Question 1

Money is defined as

Accepted Answer

A) a person's net worth. 
B) anything people generally accept in exchange for goods and services. 
C) a by product of a barter economy. 
D) any financial instrument that is backed by gold. 
A) a person's net worth. 
B) anything people generally accept in exchange for goods and services. 
C) a by product of a barter economy. 
D) any financial instrument that is backed by gold.

Question 2

When the Fed wants to undertake open market operations, it

Accepted Answer

A) can require all commercial banks to buy from or sell to it. 
B) can require all member banks to buy from or sell to it. 
C) buys or sells securities through the trading desk at the New York Federal Reserve Bank. 
D) buys from or sells to the U.S. Treasury. 
A) can require all commercial banks to buy from or sell to it. 
B) can require all member banks to buy from or sell to it. 
C) buys or sells securities through the trading desk at the New York Federal Reserve Bank. 
D) buys from or sells to the U.S. Treasury.

Question 3

The reserve ratio is 10 percent and all loan proceeds are deposited in transactions accounts. A bond dealer has $100 million in deposits, $8 million in vault cash, and $7 million in deposits at the Fed. The Fed sells $1 million in securities to the bond dealer. As a result, of this transaction alone

Accepted Answer

A) the money supply falls by $1 million and total reserves fall by $1 million. 
B) the money supply falls by $1 million and total reserves rise by $1 million. 
C) the money supply rises by $1 million, total reserves fall by $900,000. 
D) the money supply rises by $1 million, but reserves do not change. 
A) the money supply falls by $1 million and total reserves fall by $1 million. 
B) the money supply falls by $1 million and total reserves rise by $1 million. 
C) the money supply rises by $1 million, total reserves fall by $900,000. 
D) the money supply rises by $1 million, but reserves do not change.

Question 4

In which year was the Federal Deposit Insurance Corporation (FDIC)established?

Accepted Answer

A) 1913 
B) 1929 
C) 1933 
D) 1951 
A) 1913 
B) 1929 
C) 1933 
D) 1951

Question 5

The function of money as a store of value diminishes if

Accepted Answer

A) prices of goods and services increase. 
B) interest rates increase. 
C) people begin to barter. 
D) money is no longer backed by gold. 
A) prices of goods and services increase. 
B) interest rates increase. 
C) people begin to barter. 
D) money is no longer backed by gold.

Question 6

Which of the following represents a preventative measure against bank runs?

Accepted Answer

A) The President of the United States can order banks to pay depositors. 
B) The Federal Reserve can lower reserve requirements to ensure that banks have sufficient funds. 
C) The FDIC provides deposit insurance. 
D) None of the above is correct. 
A) The President of the United States can order banks to pay depositors. 
B) The Federal Reserve can lower reserve requirements to ensure that banks have sufficient funds. 
C) The FDIC provides deposit insurance. 
D) None of the above is correct.

Question 7

The M1 measure of money is suggested by the ________ approach to measuring money.

Accepted Answer

A) investment 
B) liquidity 
C) transactions 
D) security 
A) investment 
B) liquidity 
C) transactions 
D) security

Question 8

If proceeds from loans are NOT deposited back in the banking system, then

Accepted Answer

A) the magnitude of the multiplier process is reduced. 
B) there is no effect on the magnitude of the multiplier process. 
C) the magnitude of the multiplier process is increased. 
D) the Fed intervenes by selling more Federal government bonds. 
A) the magnitude of the multiplier process is reduced. 
B) there is no effect on the magnitude of the multiplier process. 
C) the magnitude of the multiplier process is increased. 
D) the Fed intervenes by selling more Federal government bonds.

Question 9

When comparing the price of a tablet with the price of a laptop, Amanda discovered the tablet was more expensive. This is an example of using money as

Accepted Answer

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

Question 10

The Board of Governors of the Federal Reserve System has

Accepted Answer

A) 7 members serving 14 year terms. 
B) 7 members serving 4 year terms. 
C) 12 members serving 14 year terms. 
D) 12 members serving 4 year terms. 
A) 7 members serving 14 year terms. 
B) 7 members serving 4 year terms. 
C) 12 members serving 14 year terms. 
D) 12 members serving 4 year terms.

Question 11

If the reserve ratio decreases from 20 percent to 10 percent, then the potential money multiplier

Accepted Answer

A) increases from 5 to 10. 
B) decreases from 10 to 5. 
C) does not change. 
D) decreases from 20 to 10. 
A) increases from 5 to 10. 
B) decreases from 10 to 5. 
C) does not change. 
D) decreases from 20 to 10.

Question 12

If the actual money multiplier equals the potential money multiplier and if the Fed wishes to reduce the money supply by $1 million when the reserve ratio is 20 percent, then the Fed should

Accepted Answer

A) sell $200,000 of government securities. 
B) buy $200,000 of government securities. 
C) sell $500,000 of government securities. 
D) buy $500,000 of government securities. 
A) sell $200,000 of government securities. 
B) buy $200,000 of government securities. 
C) sell $500,000 of government securities. 
D) buy $500,000 of government securities.

