Question 1

People with savings often deposit their funds in a commercial bank, rather than investing them directly with business enterprises, in order to

Accepted Answer

A) avoid the problems associated with financial intermediation. 
B) avoid the problems associated with asymmetric information. 
C) earn the highest possible return for taking on the riskiest investments. 
D) All of the above are correct. 
A) avoid the problems associated with financial intermediation. 
B) avoid the problems associated with asymmetric information. 
C) earn the highest possible return for taking on the riskiest investments. 
D) All of the above are correct.

Question 2

Why might the Federal Reserve intervene in foreign currency markets?

Accepted Answer

A) to ensure the safety of overseas investments for banks 
B) to ensure the safety of overseas investments for private investors 
C) to ensure the safety of overseas investments for pension funds 
D) to maintain a desired exchange rate for the dollar 
A) to ensure the safety of overseas investments for banks 
B) to ensure the safety of overseas investments for private investors 
C) to ensure the safety of overseas investments for pension funds 
D) to maintain a desired exchange rate for the dollar

Question 3

Total reserves of private banks are

Accepted Answer

A) all customer deposits. 
B) deposits held at the Fed and vault cash. 
C) the minimum amount banks need to hold against time deposits. 
D) federal reserve notes. 
A) all customer deposits. 
B) deposits held at the Fed and vault cash. 
C) the minimum amount banks need to hold against time deposits. 
D) federal reserve notes.

Question 4

A sale of U.S. government securities by the Fed causes a(n)

Accepted Answer

A) expansion of the money supply equal to the amount of the securities sold. 
B) contraction of the money supply equal to the amount of the securities sold. 
C) expansion of the money supply of more than the amount of the securities sold. 
D) contraction of the money supply of more than the amount of the securities sold. 
A) expansion of the money supply equal to the amount of the securities sold. 
B) contraction of the money supply equal to the amount of the securities sold. 
C) expansion of the money supply of more than the amount of the securities sold. 
D) contraction of the money supply of more than the amount of the securities sold.

Question 5

A barter arrangement simply means

Accepted Answer

A) a direct exchange of goods without the use of money. 
B) a promise to pay in the future. 
C) that gold must be offered from one party. 
D) the government has paid for the goods. 
A) a direct exchange of goods without the use of money. 
B) a promise to pay in the future. 
C) that gold must be offered from one party. 
D) the government has paid for the goods.

Question 6

Regarding the nation's money supply, the Federal Reserve

Accepted Answer

A) has no ability to influence its magnitude or its rate of growth. 
B) precisely sets the amount of money in circulation in consultation with the Congress. 
C) can influence its future growth. 
D) gives the U.S. Treasury the authority to print as much as it wishes. 
A) has no ability to influence its magnitude or its rate of growth. 
B) precisely sets the amount of money in circulation in consultation with the Congress. 
C) can influence its future growth. 
D) gives the U.S. Treasury the authority to print as much as it wishes.

Question 7

In defining money according to the transactions approach, you would want to include

Accepted Answer

A) those assets that are used as a store of value. 
B) those assets that are used as a medium of exchange. 
C) those assets that are used as a unit of account. 
D) those assets that are used as a standard of deferred payment. 
A) those assets that are used as a store of value. 
B) those assets that are used as a medium of exchange. 
C) those assets that are used as a unit of account. 
D) those assets that are used as a standard of deferred payment.

Question 8

Since 1982, banks and thrift institutions have offered a type of savings account that yields a market rate of interest with a minimum balance and a limit on transactions. These accounts, which have no minimum maturity, are known as

Accepted Answer

A) certificates of deposit. 
B) money market mutual funds. 
C) mutual funds. 
D) repurchase agreements. 
A) certificates of deposit. 
B) money market mutual funds. 
C) mutual funds. 
D) repurchase agreements.

Question 9

The reserve ratio is 20 percent. If the Fed buys $1 million of U.S. government securities and the check is deposited in Bank A, but Bank A increases its vault cash by the entire amount, then the money supply

Accepted Answer

A) does not increase. 
B) increases by $800,000. 
C) increases by $1 million. 
D) increases by more than $1 million. 
A) does not increase. 
B) increases by $800,000. 
C) increases by $1 million. 
D) increases by more than $1 million.

Question 10

The reserve ratio equals 20 percent. The Fed buys $1 million in U.S. government securities. The most the money supply can increase is

Accepted Answer

A) $1 million. 
B) $4 million. 
C) $5 million. 
D) $10 million. 
A) $1 million. 
B) $4 million. 
C) $5 million. 
D) $10 million.

Question 11

Financial intermediaries are institutions that

Accepted Answer

A) create money. 
B) provide checking accounts. 
C) set interest rates. 
D) transfer funds in the form of loans from savers to investors. 
A) create money. 
B) provide checking accounts. 
C) set interest rates. 
D) transfer funds in the form of loans from savers to investors.

Question 12

Which of the following is NOT part of M1?

Accepted Answer

A) credit cards 
B) checking accounts 
C) currency 
D) traveler's checks 
A) credit cards 
B) checking accounts 
C) currency 
D) traveler's checks

Question 13

Suppose that a new customer opens a checking account and a saving account, placing $50,000 in each. Later, the bank makes a loan of $100,000 to a business firm. For this bank

Accepted Answer

A) assets increased by $50,000 because the saving account is an asset, while liabilities increased by $50,000 because the checking account is a liability. 
B) assets increased by $100,000 because the checking and saving accounts are assets, and liabilities increased by $100,000 because the loan is a liability. 
C) assets increased by $100,000 because the loan is an asset, and liabilities increased by $100,000 because the checking and saving accounts are liabilities. 
D) assets remained unchanged but liabilities increased by $100,000 because of the loan. 
A) assets increased by $50,000 because the saving account is an asset, while liabilities increased by $50,000 because the checking account is a liability. 
B) assets increased by $100,000 because the checking and saving accounts are assets, and liabilities increased by $100,000 because the loan is a liability. 
C) assets increased by $100,000 because the loan is an asset, and liabilities increased by $100,000 because the checking and saving accounts are liabilities. 
D) assets remained unchanged but liabilities increased by $100,000 because of the loan.

