Question 1

Camels have been used as money. Which function of money would this type of money perform least well?

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 2

Currency consists of

Accepted Answer

A) only coins minted by the U.S. Treasury. 
B) only Federal Reserve notes. 
C) coins minted by the U.S. Treasury and Federal Reserve notes. 
D) coins, Federal Reserve Notes and traveler's checks. 
A) only coins minted by the U.S. Treasury. 
B) only Federal Reserve notes. 
C) coins minted by the U.S. Treasury and Federal Reserve notes. 
D) coins, Federal Reserve Notes and traveler's checks.

Question 3

A $20 price tag on a sweater in a department store is an example of money serving as a

Accepted Answer

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

Question 4

If depository insurance exists, bank managers may make riskier loans than they would have otherwise, which is an example of

Accepted Answer

A) regulatory lag. 
B) irrational behavior. 
C) moral hazard. 
D) adverse selection. 
A) regulatory lag. 
B) irrational behavior. 
C) moral hazard. 
D) adverse selection.

Question 5

When the Fed sells government securities

Accepted Answer

A) reserves increase, leading to a decrease in the money supply by an amount more than the sale of the government securities. 
B) reserves decrease, leading to a increase in the money supply by an amount more than the sale of the government securities. 
C) reserves increase, leading to a increase in the money supply by an amount more than the sale of the government securities. 
D) reserves decrease, leading to a decrease in the money supply by an amount more than the sale of the government securities. 
A) reserves increase, leading to a decrease in the money supply by an amount more than the sale of the government securities. 
B) reserves decrease, leading to a increase in the money supply by an amount more than the sale of the government securities. 
C) reserves increase, leading to a increase in the money supply by an amount more than the sale of the government securities. 
D) reserves decrease, leading to a decrease in the money supply by an amount more than the sale of the government securities.

Question 6

Deposits held by Federal Reserve district banks for depository institutions, plus depository institutions' vault cash are known as

Accepted Answer

A) reserves. 
B) a sweep account. 
C) adverse selection. 
D) the discount rate. 
A) reserves. 
B) a sweep account. 
C) adverse selection. 
D) the discount rate.

Question 7

The fact that individuals whose credit worthiness is less than it appears to be are those who are most willing to borrow funds at any given interest rate is an example of

Accepted Answer

A) adverse selection. 
B) symmetric information. 
C) moral bonuses. 
D) diverse origins. 
A) adverse selection. 
B) symmetric information. 
C) moral bonuses. 
D) diverse origins.

Question 8

Which of the following would be considered a transaction deposit?

Accepted Answer

A) passbook savings account 
B) checking account 
C) credit card account 
D) 401(k)retirement account 
A) passbook savings account 
B) checking account 
C) credit card account 
D) 401(k)retirement account

Question 9

Suppose the Fed purchases $1 million in bonds in the open market. Explain how the money supply can increase by more than $1 million.

Accepted Answer

Transaction deposits and reserves increa

Question 10

Which of the following is NOT a description of indirect finance?

Accepted Answer

A) You take out a student loan from your bank. 
B) An insurance company lends funds to IBM. 
C) You borrow $500 from your best friend. 
D) You buy shares in a mutual fund. 
A) You take out a student loan from your bank. 
B) An insurance company lends funds to IBM. 
C) You borrow $500 from your best friend. 
D) You buy shares in a mutual fund.

Question 11

The balance sheet of a bank shows its

Accepted Answer

A) profits and losses. 
B) assets and liabilities. 
C) earnings and expenses. 
D) revenues and costs. 
A) profits and losses. 
B) assets and liabilities. 
C) earnings and expenses. 
D) revenues and costs.

Question 12

Following a new deposit of $500, the loans of a commercial bank increase by $400. In this situation, the reserve ratio is most likely

Accepted Answer

A) 0 percent. 
B) 20 percent. 
C) 80 percent. 
D) 180 percent. 
A) 0 percent. 
B) 20 percent. 
C) 80 percent. 
D) 180 percent.

Question 13

Which of the following is NOT an asset of commercial banks?

Accepted Answer

A) consumer loans 
B) business loans 
C) savings deposits 
D) home mortgages 
A) consumer loans 
B) business loans 
C) savings deposits 
D) home mortgages

Question 14

A highly liquid asset

Accepted Answer

A) has high transaction costs associated with its sale. 
B) must be held for a substantial period of time. 
C) generally has a very limited market for its resale. 
D) can be disposed of easily without loss of value. 
A) has high transaction costs associated with its sale. 
B) must be held for a substantial period of time. 
C) generally has a very limited market for its resale. 
D) can be disposed of easily without loss of value.

Question 15

Which of the following is NOT a function of the Federal Reserve System?

