Question 1

Fractional reserve banking refers to a system in which the depository institution

Accepted Answer

A) holds reserves equal to its deposits. 
B) holds reserves greater than its deposits. 
C) holds reserves less than its deposits. 
D) holds zero reserves. 
A) holds reserves equal to its deposits. 
B) holds reserves greater than its deposits. 
C) holds reserves less than its deposits. 
D) holds zero reserves.

Question 2

All of the following are examples of financial intermediaries EXCEPT

Accepted Answer

A) credit unions. 
B) insurance companies. 
C) retirement funds. 
D) stock exchanges. 
A) credit unions. 
B) insurance companies. 
C) retirement funds. 
D) stock exchanges.

Question 3

Financial institutions participate in which of the following activities?

Accepted Answer

A) financial intermediation 
B) indirect finance 
C) the issuance of loans 
D) all of the above 
A) financial intermediation 
B) indirect finance 
C) the issuance of loans 
D) all of the above

Question 4

An asset is liquid if

Accepted Answer

A) it earns interest. 
B) it is backed by a government guarantee. 
C) it can be exchanged for other items of value without high transaction costs. 
D) All of the above are correct. 
A) it earns interest. 
B) it is backed by a government guarantee. 
C) it can be exchanged for other items of value without high transaction costs. 
D) All of the above are correct.

Question 5

The requirement for a double coincidence of wants occurs when

Accepted Answer

A) there is inflation. 
B) there is deflation. 
C) a system of barter is used. 
D) the medium of exchange is liquid. 
A) there is inflation. 
B) there is deflation. 
C) a system of barter is used. 
D) the medium of exchange is liquid.

Question 6

Which of the following is TRUE of the Federal Reserve System?
I. It was established in the early 1980s.
II. It serves as the central bank of the United States.

Accepted Answer

A) I only 
B) II only 
C) Both I and II 
D) Neither I nor II 
A) I only 
B) II only 
C) Both I and II 
D) Neither I nor II

Question 7

In a fiduciary monetary system, the value of the money issued by a government is based on

Accepted Answer

A) the gold held in that government's vaults. 
B) public confidence in that currency's acceptability and predictability of value. 
C) the ability to convert it to some asset of value, like silver. 
D) its being made out of some material with a market value equal to a bill's face value. 
A) the gold held in that government's vaults. 
B) public confidence in that currency's acceptability and predictability of value. 
C) the ability to convert it to some asset of value, like silver. 
D) its being made out of some material with a market value equal to a bill's face value.

Question 8

Which of the following is the central bank for the United States?

Accepted Answer

A) the Federal Deposit Insurance Corporation (FDI
C)  
B) the United States Treasury 
C) the Comptroller of the Currency 
D) none of the above 
A) the Federal Deposit Insurance Corporation (FDI
C)  
B) the United States Treasury 
C) the Comptroller of the Currency 
D) none of the above

Question 9

Which of the following is a checkable and debitable account?

Accepted Answer

A) a brokerage account with your stockbroker 
B) a savings account 
C) a checking account 
D) All of the above are checkable and debitable accounts. 
A) a brokerage account with your stockbroker 
B) a savings account 
C) a checking account 
D) All of the above are checkable and debitable accounts.

Question 10

What differentiates a savings deposit from a small-denomination certificate of deposit (CD)?

Accepted Answer

A) A CD has a fixed maturity date; a savings deposit can be withdrawn at any time. 
B) A savings deposit cannot be withdrawn before its maturity date without incurring a penalty; funds in a CD are available at any time with no interest penalty. 
C) Only a savings deposit is a time deposit. 
D) All depository institutions accept savings deposits, whereas only a thrift institution can issue a CD. 
A) A CD has a fixed maturity date; a savings deposit can be withdrawn at any time. 
B) A savings deposit cannot be withdrawn before its maturity date without incurring a penalty; funds in a CD are available at any time with no interest penalty. 
C) Only a savings deposit is a time deposit. 
D) All depository institutions accept savings deposits, whereas only a thrift institution can issue a CD.

Question 11

Which of the following is NOT included in the money supply when the transactions approach is used?

Accepted Answer

A) money market deposit accounts 
B) traveler's checks 
C) transaction deposits 
D) currency 
A) money market deposit accounts 
B) traveler's checks 
C) transaction deposits 
D) currency

Question 12

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

Accepted Answer

A) The Fed holds reserves of depository institutions. 
B) The Fed supplies the economy with fiduciary currency. 
C) The Fed determines government spending and taxation policies. 
D) The Fed acts as fiscal agent for the United States Department of the Treasury. 
A) The Fed holds reserves of depository institutions. 
B) The Fed supplies the economy with fiduciary currency. 
C) The Fed determines government spending and taxation policies. 
D) The Fed acts as fiscal agent for the United States Department of the Treasury.

Question 13

Which of the following assets are counted in M2?

