Question 1

-Based on the above table, an open market operation in which the Fed purchased $100,000 of government securities would

Accepted Answer

A) create a reserve deficiency for the banking system. 
B) lead to a maximum potential expansion of the money supply of $100,000. 
C) lead to a maximum potential expansion of the money supply of $1 million. 
D) cause demand deposits to fall by $100,000. 
A) create a reserve deficiency for the banking system. 
B) lead to a maximum potential expansion of the money supply of $100,000. 
C) lead to a maximum potential expansion of the money supply of $1 million. 
D) cause demand deposits to fall by $100,000.

Question 2

What effect has the presence of federal deposit insurance had on the banking industry?

Accepted Answer

A) Banks now hold more excess reserves. 
B) Banks have made it more difficult for customers to qualify for loans. 
C) Banks have made riskier loans. 
D) Depositors have become more vigilant in monitoring the decisions made by managers of their banks. 
A) Banks now hold more excess reserves. 
B) Banks have made it more difficult for customers to qualify for loans. 
C) Banks have made riskier loans. 
D) Depositors have become more vigilant in monitoring the decisions made by managers of their banks.

Question 3

The direct exchange of one good or service for another is called

Accepted Answer

A) a token exchange. 
B) a standard of deferred payment. 
C) the exchange of purchasing power. 
D) barter. 
A) a token exchange. 
B) a standard of deferred payment. 
C) the exchange of purchasing power. 
D) barter.

Question 4

The liquidity approach to measuring the money supply uses

Accepted Answer

A) M1 only. 
B) near moneys only. 
C) M1 plus some highly liquid assets. 
D) M2 plus some highly liquid assets. 
A) M1 only. 
B) near moneys only. 
C) M1 plus some highly liquid assets. 
D) M2 plus some highly liquid assets.

Question 5

Which of the following would reduce the money multiplier?

Accepted Answer

A) the purchase of bonds by the Fed 
B) lowering the reserve ratio 
C) increases in the reserve ratio 
D) a flow of currency into the banking system 
A) the purchase of bonds by the Fed 
B) lowering the reserve ratio 
C) increases in the reserve ratio 
D) a flow of currency into the banking system

Question 6

The existence of money in an economy promotes efficiency by

Accepted Answer

A) creating an equal distribution of income. 
B) creating incentives to be self-sufficient. 
C) facilitating trade, thereby allowing for greater specialization. 
D) allowing for the formation of corporations as legal entities. 
A) creating an equal distribution of income. 
B) creating incentives to be self-sufficient. 
C) facilitating trade, thereby allowing for greater specialization. 
D) allowing for the formation of corporations as legal entities.

Question 7

Small-denomination time deposits are

Accepted Answer

A) considered part of near money. 
B) included in the definition of both M1 and M2. 
C) included in the definition of M1, but not in M2. 
D) the same as transaction deposits. 
A) considered part of near money. 
B) included in the definition of both M1 and M2. 
C) included in the definition of M1, but not in M2. 
D) the same as transaction deposits.

Question 8

The liquidity of money refers to

Accepted Answer

A) the amount of gold it is backed by. 
B) the standard of deferred payments and how quickly those payments can be made. 
C) how quickly it can be disposed of without high transaction costs. 
D) asymmetric information. 
A) the amount of gold it is backed by. 
B) the standard of deferred payments and how quickly those payments can be made. 
C) how quickly it can be disposed of without high transaction costs. 
D) asymmetric information.

Question 9

A fiduciary monetary system has to have all of the following EXCEPT

Accepted Answer

A) trust. 
B) a central bank. 
C) acceptability. 
D) predictability of value. 
A) trust. 
B) a central bank. 
C) acceptability. 
D) predictability of value.

Question 10

Money functions as a(n)

Accepted Answer

A) store of value. 
B) unit of account. 
C) medium of exchange. 
D) all of the above. 
A) store of value. 
B) unit of account. 
C) medium of exchange. 
D) all of the above.

Question 11

If something is to serve as money it must be a store of value. This means that it must

Accepted Answer

A) be divisible. 
B) be the standard by which all goods are compared in setting prices. 
C) hold its purchasing power over time. 
D) be liquid. 
A) be divisible. 
B) be the standard by which all goods are compared in setting prices. 
C) hold its purchasing power over time. 
D) be liquid.

Question 12

A bank with $100 million in deposits has $15 million of cash in the bank, $10 million in deposits with the Fed, and $15 million in government securities in its vault. Its total reserves equal

Accepted Answer

A) $10 million. 
B) $15 million. 
C) $25 million. 
D) $40 million. 
A) $10 million. 
B) $15 million. 
C) $25 million. 
D) $40 million.

Question 13

Which of the following is NOT a correct statement about the Federal Reserve banks?

Accepted Answer

A) They supervise member banks within the Federal Reserve System. 
B) They provide a system of check collection and clearing. 
C) They provide the economy with gold backed currency. 
D) They act as banker and fiscal agent for the U.S. government. 
A) They supervise member banks within the Federal Reserve System. 
B) They provide a system of check collection and clearing. 
C) They provide the economy with gold backed currency. 
D) They act as banker and fiscal agent for the U.S. government.

Question 14

As of 2010, the FDIC insured deposit accounts up to which of the following amounts?

