Question 1

How are the assets and liabilities changed for a bond dealer, the bond dealer's bank, and the Fed when the Fed buys $100,000 in bonds?

Accepted Answer

The bond dealer trades a bond for a tran

Question 2

-According to the above table, the value of M1 is

Accepted Answer

A) $1,888 billion. 
B) $1,629 billion. 
C) $1,213 billion. 
D) $1,205 billion. 
A) $1,888 billion. 
B) $1,629 billion. 
C) $1,213 billion. 
D) $1,205 billion.

Question 3

Suppose that the reserve ratio is 5%. What is the value of the potential money multiplier?

Accepted Answer

A) 2 
B) 5 
C) 10 
D) 20 
A) 2 
B) 5 
C) 10 
D) 20

Question 4

Financial intermediation is best defined as the process by which

Accepted Answer

A) inflation is controlled. 
B) corporations issue new stock. 
C) liabilities are liquidated. 
D) financial institutions accept savings from savers and make loans to investors. 
A) inflation is controlled. 
B) corporations issue new stock. 
C) liabilities are liquidated. 
D) financial institutions accept savings from savers and make loans to investors.

Question 5

Assets that can be easily converted into money without significant loss of value are

Accepted Answer

A) transactions balances. 
B) near monies. 
C) currencies. 
D) liabilities. 
A) transactions balances. 
B) near monies. 
C) currencies. 
D) liabilities.

Question 6

A monetary system is preferable over the barter system because it

Accepted Answer

A) reduces transaction costs. 
B) is easier to track by the government. 
C) limits cash leakages. 
D) is determined by the Congress. 
A) reduces transaction costs. 
B) is easier to track by the government. 
C) limits cash leakages. 
D) is determined by the Congress.

Question 7

The part of the Federal Reserve System (the Fed)that directs the buying and selling of U.S. government securities 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 8

Fractional reserve banking began

Accepted Answer

A) in the early twentieth century. 
B) in the early nineteenth century. 
C) in the Middle Ages. 
D) in ancient Greece. 
A) in the early twentieth century. 
B) in the early nineteenth century. 
C) in the Middle Ages. 
D) in ancient Greece.

Question 9

Two people are involved in a borrower/lender situation, and one person has superior knowledge of its own current and future prospects over the other person. This is known as

Accepted Answer

A) preventable information. 
B) symmetric information. 
C) asymmetric information. 
D) deceptive knowledge. 
A) preventable information. 
B) symmetric information. 
C) asymmetric information. 
D) deceptive knowledge.

Question 10

When Annie puts her money in her sock drawer for purchases later on, money is acting as a

Accepted Answer

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

Question 11

A statement of assets and liabilities of any business entity is called

Accepted Answer

A) an income statement. 
B) a cash flow statement. 
C) a balance sheet. 
D) a statement of net worth. 
A) an income statement. 
B) a cash flow statement. 
C) a balance sheet. 
D) a statement of net worth.

Question 12

Checking accounts are included in

Accepted Answer

A) certificates of deposit. 
B) currency. 
C) lines of credit. 
D) M1. 
A) certificates of deposit. 
B) currency. 
C) lines of credit. 
D) M1.

Question 13

You go to work today, but will get your paycheck at the end of the month. This is an example of money serving 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 14

Bank runs are a possibility because

Accepted Answer

A) the FDIC is inefficient. 
B) bankers are often poor businesspeople. 
C) in difficult times people want currency instead of demand deposits. 
D) banks do not keep enough reserves to cover all their depository liabilities. 
A) the FDIC is inefficient. 
B) bankers are often poor businesspeople. 
C) in difficult times people want currency instead of demand deposits. 
D) banks do not keep enough reserves to cover all their depository liabilities.

Question 15

A method of measuring the money supply by looking at money as a temporary store of value is the

Accepted Answer

A) fiduciary monetary system. 
B) capital control. 
C) transactions approach. 
D) liquidity approach. 
A) fiduciary monetary system. 
B) capital control. 
C) transactions approach. 
D) liquidity approach.

