Question 1

For the United States, what is money based on the transactions approach to measuring money?

Accepted Answer

The transactions approach look

Question 2

Explain how the Fed increases the money supply when it buys bonds in the open market.

Accepted Answer

The Fed buys bonds in the open market an

Question 3

Among the liabilities of a bank are its

Accepted Answer

A) transaction deposits. 
B) total reserves. 
C) excess reserves. 
D) loans. 
A) transaction deposits. 
B) total reserves. 
C) excess reserves. 
D) loans.

Question 4

The initial impact of the Fed's open market sale of government securities by the Federal Reserve is

Accepted Answer

A) an increase in the money supply by some multiple of the dollar volume of the sale. 
B) an increase in commercial bank deposits at the Fed. 
C) a fall in the money supply by some multiple of the dollar volume of the sale. 
D) a reduction of the commercial banking system's reserve deposits at the Fed. 
A) an increase in the money supply by some multiple of the dollar volume of the sale. 
B) an increase in commercial bank deposits at the Fed. 
C) a fall in the money supply by some multiple of the dollar volume of the sale. 
D) a reduction of the commercial banking system's reserve deposits at the Fed.

Question 5

Which of the following is NOT a function of the Fed?

Accepted Answer

A) regulating the money supply in the economy 
B) offering checking accounts to the U.S. public 
C) acting as government's fiscal agent 
D) providing a system of check collection and clearing for depository institutions 
A) regulating the money supply in the economy 
B) offering checking accounts to the U.S. public 
C) acting as government's fiscal agent 
D) providing a system of check collection and clearing for depository institutions

Question 6

The FDIC was created because

Accepted Answer

A) banks failed to create money the way the Fed wanted them to. 
B) people worried about bank failures after World War I, even though very few banks actually failed. 
C) there were so many bank failures in the 1930s. 
D) the Fed kept the required reserve ratio too low. 
A) banks failed to create money the way the Fed wanted them to. 
B) people worried about bank failures after World War I, even though very few banks actually failed. 
C) there were so many bank failures in the 1930s. 
D) the Fed kept the required reserve ratio too low.

Question 7

All of the following are functions of the Fed EXCEPT

Accepted Answer

A) providing paper currency. 
B) enforcing international trade agreements. 
C) serving as a mechanism for clearing checks. 
D) the banker and fiscal agent for the government. 
A) providing paper currency. 
B) enforcing international trade agreements. 
C) serving as a mechanism for clearing checks. 
D) the banker and fiscal agent for the government.

Question 8

The value of the money multiplier depends on

Accepted Answer

A) the reserve ratio. 
B) the ratio of total assets to total liabilities for the banking system as a whole. 
C) the interest rate offered on bonds currently being sold by the Fed. 
D) the interest rate offered on bonds currently being purchased by the Fed. 
A) the reserve ratio. 
B) the ratio of total assets to total liabilities for the banking system as a whole. 
C) the interest rate offered on bonds currently being sold by the Fed. 
D) the interest rate offered on bonds currently being purchased by the Fed.

Question 9

Check collection and clearing happen

Accepted Answer

A) at the bank where the check was written. 
B) only at private clearing centers. 
C) at the Fed and at private clearing centers. 
D) only at the Fed. 
A) at the bank where the check was written. 
B) only at private clearing centers. 
C) at the Fed and at private clearing centers. 
D) only at the Fed.

Question 10

Suppose you and your friend are in a shopping mall and you borrow $100 from your friend to pay for a pair of shoes that you purchase in a shop. This is an example of

Accepted Answer

A) direct financing. 
B) indirect financing. 
C) moral hazard. 
D) transaction costs. 
A) direct financing. 
B) indirect financing. 
C) moral hazard. 
D) transaction costs.

Question 11

When you deposit funds in a bank and then the bank lends these funds to a borrower, the bank is engaged in

Accepted Answer

A) fiduciary investment. 
B) fraudulent behavior. 
C) universal banking. 
D) financial intermediation. 
A) fiduciary investment. 
B) fraudulent behavior. 
C) universal banking. 
D) financial intermediation.

Question 12

Explain the forces that caused the savings and loan debacle in the latter half of the 1980s.

Accepted Answer

Deposit insurance created a moral hazard

Question 13

The fiscal agent for the U.S. federal government is

Accepted Answer

A) the United States Treasury. 
B) the Internal Revenue Service. 
C) the Comptroller of Currency. 
D) the Federal Reserve System. 
A) the United States Treasury. 
B) the Internal Revenue Service. 
C) the Comptroller of Currency. 
D) the Federal Reserve System.

Question 14

What is a fiduciary monetary system?