Question 14

Control of the money supply is handled by

Accepted Answer

A) Congress. 
B) the Federal Reserve System. 
C) all commercial banks. 
D) Congress and all member commercial banks. 
A) Congress. 
B) the Federal Reserve System. 
C) all commercial banks. 
D) Congress and all member commercial banks.

Question 15

The Federal Deposit Insurance Corporation

Accepted Answer

A) increases the stability of the banking system by reducing the likelihood of bank runs. 
B) discourages banks from engaging in excessive risk taking. 
C) only insures deposits in money-center banks. 
D) was established after the Panic of 1907. 
A) increases the stability of the banking system by reducing the likelihood of bank runs. 
B) discourages banks from engaging in excessive risk taking. 
C) only insures deposits in money-center banks. 
D) was established after the Panic of 1907.

Question 16

The price tag on a pair of Nike shoes illustrates how money performs the function of a

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 17

An interest-earning account that can be withdrawn at any time without payment of a penalty is a

Accepted Answer

A) savings deposit. 
B) money market deposit account. 
C) time deposit. 
D) certificate of deposit. 
A) savings deposit. 
B) money market deposit account. 
C) time deposit. 
D) certificate of deposit.

Question 18

If a check written on one bank is deposited in another bank

Accepted Answer

A) the money supply increases. 
B) the money supply remains unchanged. 
C) the money supply decreases. 
D) new reserves are created for the banking system. 
A) the money supply increases. 
B) the money supply remains unchanged. 
C) the money supply decreases. 
D) new reserves are created for the banking system.

Question 19

Perishable goods such as milk or fruit are never used as money, because they cannot function as a

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 20

Beginning in late 2010, the FDIC sought to increase the public's confidence in depository institutions by

Accepted Answer

A) lowering insurance premiums for bank deposits. 
B) eliminating insurance premiums for bank deposits. 
C) assessing insurance premiums on banks' total liabilities. 
D) changing the scope of insurance to banks' assets. 
A) lowering insurance premiums for bank deposits. 
B) eliminating insurance premiums for bank deposits. 
C) assessing insurance premiums on banks' total liabilities. 
D) changing the scope of insurance to banks' assets.

People with savings often deposit their funds in a commercial bank, rather than investing them directly with business enterprises, in order to

Why might the Federal Reserve intervene in foreign currency markets?

Total reserves of private banks are

A sale of U.S. government securities by the Fed causes a(n)

A barter arrangement simply means

Regarding the nation's money supply, the Federal Reserve

In defining money according to the transactions approach, you would want to include

Since 1982, banks and thrift institutions have offered a type of savings account that yields a market rate of interest with a minimum balance and a limit on transactions. These accounts, which have no minimum maturity, are known as

The reserve ratio is 20 percent. If the Fed buys $1 million of U.S. government securities and the check is deposited in Bank A, but Bank A increases its vault cash by the entire amount, then the money supply

The reserve ratio equals 20 percent. The Fed buys $1 million in U.S. government securities. The most the money supply can increase is

Financial intermediaries are institutions that

Which of the following is NOT part of M1?

Suppose that a new customer opens a checking account and a saving account, placing $50,000 in each. Later, the bank makes a loan of $100,000 to a business firm. For this bank

Control of the money supply is handled by

The Federal Deposit Insurance Corporation

The price tag on a pair of Nike shoes illustrates how money performs the function of a

An interest-earning account that can be withdrawn at any time without payment of a penalty is a

If a check written on one bank is deposited in another bank

Perishable goods such as milk or fruit are never used as money, because they cannot function as a

Beginning in late 2010, the FDIC sought to increase the public's confidence in depository institutions by

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

People with savings often deposit their funds in a commercial bank, rather than investing them directly with business enterprises, in order to

Why might the Federal Reserve intervene in foreign currency markets?

Total reserves of private banks are

A sale of U.S. government securities by the Fed causes a(n)

A barter arrangement simply means

Regarding the nation's money supply, the Federal Reserve

In defining money according to the transactions approach, you would want to include

Since 1982, banks and thrift institutions have offered a type of savings account that yields a market rate of interest with a minimum balance and a limit on transactions. These accounts, which have no minimum maturity, are known as

The reserve ratio is 20 percent. If the Fed buys $1 million of U.S. government securities and the check is deposited in Bank A, but Bank A increases its vault cash by the entire amount, then the money supply

The reserve ratio equals 20 percent. The Fed buys $1 million in U.S. government securities. The most the money supply can increase is

Financial intermediaries are institutions that

Which of the following is NOT part of M1?

Suppose that a new customer opens a checking account and a saving account, placing $50,000 in each. Later, the bank makes a loan of $100,000 to a business firm. For this bank

Control of the money supply is handled by

The Federal Deposit Insurance Corporation

The price tag on a pair of Nike shoes illustrates how money performs the function of a

An interest-earning account that can be withdrawn at any time without payment of a penalty is a

If a check written on one bank is deposited in another bank

Perishable goods such as milk or fruit are never used as money, because they cannot function as a

Beginning in late 2010, the FDIC sought to increase the public's confidence in depository institutions by

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