Question 1

Which of the following would NOT be an asset on a bank's balance sheet?

Accepted Answer

A) loans outstanding 
B) bank building 
C) cash in the vault 
D) transactions deposits 
A) loans outstanding 
B) bank building 
C) cash in the vault 
D) transactions deposits

Question 2

The Fed's buying and selling of existing government securities is called

Accepted Answer

A) market interventions. 
B) open market operations. 
C) changes in the reserve requirement ratio. 
D) changes in the difference between the discount rate and the federal funds rate. 
A) market interventions. 
B) open market operations. 
C) changes in the reserve requirement ratio. 
D) changes in the difference between the discount rate and the federal funds rate.

Question 3

Suppose you pay $290.00 for a new tablet computer. This is an example of

Accepted Answer

A) money as a medium of exchange. 
B) money as a store of value. 
C) barter. 
D) money as a standard of deferred payment. 
A) money as a medium of exchange. 
B) money as a store of value. 
C) barter. 
D) money as a standard of deferred payment.

Question 4

How many Federal Reserve district banks are there in the United States?

Accepted Answer

A) 1 
B) 5 
C) 7 
D) none of the above 
A) 1 
B) 5 
C) 7 
D) none of the above

Question 5

The reserve ratio is 10% and a bank has $600,000 in transaction deposits. The amount of reserves equals

Accepted Answer

A) $6,000. 
B) $60,000. 
C) $600,000. 
D) undeterminable without information on cash reserves. 
A) $6,000. 
B) $60,000. 
C) $600,000. 
D) undeterminable without information on cash reserves.

Question 6

Open market operations are

Accepted Answer

A) the procedures for approving loans at commercial banks. 
B) the procedures of applying for loans at commercial banks. 
C) the Federal Reserve's purchase and sale of existing U.S. government securities. 
D) steps a bank must complete before it can invest in stocks on the open market. 
A) the procedures for approving loans at commercial banks. 
B) the procedures of applying for loans at commercial banks. 
C) the Federal Reserve's purchase and sale of existing U.S. government securities. 
D) steps a bank must complete before it can invest in stocks on the open market.

Question 7

When an asset is described as being highly liquid, which one of the following characteristics does it possess?

Accepted Answer

A) It earns a high rate of interest, so its purchasing power is maintained when prices rise. 
B) It is easily and readily converted into money without any loss in purchasing power. 
C) The face value of the asset is somewhat less than its value when converted into currency. 
D) The asset holds its value over time. 
A) It earns a high rate of interest, so its purchasing power is maintained when prices rise. 
B) It is easily and readily converted into money without any loss in purchasing power. 
C) The face value of the asset is somewhat less than its value when converted into currency. 
D) The asset holds its value over time.

Question 8

When you use a debit card to purchase a pair of jeans, you are

Accepted Answer

A) creating a 30-day loan from your bank to the seller. 
B) creating a 30-day loan from the seller to your bank. 
C) giving your bank an instruction to transfer funds directly from your bank account to the store's bank account. 
D) creating an overnight repurchase agreement between your bank and the store. 
A) creating a 30-day loan from your bank to the seller. 
B) creating a 30-day loan from the seller to your bank. 
C) giving your bank an instruction to transfer funds directly from your bank account to the store's bank account. 
D) creating an overnight repurchase agreement between your bank and the store.

Question 9

The transactions approach to measuring money includes

Accepted Answer

A) government bonds. 
B) the value of shares of stock in commercial banks. 
C) traveler's checks. 
D) all of these. 
A) government bonds. 
B) the value of shares of stock in commercial banks. 
C) traveler's checks. 
D) all of these.

Question 10

The part of the Federal Reserve System (the Fed)that holds the reserve balances of depository institutions is

Accepted Answer

A) the Federal Open Market Committee. 
B) the Federal Advisory Committee. 
C) the Federal Reserve district banks. 
D) the Board of Governors. 
A) the Federal Open Market Committee. 
B) the Federal Advisory Committee. 
C) the Federal Reserve district banks. 
D) the Board of Governors.

Question 11

Russia borrowed funds from the International Monetary Fund in 1989 in exchange for agreeing to undertake certain changes. However, after receiving the funds, Russia spent the funds on other things, making the loan repayment more unlikely to occur. This situation is referred to as

Accepted Answer

A) adverse selection. 
B) moral hazard. 
C) asymmetric information. 
D) deceptive knowledge. 
A) adverse selection. 
B) moral hazard. 
C) asymmetric information. 
D) deceptive knowledge.

Question 12

Other things being equal, when the Fed buys U.S. government securities

Accepted Answer

A) the U.S. Treasury must immediately issue new securities to replace the securities that the Fed has removed from the market. 
B) the Fed's total assets and total liabilities immediately expand by exactly the amount of the Fed's purchase. 
C) the quantity of deposits in the U.S. banking system expands by less than the amount of the Fed's purchase. 
D) the quantity of paper currency and coins in circulation expands by more than the amount of the Fed's purchase. 
A) the U.S. Treasury must immediately issue new securities to replace the securities that the Fed has removed from the market. 
B) the Fed's total assets and total liabilities immediately expand by exactly the amount of the Fed's purchase. 
C) the quantity of deposits in the U.S. banking system expands by less than the amount of the Fed's purchase. 
D) the quantity of paper currency and coins in circulation expands by more than the amount of the Fed's purchase.

Question 13

Which of the following depository institutions is NOT regulated by a government agency?

Accepted Answer

A) savings and loan associations 
B) credit unions 
C) commercial banks that are not part of the Federal Reserve System 
D) None of the above: All depository institutions are regulated by some government agency. 
A) savings and loan associations 
B) credit unions 
C) commercial banks that are not part of the Federal Reserve System 
D) None of the above: All depository institutions are regulated by some government agency.