Question 16

Liquidity refers to

Accepted Answer

A) the ease with which an asset can be acquired or disposed of without incurring high transaction costs. 
B) the expected return from an asset. 
C) the amount of indebtedness held against an asset. 
D) the net worth of the individual in question. 
A) the ease with which an asset can be acquired or disposed of without incurring high transaction costs. 
B) the expected return from an asset. 
C) the amount of indebtedness held against an asset. 
D) the net worth of the individual in question.

Question 17

The possibility that a borrower might engage in riskier behavior after a loan has been obtained is

Accepted Answer

A) asymmetric information. 
B) adverse selection. 
C) moral hazard. 
D) financial intermediation. 
A) asymmetric information. 
B) adverse selection. 
C) moral hazard. 
D) financial intermediation.

Question 18

A checkable account

Accepted Answer

A) is a very illiquid asset. 
B) is one on which the holder can write checks. 
C) must be traded on the stock exchange. 
D) cannot serve as a store of value. 
A) is a very illiquid asset. 
B) is one on which the holder can write checks. 
C) must be traded on the stock exchange. 
D) cannot serve as a store of value.

Question 19

All of the following are functions of the Federal Reserve System EXCEPT

Accepted Answer

A) supplying the economy with fiduciary currency. 
B) providing a system of check collection and clearing. 
C) acting as the government's fiscal agent. 
D) lending funds to risky customers denied credit by commercial banks. 
A) supplying the economy with fiduciary currency. 
B) providing a system of check collection and clearing. 
C) acting as the government's fiscal agent. 
D) lending funds to risky customers denied credit by commercial banks.

Question 20

The cost of holding money is

Accepted Answer

A) transactions accounts. 
B) the opportunity cost. 
C) the liquidity approach. 
D) capital controls. 
A) transactions accounts. 
B) the opportunity cost. 
C) the liquidity approach. 
D) capital controls.

How are the assets and liabilities changed for a bond dealer, the bond dealer's bank, and the Fed when the Fed buys $100,000 in bonds?

-According to the above table, the value of M1 is

Suppose that the reserve ratio is 5%. What is the value of the potential money multiplier?

Financial intermediation is best defined as the process by which

Assets that can be easily converted into money without significant loss of value are

A monetary system is preferable over the barter system because it

The part of the Federal Reserve System (the Fed)that directs the buying and selling of U.S. government securities is

Fractional reserve banking began

Two people are involved in a borrower/lender situation, and one person has superior knowledge of its own current and future prospects over the other person. This is known as

When Annie puts her money in her sock drawer for purchases later on, money is acting as a

A statement of assets and liabilities of any business entity is called

Checking accounts are included in

You go to work today, but will get your paycheck at the end of the month. This is an example of money serving as a

Bank runs are a possibility because

A method of measuring the money supply by looking at money as a temporary store of value is the

Liquidity refers to

The possibility that a borrower might engage in riskier behavior after a loan has been obtained is

A checkable account

All of the following are functions of the Federal Reserve System EXCEPT

The cost of holding money is

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

How are the assets and liabilities changed for a bond dealer, the bond dealer's bank, and the Fed when the Fed buys $100,000 in bonds?

-According to the above table, the value of M1 is

Suppose that the reserve ratio is 5%. What is the value of the potential money multiplier?

Financial intermediation is best defined as the process by which

Assets that can be easily converted into money without significant loss of value are

A monetary system is preferable over the barter system because it

The part of the Federal Reserve System (the Fed)that directs the buying and selling of U.S. government securities is

Fractional reserve banking began

Two people are involved in a borrower/lender situation, and one person has superior knowledge of its own current and future prospects over the other person. This is known as

When Annie puts her money in her sock drawer for purchases later on, money is acting as a

A statement of assets and liabilities of any business entity is called

Checking accounts are included in

You go to work today, but will get your paycheck at the end of the month. This is an example of money serving as a

Bank runs are a possibility because

A method of measuring the money supply by looking at money as a temporary store of value is the

Liquidity refers to

The possibility that a borrower might engage in riskier behavior after a loan has been obtained is

A checkable account

All of the following are functions of the Federal Reserve System EXCEPT

The cost of holding money is

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