Accepted Answer

A) supply fiduciary currency to the economy 
B) provide a system for check collection and clearing 
C) implement fiscal policy 
D) regulate the money supply 
A) supply fiduciary currency to the economy 
B) provide a system for check collection and clearing 
C) implement fiscal policy 
D) regulate the money supply

Question 16

For barter to occur there has to be

Accepted Answer

A) a commodity to serve as a medium of exchange. 
B) a formal market where prices are quoted. 
C) a double coincidence of wants. 
D) a single coincidence of wants. 
A) a commodity to serve as a medium of exchange. 
B) a formal market where prices are quoted. 
C) a double coincidence of wants. 
D) a single coincidence of wants.

Question 17

For a small-denomination certificate of deposit to be included in M2 it must be a denomination of less than

Accepted Answer

A) $1,000,000. 
B) $100,000. 
C) $10,000. 
D) $1,000. 
A) $1,000,000. 
B) $100,000. 
C) $10,000. 
D) $1,000.

Question 18

The degree to which an asset can be acquired or disposed of without much danger of any intervening loss in nominal value is known as

Accepted Answer

A) transaction deposits. 
B) a time deposit. 
C) liquidity. 
D) M2. 
A) transaction deposits. 
B) a time deposit. 
C) liquidity. 
D) M2.

Question 19

The transactions approach to measuring money relies on the role of money primarily as a

Accepted Answer

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

Question 20

The reserve ratio is 20 percent. The Fed buys $1 million in government securities from a bond dealer by transmitting the funds to the dealer's deposit account at Bank A. Bank A loans the maximum amount possible to a construction company, which buys materials from a lumber yard. The lumberyard deposits the construction company's check in Bank B. What is the maximum loan Bank A can now make and the maximum loan Bank B can now make?

Accepted Answer

A) Bank A: 0; Bank B: $640,000 
B) Bank A: 0; Bank B: $800,000 
C) Bank A: $800,000; Bank B: $640,000 
D) Bank A: $800,000; Bank B: 0 
A) Bank A: 0; Bank B: $640,000 
B) Bank A: 0; Bank B: $800,000 
C) Bank A: $800,000; Bank B: $640,000 
D) Bank A: $800,000; Bank B: 0

Camels have been used as money. Which function of money would this type of money perform least well?

Currency consists of

A $20 price tag on a sweater in a department store is an example of money serving as a

If depository insurance exists, bank managers may make riskier loans than they would have otherwise, which is an example of

When the Fed sells government securities

Deposits held by Federal Reserve district banks for depository institutions, plus depository institutions' vault cash are known as

The fact that individuals whose credit worthiness is less than it appears to be are those who are most willing to borrow funds at any given interest rate is an example of

Which of the following would be considered a transaction deposit?

Suppose the Fed purchases $1 million in bonds in the open market. Explain how the money supply can increase by more than $1 million.

Which of the following is NOT a description of indirect finance?

The balance sheet of a bank shows its

Following a new deposit of $500, the loans of a commercial bank increase by $400. In this situation, the reserve ratio is most likely

Which of the following is NOT an asset of commercial banks?

A highly liquid asset

Which of the following is NOT a function of the Federal Reserve System?

For barter to occur there has to be

For a small-denomination certificate of deposit to be included in M2 it must be a denomination of less than

The degree to which an asset can be acquired or disposed of without much danger of any intervening loss in nominal value is known as

The transactions approach to measuring money relies on the role of money primarily as a

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

Camels have been used as money. Which function of money would this type of money perform least well?

Currency consists of

A $20 price tag on a sweater in a department store is an example of money serving as a

If depository insurance exists, bank managers may make riskier loans than they would have otherwise, which is an example of

When the Fed sells government securities

Deposits held by Federal Reserve district banks for depository institutions, plus depository institutions' vault cash are known as

The fact that individuals whose credit worthiness is less than it appears to be are those who are most willing to borrow funds at any given interest rate is an example of

Which of the following would be considered a transaction deposit?

Suppose the Fed purchases $1 million in bonds in the open market. Explain how the money supply can increase by more than $1 million.

Which of the following is NOT a description of indirect finance?

The balance sheet of a bank shows its

Following a new deposit of $500, the loans of a commercial bank increase by $400. In this situation, the reserve ratio is most likely

Which of the following is NOT an asset of commercial banks?

A highly liquid asset

Which of the following is NOT a function of the Federal Reserve System?

For barter to occur there has to be

For a small-denomination certificate of deposit to be included in M2 it must be a denomination of less than

The degree to which an asset can be acquired or disposed of without much danger of any intervening loss in nominal value is known as

The transactions approach to measuring money relies on the role of money primarily as a

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