Question 14

When money provides a yardstick that allows individuals to compare the relative values of goods and services, it is functioning 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 15

The Federal Open Market Committee (FOMC)

Accepted Answer

A) determines the tax policy of the government. 
B) influences the future growth of the money supply. 
C) oversees all transactions on the stock market. 
D) lends to the least credit-worthy customers. 
A) determines the tax policy of the government. 
B) influences the future growth of the money supply. 
C) oversees all transactions on the stock market. 
D) lends to the least credit-worthy customers.

Question 16

A central bank is

Accepted Answer

A) the largest bank in the country. 
B) the largest bank in the country's capital. 
C) a banker's bank. 
D) an international bank. 
A) the largest bank in the country. 
B) the largest bank in the country's capital. 
C) a banker's bank. 
D) an international bank.

Question 17

The Fed buys $1 million in bonds from a bond dealer. The bond dealer's bank experiences

Accepted Answer

A) an increase in assets of $1 million as its reserves increase and a decrease in liabilities as its transactions deposits fall. 
B) no change in assets or liabilities. Assets both increased and decreased by the amount of the check. 
C) a decrease in assets of $1 million as the checking account of the bond dealer increased, and a decrease in liabilities as the bank's deposits with the Fed increased by $1 million. 
D) an increase in assets of $1 million as its reserves increase and an increase in liabilities of $1 million as the deposits in the bond dealer's transactions account increases by $1 million. 
A) an increase in assets of $1 million as its reserves increase and a decrease in liabilities as its transactions deposits fall. 
B) no change in assets or liabilities. Assets both increased and decreased by the amount of the check. 
C) a decrease in assets of $1 million as the checking account of the bond dealer increased, and a decrease in liabilities as the bank's deposits with the Fed increased by $1 million. 
D) an increase in assets of $1 million as its reserves increase and an increase in liabilities of $1 million as the deposits in the bond dealer's transactions account increases by $1 million.

Question 18

Which of the following is NOT an example of a financial intermediary?

Accepted Answer

A) a credit union 
B) a pension fund 
C) the Internal Revenue Service 
D) an insurance company 
A) a credit union 
B) a pension fund 
C) the Internal Revenue Service 
D) an insurance company

Question 19

The Federal Reserve System acts as the government's fiscal agent by

Accepted Answer

A) auditing taxpayers. 
B) providing checking account services for the government. 
C) preparing the budget the President presents to Congress every year. 
D) determining how to finance a deficit. 
A) auditing taxpayers. 
B) providing checking account services for the government. 
C) preparing the budget the President presents to Congress every year. 
D) determining how to finance a deficit.

Question 20

Money is still useful during times of inflation because

Accepted Answer

A) it still retains the characteristic of predictability of value. 
B) more money can be made so people can still purchase the goods and services they want. 
C) it is not a liquid asset. 
D) its opportunity cost falls as inflation rises. 
A) it still retains the characteristic of predictability of value. 
B) more money can be made so people can still purchase the goods and services they want. 
C) it is not a liquid asset. 
D) its opportunity cost falls as inflation rises.

Which of the following would NOT be an asset on a bank's balance sheet?

The Fed's buying and selling of existing government securities is called

Suppose you pay $290.00 for a new tablet computer. This is an example of

How many Federal Reserve district banks are there in the United States?

The reserve ratio is 10% and a bank has $600,000 in transaction deposits. The amount of reserves equals

Open market operations are

When an asset is described as being highly liquid, which one of the following characteristics does it possess?

When you use a debit card to purchase a pair of jeans, you are

The transactions approach to measuring money includes

The part of the Federal Reserve System (the Fed)that holds the reserve balances of depository institutions is

Russia borrowed funds from the International Monetary Fund in 1989 in exchange for agreeing to undertake certain changes. However, after receiving the funds, Russia spent the funds on other things, making the loan repayment more unlikely to occur. This situation is referred to as

Other things being equal, when the Fed buys U.S. government securities

Which of the following depository institutions is NOT regulated by a government agency?

When money provides a yardstick that allows individuals to compare the relative values of goods and services, it is functioning as a

The Federal Open Market Committee (FOMC)

A central bank is

The Fed buys $1 million in bonds from a bond dealer. The bond dealer's bank experiences

Which of the following is NOT an example of a financial intermediary?

The Federal Reserve System acts as the government's fiscal agent by

Money is still useful during times of inflation because

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

Which of the following would NOT be an asset on a bank's balance sheet?

The Fed's buying and selling of existing government securities is called

Suppose you pay $290.00 for a new tablet computer. This is an example of

How many Federal Reserve district banks are there in the United States?

The reserve ratio is 10% and a bank has $600,000 in transaction deposits. The amount of reserves equals

Open market operations are

When an asset is described as being highly liquid, which one of the following characteristics does it possess?

When you use a debit card to purchase a pair of jeans, you are

The transactions approach to measuring money includes

The part of the Federal Reserve System (the Fed)that holds the reserve balances of depository institutions is

Russia borrowed funds from the International Monetary Fund in 1989 in exchange for agreeing to undertake certain changes. However, after receiving the funds, Russia spent the funds on other things, making the loan repayment more unlikely to occur. This situation is referred to as

Other things being equal, when the Fed buys U.S. government securities

Which of the following depository institutions is NOT regulated by a government agency?

When money provides a yardstick that allows individuals to compare the relative values of goods and services, it is functioning as a

The Federal Open Market Committee (FOMC)

A central bank is

The Fed buys $1 million in bonds from a bond dealer. The bond dealer's bank experiences

Which of the following is NOT an example of a financial intermediary?

The Federal Reserve System acts as the government's fiscal agent by

Money is still useful during times of inflation because

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