Accepted Answer

A fiduciary monetary system is a system

Question 15

A major function of the Federal Reserve System is

Accepted Answer

A) the implementation of fiscal policy for the federal government. 
B) the control of the money supply. 
C) the control of government spending. 
D) the control of taxing policy. 
A) the implementation of fiscal policy for the federal government. 
B) the control of the money supply. 
C) the control of government spending. 
D) the control of taxing policy.

Question 16

Under a fractional reserve banking system,

Accepted Answer

A) banks keep a fraction of their deposits on hand as reserves. 
B) banks keep a fraction of their reserves on hand as deposits. 
C) banks keep all of their deposits on hand as reserves. 
D) banks keep all of their reserves on hand as deposits. 
A) banks keep a fraction of their deposits on hand as reserves. 
B) banks keep a fraction of their reserves on hand as deposits. 
C) banks keep all of their deposits on hand as reserves. 
D) banks keep all of their reserves on hand as deposits.

Question 17

The money supply in the United States is backed by

Accepted Answer

A) faith. 
B) gold. 
C) silver. 
D) platinum. 
A) faith. 
B) gold. 
C) silver. 
D) platinum.

Question 18

A business owner applies for a bank loan to launch a fairly low-risk project. After receiving the loan, she cancels the low-risk project and instead uses the borrowed funds for a high-risk venture. This is an example of

Accepted Answer

A) financial intermediation. 
B) the transactions approach. 
C) moral hazard. 
D) capital controls. 
A) financial intermediation. 
B) the transactions approach. 
C) moral hazard. 
D) capital controls.

Question 19

The value of a dollar varies

Accepted Answer

A) inversely with the price of gold. 
B) inversely with the price level. 
C) directly with the price level. 
D) directly with the purchasing power of other major currencies. 
A) inversely with the price of gold. 
B) inversely with the price level. 
C) directly with the price level. 
D) directly with the purchasing power of other major currencies.

Question 20

For the money expansion process to produce the maximum potential multiplier effect

Accepted Answer

A) all loans of a given bank have to be deposited in that bank. 
B) the required reserve ratio has to be 100 percent. 
C) the Fed has to sell government bonds to back up the loans. 
D) all loans from banks have to be redeposited throughout the banking system. 
A) all loans of a given bank have to be deposited in that bank. 
B) the required reserve ratio has to be 100 percent. 
C) the Fed has to sell government bonds to back up the loans. 
D) all loans from banks have to be redeposited throughout the banking system.

For the United States, what is money based on the transactions approach to measuring money?

Explain how the Fed increases the money supply when it buys bonds in the open market.

Among the liabilities of a bank are its

The initial impact of the Fed's open market sale of government securities by the Federal Reserve is

Which of the following is NOT a function of the Fed?

The FDIC was created because

All of the following are functions of the Fed EXCEPT

The value of the money multiplier depends on

Check collection and clearing happen

Suppose you and your friend are in a shopping mall and you borrow $100 from your friend to pay for a pair of shoes that you purchase in a shop. This is an example of

When you deposit funds in a bank and then the bank lends these funds to a borrower, the bank is engaged in

Explain the forces that caused the savings and loan debacle in the latter half of the 1980s.

The fiscal agent for the U.S. federal government is

What is a fiduciary monetary system?

A major function of the Federal Reserve System is

Under a fractional reserve banking system,

The money supply in the United States is backed by

A business owner applies for a bank loan to launch a fairly low-risk project. After receiving the loan, she cancels the low-risk project and instead uses the borrowed funds for a high-risk venture. This is an example of

The value of a dollar varies

For the money expansion process to produce the maximum potential multiplier effect

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

For the United States, what is money based on the transactions approach to measuring money?

Explain how the Fed increases the money supply when it buys bonds in the open market.

Among the liabilities of a bank are its

The initial impact of the Fed's open market sale of government securities by the Federal Reserve is

Which of the following is NOT a function of the Fed?

The FDIC was created because

All of the following are functions of the Fed EXCEPT

The value of the money multiplier depends on

Check collection and clearing happen

Suppose you and your friend are in a shopping mall and you borrow $100 from your friend to pay for a pair of shoes that you purchase in a shop. This is an example of

When you deposit funds in a bank and then the bank lends these funds to a borrower, the bank is engaged in

Explain the forces that caused the savings and loan debacle in the latter half of the 1980s.

The fiscal agent for the U.S. federal government is

What is a fiduciary monetary system?

A major function of the Federal Reserve System is

Under a fractional reserve banking system,

The money supply in the United States is backed by

A business owner applies for a bank loan to launch a fairly low-risk project. After receiving the loan, she cancels the low-risk project and instead uses the borrowed funds for a high-risk venture. This is an example of

The value of a dollar varies

For the money expansion process to produce the maximum potential multiplier effect

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