) assets of the bank rise by $100,000. 
D) reserves of the bank rise by $100,000. 
A) liabilities of the bank rise by $100,000. 
B) reserves of the bank fall by $100,000. 
C) assets of the bank rise by $100,000. 
D) reserves of the bank rise by $100,000. D

Question 2

If something serves as a store of value, we expect it to be

Accepted Answer

A) divisible. 
B) durable. 
C) of intrinsic value. 
D) light. 
A) divisible. 
B) durable. 
C) of intrinsic value. 
D) light. B

Question 3

A fiduciary monetary system is

Accepted Answer

A) fully backed by gold. 
B) dependent on barter for exchanges of goods and services. 
C) one which cannot have any inflation. 
D) dependent on the public's faith to accept the currency. 
A) fully backed by gold. 
B) dependent on barter for exchanges of goods and services. 
C) one which cannot have any inflation. 
D) dependent on the public's faith to accept the currency. D

Question 4

Which of the following would be considered the least liquid asset?

Accepted Answer

A) currency 
B) checkable deposits 
C) travelers checks 
D) shares of stock 
A) currency 
B) checkable deposits 
C) travelers checks 
D) shares of stock

Question 5

A fiduciary monetary standard exists when the value of a currency

Accepted Answer

A) is determined by law. 
B) is convertible to a fixed quantity of gold. 
C) depends upon the public's confidence that the currency can be exchanged for goods and services. 
D) increases with inflation. 
A) is determined by law. 
B) is convertible to a fixed quantity of gold. 
C) depends upon the public's confidence that the currency can be exchanged for goods and services. 
D) increases with inflation.

Question 6

Which of the following is solely responsible for determining changes in the money supply in the United States?

Accepted Answer

A) the U.S. Treasury 
B) the Comptroller of the Currency 
C) the Federal Open Market Committee 
D) the chairman of the Federal Reserve 
A) the U.S. Treasury 
B) the Comptroller of the Currency 
C) the Federal Open Market Committee 
D) the chairman of the Federal Reserve

Question 7

Which of the following will limit the expansion of the money supply following a new deposit?

Accepted Answer

A) failure of banks to voluntarily hold excess reserves 
B) a strong demand for new loans 
C) a re-depositing of all loan proceeds 
D) a strong demand for holding currency outside of commercial banks 
A) failure of banks to voluntarily hold excess reserves 
B) a strong demand for new loans 
C) a re-depositing of all loan proceeds 
D) a strong demand for holding currency outside of commercial banks

Question 8

A statement of assets and liabilities of any business entity is

Accepted Answer

A) a sweep account. 
B) a balance sheet. 
C) net worth. 
D) legal reserves. 
A) a sweep account. 
B) a balance sheet. 
C) net worth. 
D) legal reserves.

Question 9

The term "depository institution" refers to

Accepted Answer

A) commercial banks only. 
B) credit unions only. 
C) savings and loan associations only. 
D) commercial banks, credit unions, and savings and loan associations. 
A) commercial banks only. 
B) credit unions only. 
C) savings and loan associations only. 
D) commercial banks, credit unions, and savings and loan associations.

Question 10

The most liquid asset is

Accepted Answer

A) gold. 
B) a house. 
C) money. 
D) stocks of a highly profitable company. 
A) gold. 
B) a house. 
C) money. 
D) stocks of a highly profitable company.

Question 11

Checkable and debitable accounts in commercial banks and other financial institutions are classified as money because

Accepted Answer

A) they are not liabilities of the banks. 
B) they sometimes earn an interest income for the depositor. 
C) they are generally acceptable in the payment of debt. 
D) banks hold currency in their vaults equal to the value of demand deposits. 
A) they are not liabilities of the banks. 
B) they sometimes earn an interest income for the depositor. 
C) they are generally acceptable in the payment of debt. 
D) banks hold currency in their vaults equal to the value of demand deposits.

Question 12

The process in which financial institutions accept savings from businesses, households, and governments and lend the funds to other businesses, households, and governments is called

Accepted Answer

A) central banking system. 
B) financial intermediation. 
C) moral hazard. 
D) adverse selection. 
A) central banking system. 
B) financial intermediation. 
C) moral hazard. 
D) adverse selection.

Question 13

As a "lender of last resort," the Fed

Accepted Answer

A) is obligated to bail out any depository institution in the country that is in financial difficulty. 
B) protects the deposits of $100,000 or less in all commercial banks in the country. 
C) provides loans to banks experiencing temporary liquidity problems. 
D) bails out any corporation the government has decided should not fail. 
A) is obligated to bail out any depository institution in the country that is in financial difficulty. 
B) protects the deposits of $100,000 or less in all commercial banks in the country. 
C) provides loans to banks experiencing temporary liquidity problems. 
D) bails out any corporation the government has decided should not fail.