Accepted Answer

A) $10,000. 
B) $25,000. 
C) $100,000. 
D) $250,000. 
A) $10,000. 
B) $25,000. 
C) $100,000. 
D) $250,000.

Question 15

Which of the following is NOT included in M1?

Accepted Answer

A) transaction deposits 
B) currency 
C) small time deposits 
D) travelers checks 
A) transaction deposits 
B) currency 
C) small time deposits 
D) travelers checks

Question 16

Which of the following would reduce the money multiplier?

Accepted Answer

A) reducing the reserve ratio 
B) bond purchases by the Fed 
C) cash drains from banks 
D) bank reductions in desired reserve holdings 
A) reducing the reserve ratio 
B) bond purchases by the Fed 
C) cash drains from banks 
D) bank reductions in desired reserve holdings

Question 17

The members of the Federal Open Market Committee are

Accepted Answer

A) the Treasury secretary, the head of the Federal Deposit Insurance Corporation, and the Comptroller of the Currency. 
B) the seven members of the Fed's Board of Governors and five of the Federal Reserve bank presidents. 
C) the President, the Speaker of the House of Representatives, and the Senate Majority Leader. 
D) the five top officials at the Federal Reserve Bank of New York's Trading Desk. 
A) the Treasury secretary, the head of the Federal Deposit Insurance Corporation, and the Comptroller of the Currency. 
B) the seven members of the Fed's Board of Governors and five of the Federal Reserve bank presidents. 
C) the President, the Speaker of the House of Representatives, and the Senate Majority Leader. 
D) the five top officials at the Federal Reserve Bank of New York's Trading Desk.

Question 18

If the transactions approach to measuring money is used, then the money supply consists of

Accepted Answer

A) currency only. 
B) transaction deposits only. 
C) currency and transaction deposits only. 
D) currency, checkable and debitable deposits, and traveler's checks. 
A) currency only. 
B) transaction deposits only. 
C) currency and transaction deposits only. 
D) currency, checkable and debitable deposits, and traveler's checks.

Question 19

If people withdraw $10 million from the nation's money market mutual funds and redeposit the funds in various checkable and debitable accounts, then

Accepted Answer

A) M1 and M2 will remain unchanged. 
B) M1 will increase, M2 will remain unchanged. 
C) M1 will increase, M2 will decrease. 
D) M1 and M2 will increase. 
A) M1 and M2 will remain unchanged. 
B) M1 will increase, M2 will remain unchanged. 
C) M1 will increase, M2 will decrease. 
D) M1 and M2 will increase.

Question 20

A fiduciary monetary system is dependent on

Accepted Answer

A) acceptability and predictability of value. 
B) precious metals backing fiat money. 
C) Congressional monetary support. 
D) a negative inflation rate. 
A) acceptability and predictability of value. 
B) precious metals backing fiat money. 
C) Congressional monetary support. 
D) a negative inflation rate.

-Based on the above table, an open market operation in which the Fed purchased $100,000 of government securities would

What effect has the presence of federal deposit insurance had on the banking industry?

The direct exchange of one good or service for another is called

The liquidity approach to measuring the money supply uses

Which of the following would reduce the money multiplier?

The existence of money in an economy promotes efficiency by

Small-denomination time deposits are

The liquidity of money refers to

A fiduciary monetary system has to have all of the following EXCEPT

Money functions as a(n)

If something is to serve as money it must be a store of value. This means that it must

A bank with $100 million in deposits has $15 million of cash in the bank, $10 million in deposits with the Fed, and $15 million in government securities in its vault. Its total reserves equal

Which of the following is NOT a correct statement about the Federal Reserve banks?

As of 2010, the FDIC insured deposit accounts up to which of the following amounts?

Which of the following is NOT included in M1?

Which of the following would reduce the money multiplier?

The members of the Federal Open Market Committee are

If the transactions approach to measuring money is used, then the money supply consists of

If people withdraw $10 million from the nation's money market mutual funds and redeposit the funds in various checkable and debitable accounts, then

A fiduciary monetary system is dependent on

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

-Based on the above table, an open market operation in which the Fed purchased $100,000 of government securities would

What effect has the presence of federal deposit insurance had on the banking industry?

The direct exchange of one good or service for another is called

The liquidity approach to measuring the money supply uses

Which of the following would reduce the money multiplier?

The existence of money in an economy promotes efficiency by

Small-denomination time deposits are

The liquidity of money refers to

A fiduciary monetary system has to have all of the following EXCEPT

Money functions as a(n)

If something is to serve as money it must be a store of value. This means that it must

A bank with $100 million in deposits has $15 million of cash in the bank, $10 million in deposits with the Fed, and $15 million in government securities in its vault. Its total reserves equal

Which of the following is NOT a correct statement about the Federal Reserve banks?

As of 2010, the FDIC insured deposit accounts up to which of the following amounts?

Which of the following is NOT included in M1?

Which of the following would reduce the money multiplier?

The members of the Federal Open Market Committee are

If the transactions approach to measuring money is used, then the money supply consists of

If people withdraw $10 million from the nation's money market mutual funds and redeposit the funds in various checkable and debitable accounts, then

A fiduciary monetary system is dependent on

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