Question 13

The best measure of money is

Accepted Answer

A) coins and currency. 
B) the one based on the transactions approach. 
C) the one based on the liquidity approach. 
D) something economists have never agreed on. 
A) coins and currency. 
B) the one based on the transactions approach. 
C) the one based on the liquidity approach. 
D) something economists have never agreed on.

Question 14

When people decide to increase the amount of currency they are currently holding

Accepted Answer

A) the potential money multiplier will increase. 
B) the potential money multiplier will decrease. 
C) the actual money multiplier will increase. 
D) the actual money multiplier will decrease. 
A) the potential money multiplier will increase. 
B) the potential money multiplier will decrease. 
C) the actual money multiplier will increase. 
D) the actual money multiplier will decrease.

Question 15

Money provides a way to transfer wealth into the future. This function of money is known as

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 16

Which of the following is NOT included in M1?

Accepted Answer

A) currency 
B) transaction deposits 
C) saving deposits 
D) traveler's checks 
A) currency 
B) transaction deposits 
C) saving deposits 
D) traveler's checks

Question 17

If the FOMC decides to engage in the selling of government bonds, what is the effect on the money supply?

Accepted Answer

A) a decrease 
B) an increase 
C) no change 
D) an initial increase followed by an additional rise when the bonds mature 
A) a decrease 
B) an increase 
C) no change 
D) an initial increase followed by an additional rise when the bonds mature

Question 18

Mary decides to buy a bond from Joe for $100. The money supply will

Accepted Answer

A) neither increase nor decrease. 
B) increase by $100. 
C) increase by more than $100. 
D) decrease by $100. 
A) neither increase nor decrease. 
B) increase by $100. 
C) increase by more than $100. 
D) decrease by $100.

Question 19

The ability to quickly convert an asset into cash is

Accepted Answer

A) disintermediation. 
B) the standard of deferred payment. 
C) financial intermediation. 
D) liquidity. 
A) disintermediation. 
B) the standard of deferred payment. 
C) financial intermediation. 
D) liquidity.

Question 20

The Board of Governors of the Federal Reserve System has how many governors?

Accepted Answer

A) 1 
B) 5 
C) 7 
D) 12 
A) 1 
B) 5 
C) 7 
D) 12

Money is defined as

When the Fed wants to undertake open market operations, it

The reserve ratio is 10 percent and all loan proceeds are deposited in transactions accounts. A bond dealer has $100 million in deposits, $8 million in vault cash, and $7 million in deposits at the Fed. The Fed sells $1 million in securities to the bond dealer. As a result, of this transaction alone

In which year was the Federal Deposit Insurance Corporation (FDIC)established?

The function of money as a store of value diminishes if

Which of the following represents a preventative measure against bank runs?

The M1 measure of money is suggested by the ________ approach to measuring money.

If proceeds from loans are NOT deposited back in the banking system, then

When comparing the price of a tablet with the price of a laptop, Amanda discovered the tablet was more expensive. This is an example of using money as

The Board of Governors of the Federal Reserve System has

If the reserve ratio decreases from 20 percent to 10 percent, then the potential money multiplier

If the actual money multiplier equals the potential money multiplier and if the Fed wishes to reduce the money supply by $1 million when the reserve ratio is 20 percent, then the Fed should

The best measure of money is

When people decide to increase the amount of currency they are currently holding

Money provides a way to transfer wealth into the future. This function of money is known as

Which of the following is NOT included in M1?

If the FOMC decides to engage in the selling of government bonds, what is the effect on the money supply?

Mary decides to buy a bond from Joe for $100. The money supply will

The ability to quickly convert an asset into cash is

The Board of Governors of the Federal Reserve System has how many governors?

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

Money is defined as

When the Fed wants to undertake open market operations, it

In which year was the Federal Deposit Insurance Corporation (FDIC)established?

The function of money as a store of value diminishes if

Which of the following represents a preventative measure against bank runs?

The M1 measure of money is suggested by the ________ approach to measuring money.

If proceeds from loans are NOT deposited back in the banking system, then

When comparing the price of a tablet with the price of a laptop, Amanda discovered the tablet was more expensive. This is an example of using money as

The Board of Governors of the Federal Reserve System has

If the reserve ratio decreases from 20 percent to 10 percent, then the potential money multiplier

If the actual money multiplier equals the potential money multiplier and if the Fed wishes to reduce the money supply by $1 million when the reserve ratio is 20 percent, then the Fed should

The best measure of money is

When people decide to increase the amount of currency they are currently holding

Money provides a way to transfer wealth into the future. This function of money is known as

Which of the following is NOT included in M1?

If the FOMC decides to engage in the selling of government bonds, what is the effect on the money supply?

Mary decides to buy a bond from Joe for $100. The money supply will

The ability to quickly convert an asset into cash is

The Board of Governors of the Federal Reserve System has how many governors?

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