Accepted Answer

A) gold 
B) balances in retail mutual funds accounts 
C) value of outstanding bonds 
D) lines of credit offered by commercial banks 
A) gold 
B) balances in retail mutual funds accounts 
C) value of outstanding bonds 
D) lines of credit offered by commercial banks

Question 14

A purchase of U.S. government securities by the Fed causes

Accepted Answer

A) a multiple contraction of the money supply because deposits fall by more than the amount of the securities purchased. 
B) a contraction of the money supply equal to the amount of the securities because all other transactions occur within the banking system. 
C) a multiple expansion of the money supply because the reserve ratio is less than one. 
D) an expansion of the money supply equal to the amount of the securities because all other transactions occur within the banking system. 
A) a multiple contraction of the money supply because deposits fall by more than the amount of the securities purchased. 
B) a contraction of the money supply equal to the amount of the securities because all other transactions occur within the banking system. 
C) a multiple expansion of the money supply because the reserve ratio is less than one. 
D) an expansion of the money supply equal to the amount of the securities because all other transactions occur within the banking system.

Question 15

Which approach to measuring money focuses on the value of currency, transaction deposits, and travelers checks?

Accepted Answer

A) the transactions approach 
B) the liquidity approach 
C) near moneys 
D) M2 
A) the transactions approach 
B) the liquidity approach 
C) near moneys 
D) M2

Question 16

The money supply is

Accepted Answer

A) the rate at which the Federal Reserve Board prints currency. 
B) limited to currency and coins. 
C) the amount of money in circulation. 
D) the rate at which the Federal Reserve Board creates money. 
A) the rate at which the Federal Reserve Board prints currency. 
B) limited to currency and coins. 
C) the amount of money in circulation. 
D) the rate at which the Federal Reserve Board creates money.

Question 17

If a friend of yours keeps cash hidden under the mattress, he is using money 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 18

Initially, the reserve ratio is 10 percent. Now banks decide they want an additional 10 percent of deposits as reserves. There are no currency drains. If the Fed buys $1 million of U.S. government securities, the money supply will

Accepted Answer

A) not change because of the excess reserves banks keep on hand. 
B) increase by $1 million. 
C) increase by $5 million. 
D) increase by $10 million. 
A) not change because of the excess reserves banks keep on hand. 
B) increase by $1 million. 
C) increase by $5 million. 
D) increase by $10 million.

Question 19

Financial institutions that receive most of their funds from the savings of the public are

Accepted Answer

A) the fiduciary monetary system. 
B) the world index fund. 
C) universal banking. 
D) thrift institutions. 
A) the fiduciary monetary system. 
B) the world index fund. 
C) universal banking. 
D) thrift institutions.

Question 20

The Federal Reserve Bank was first established in the U.S. by an Act of Congress passed in

Accepted Answer

A) 1789. 
B) 1861. 
C) 1913. 
D) 1947. 
A) 1789. 
B) 1861. 
C) 1913. 
D) 1947.

Fractional reserve banking refers to a system in which the depository institution

All of the following are examples of financial intermediaries EXCEPT

Financial institutions participate in which of the following activities?

An asset is liquid if

The requirement for a double coincidence of wants occurs when

Which of the following is TRUE of the Federal Reserve System? I. It was established in the early 1980s. II. It serves as the central bank of the United States.

In a fiduciary monetary system, the value of the money issued by a government is based on

Which of the following is the central bank for the United States?

Which of the following is a checkable and debitable account?

What differentiates a savings deposit from a small-denomination certificate of deposit (CD)?

Which of the following is NOT included in the money supply when the transactions approach is used?

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

Which of the following assets are counted in M2?

A purchase of U.S. government securities by the Fed causes

Which approach to measuring money focuses on the value of currency, transaction deposits, and travelers checks?

The money supply is

If a friend of yours keeps cash hidden under the mattress, he is using money as a

Initially, the reserve ratio is 10 percent. Now banks decide they want an additional 10 percent of deposits as reserves. There are no currency drains. If the Fed buys $1 million of U.S. government securities, the money supply will

Financial institutions that receive most of their funds from the savings of the public are

The Federal Reserve Bank was first established in the U.S. by an Act of Congress passed in

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

Exam 14: Money Banking and Central Banking

Fractional reserve banking refers to a system in which the depository institution

All of the following are examples of financial intermediaries EXCEPT

Financial institutions participate in which of the following activities?

An asset is liquid if

The requirement for a double coincidence of wants occurs when

Which of the following is TRUE of the Federal Reserve System? I. It was established in the early 1980s. II. It serves as the central bank of the United States.

In a fiduciary monetary system, the value of the money issued by a government is based on

Which of the following is the central bank for the United States?

Which of the following is a checkable and debitable account?

What differentiates a savings deposit from a small-denomination certificate of deposit (CD)?

Which of the following is NOT included in the money supply when the transactions approach is used?

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

Which of the following assets are counted in M2?

A purchase of U.S. government securities by the Fed causes

Which approach to measuring money focuses on the value of currency, transaction deposits, and travelers checks?

The money supply is

If a friend of yours keeps cash hidden under the mattress, he is using money as a

Initially, the reserve ratio is 10 percent. Now banks decide they want an additional 10 percent of deposits as reserves. There are no currency drains. If the Fed buys $1 million of U.S. government securities, the money supply will

Financial institutions that receive most of their funds from the savings of the public are

The Federal Reserve Bank was first established in the U.S. by an Act of Congress passed in

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