Question 14

For something to serve as money, it must be

Accepted Answer

A) backed by the authority of the government. 
B) generally accepted by buyers and sellers. 
C) light, durable, and common. 
D) convertible to gold. 
A) backed by the authority of the government. 
B) generally accepted by buyers and sellers. 
C) light, durable, and common. 
D) convertible to gold.

Question 15

If the Federal Reserve sells $100 of securities through a commercial bank when the reserve requirement is 10 percent, the maximum potential change in the money supply is

Accepted Answer

A) a $100 increase. 
B) a $1,000 increase. 
C) a $100 decrease. 
D) a $1,000 decrease. 
A) a $100 increase. 
B) a $1,000 increase. 
C) a $100 decrease. 
D) a $1,000 decrease.

Question 16

Which of the following would most likely NOT be included in the liquidity approach to defining the money supply?

Accepted Answer

A) savings deposits 
B) money market mutual fund accounts 
C) corporate bonds 
D) traveler's checks 
A) savings deposits 
B) money market mutual fund accounts 
C) corporate bonds 
D) traveler's checks

Question 17

The ability of an asset to hold its value over time is a(n)

Accepted Answer

A) medium of exchange. 
B) unit of accounting. 
C) store of value. 
D) standard of deferred payment. 
A) medium of exchange. 
B) unit of accounting. 
C) store of value. 
D) standard of deferred payment.

Question 18

Cigarettes served as money in some prisoner of war (POW)camps during World War II. Given this, we would expect to observe

Accepted Answer

A) no one ever smoking a cigarette. 
B) people usually resorting to barter rather than using cigarettes as money. 
C) prices of other goods expressed in terms of cigarettes. 
D) only government-issued cigarettes being accepted as money. 
A) no one ever smoking a cigarette. 
B) people usually resorting to barter rather than using cigarettes as money. 
C) prices of other goods expressed in terms of cigarettes. 
D) only government-issued cigarettes being accepted as money.

Question 19

When you make a purchase at a retail store by giving your bank an instruction to transfer funds directly from your bank account to the store's bank account, you have most likely made the purchase using

Accepted Answer

A) cash. 
B) a loan. 
C) a debit card. 
D) credit. 
A) cash. 
B) a loan. 
C) a debit card. 
D) credit.

Question 20

Explain the role of financial intermediation.

Accepted Answer

Financial intermediation is the process

If the Fed purchases $100,000 in government bonds from a bank, then the

If something serves as a store of value, we expect it to be

A fiduciary monetary system is

Which of the following would be considered the least liquid asset?

A fiduciary monetary standard exists when the value of a currency

Which of the following is solely responsible for determining changes in the money supply in the United States?

Which of the following will limit the expansion of the money supply following a new deposit?

A statement of assets and liabilities of any business entity is

The term "depository institution" refers to

The most liquid asset is

Checkable and debitable accounts in commercial banks and other financial institutions are classified as money because

The process in which financial institutions accept savings from businesses, households, and governments and lend the funds to other businesses, households, and governments is called

As a "lender of last resort," the Fed

For something to serve as money, it must be

If the Federal Reserve sells $100 of securities through a commercial bank when the reserve requirement is 10 percent, the maximum potential change in the money supply is

Which of the following would most likely NOT be included in the liquidity approach to defining the money supply?

The ability of an asset to hold its value over time is a(n)

Cigarettes served as money in some prisoner of war (POW)camps during World War II. Given this, we would expect to observe

When you make a purchase at a retail store by giving your bank an instruction to transfer funds directly from your bank account to the store's bank account, you have most likely made the purchase using

Explain the role of financial intermediation.

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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Exam 14: Money Banking and Central Banking

If the Fed purchases $100,000 in government bonds from a bank, then the

If something serves as a store of value, we expect it to be

A fiduciary monetary system is

Which of the following would be considered the least liquid asset?

A fiduciary monetary standard exists when the value of a currency

Which of the following is solely responsible for determining changes in the money supply in the United States?

Which of the following will limit the expansion of the money supply following a new deposit?

A statement of assets and liabilities of any business entity is

The term "depository institution" refers to

The most liquid asset is

Checkable and debitable accounts in commercial banks and other financial institutions are classified as money because

The process in which financial institutions accept savings from businesses, households, and governments and lend the funds to other businesses, households, and governments is called

As a "lender of last resort," the Fed

For something to serve as money, it must be

If the Federal Reserve sells $100 of securities through a commercial bank when the reserve requirement is 10 percent, the maximum potential change in the money supply is

Which of the following would most likely NOT be included in the liquidity approach to defining the money supply?

The ability of an asset to hold its value over time is a(n)

Cigarettes served as money in some prisoner of war (POW)camps during World War II. Given this, we would expect to observe

When you make a purchase at a retail store by giving your bank an instruction to transfer funds directly from your bank account to the store's bank account, you have most likely made the purchase using

Explain the role of financial intermediation.

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters