Question 1

The Federal Reserve System is divided into how many districts?

Accepted Answer

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

Question 2

The Fed is the bankers' bank. What functions of the Fed are involved in this role?
 What are the other important functions of the Fed?

Accepted Answer

The Fed holds reserves of banks, lends t

Question 3

When the Fed buys a U.S. bond in the open market

Accepted Answer

A) its action has no effect on the total reserves or the money supply because the check it writes increases reserves at one bank but they fall at another. 
B) total reserves increase by the amount of the purchase but the money supply stays the same. 
C) its action expands total reserves and the money supply. 
D) its action contracts total reserves and the money supply. 
A) its action has no effect on the total reserves or the money supply because the check it writes increases reserves at one bank but they fall at another. 
B) total reserves increase by the amount of the purchase but the money supply stays the same. 
C) its action expands total reserves and the money supply. 
D) its action contracts total reserves and the money supply.

Question 4

The potential for a financial breakdown at large institutions to spread throughout the financial system is called

Accepted Answer

A) a systemic risk. 
B) a too-large-to-fail problem. 
C) an averse selection problem. 
D) a moral hazard. 
A) a systemic risk. 
B) a too-large-to-fail problem. 
C) an averse selection problem. 
D) a moral hazard.

Question 5

To contract the money supply, the Fed should

Accepted Answer

A) reduce the differential between the discount rate and the federal funds rate. 
B) increase government spending and cut taxes. 
C) lower the required reserve ratio. 
D) sell U.S. government securities. 
A) reduce the differential between the discount rate and the federal funds rate. 
B) increase government spending and cut taxes. 
C) lower the required reserve ratio. 
D) sell U.S. government securities.

Question 6

The largest component of M1 is

Accepted Answer

A) currency and coins. 
B) traveler's checks. 
C) transaction deposits. 
D) time deposit. 
A) currency and coins. 
B) traveler's checks. 
C) transaction deposits. 
D) time deposit.

Question 7

Total reserves are

Accepted Answer

A) deposits held by Federal Reserve district banks for depository institutions, plus depository institutions' vault cash. 
B) reserves that a depository institution must hold in the form of vault cash. 
C) reserves that depository institutions are allowed to claim as reserves. 
D) any item that legally functions as money. 
A) deposits held by Federal Reserve district banks for depository institutions, plus depository institutions' vault cash. 
B) reserves that a depository institution must hold in the form of vault cash. 
C) reserves that depository institutions are allowed to claim as reserves. 
D) any item that legally functions as money.

Question 8

Asymmetric information before a transaction takes place generates the problem of

Accepted Answer

A) bank runs. 
B) irrational behavior. 
C) moral hazard. 
D) adverse selection. 
A) bank runs. 
B) irrational behavior. 
C) moral hazard. 
D) adverse selection.

Question 9

The two basic ways to define money are

Accepted Answer

A) the transactions approach and the fiduciary approach. 
B) the transactions approach and the M1 approach. 
C) the transactions approach and the liquidity approach. 
D) the liquidity approach and the store of value approach. 
A) the transactions approach and the fiduciary approach. 
B) the transactions approach and the M1 approach. 
C) the transactions approach and the liquidity approach. 
D) the liquidity approach and the store of value approach.

Question 10

To expand the money supply, the Fed should

Accepted Answer

A) buy U.S. government securities. 
B) sell U.S. government securities. 
C) raise the required reserve ration. 
D) cut taxes. 
A) buy U.S. government securities. 
B) sell U.S. government securities. 
C) raise the required reserve ration. 
D) cut taxes.

Question 11

Which of the following statements is NOT true about money?

Accepted Answer

A) Anything that serves as a medium of exchange, as a unit of accounting, as a store of value, and as a standard of deferred payment can be called money. 
B) Money is any medium that is universally accepted by sellers and creditors. 
C) Money is a standard of deferred payment. 
D) Money can only be coins and paper. 
A) Anything that serves as a medium of exchange, as a unit of accounting, as a store of value, and as a standard of deferred payment can be called money. 
B) Money is any medium that is universally accepted by sellers and creditors. 
C) Money is a standard of deferred payment. 
D) Money can only be coins and paper.

Question 12

Thrift institutions

Accepted Answer

A) receive most of their funds from the public's savings deposits. 
B) include commercial banks and investment firms. 
C) include credit unions but not savings and loan associations. 
D) do not offer transaction deposits. 
A) receive most of their funds from the public's savings deposits. 
B) include commercial banks and investment firms. 
C) include credit unions but not savings and loan associations. 
D) do not offer transaction deposits.

Question 13

Who appoints the chair of the Federal Reserve System?

Accepted Answer

A) the Senate and Congress 
B) member banks of the Federal Reserve System 
C) the President of the United States 
D) the Federal Open Market Committee (FOM
C)  
A) the Senate and Congress 
B) member banks of the Federal Reserve System 
C) the President of the United States 
D) the Federal Open Market Committee (FOM
C)

Question 14

A system in which depository institutions hold reserves that are less than the amount of total deposits is called

Accepted Answer

A) fiat money banking. 
B) fractional reserve banking. 
C) central banking system. 
D) required reserve banking. 
A) fiat money banking. 
B) fractional reserve banking. 
C) central banking system. 
D) required reserve banking.

Question 15

In economics, money is

Accepted Answer

A) another term for income. 
B) a financial instrument backed by some precious metal such as gold or silver. 
C) anything that people generally accept in exchange for goods and services. 
D) whatever the government defines it to be. 
A) another term for income. 
B) a financial instrument backed by some precious metal such as gold or silver. 
C) anything that people generally accept in exchange for goods and services. 
D) whatever the government defines it to be.

Question 16

Which of the following is the most liquid?

Accepted Answer

A) real estate 
B) currency 
C) U.S. treasury bonds 
D) shares of stock 
A) real estate 
B) currency 
C) U.S. treasury bonds 
D) shares of stock

Question 17

An item to which a business holds legal claim is called a(n)

Accepted Answer

A) asset. 
B) liability. 
C) loan. 
D) time deposit. 
A) asset. 
B) liability. 
C) loan. 
D) time deposit.

Question 18

Federal Reserve notes are

Accepted Answer

A) a liability of the Federal Reserve System. 
B) an asset to the Federal Reserve System. 
C) both an asset and a liability to the Federal Reserve System. 
D) a liability to the United States Treasury. 
A) a liability of the Federal Reserve System. 
B) an asset to the Federal Reserve System. 
C) both an asset and a liability to the Federal Reserve System. 
D) a liability to the United States Treasury.

Question 19

Which of the following statements does NOT describe a function of money?

Accepted Answer

A) a store of value 
B) a hedge against inflation 
C) a standard of deferred payment 
D) a unit of accounting 
A) a store of value 
B) a hedge against inflation 
C) a standard of deferred payment 
D) a unit of accounting

Question 20

Deposit insurance shields depositors from the adverse effects of risky decisions and thereby

Accepted Answer

A) encourages riskier behavior on the part of managers of depository institutions. 
B) encourages depositors to monitor the managers of depository institutions more closely. 
C) encourages moral hazard on the part of depositors. 
D) generates a more efficient banking system. 
A) encourages riskier behavior on the part of managers of depository institutions. 
B) encourages depositors to monitor the managers of depository institutions more closely. 
C) encourages moral hazard on the part of depositors. 
D) generates a more efficient banking system.

The Federal Reserve System is divided into how many districts?

The Fed is the bankers' bank. What functions of the Fed are involved in this role? What are the other important functions of the Fed?

When the Fed buys a U.S. bond in the open market

The potential for a financial breakdown at large institutions to spread throughout the financial system is called

To contract the money supply, the Fed should

The largest component of M1 is

Total reserves are

Asymmetric information before a transaction takes place generates the problem of

The two basic ways to define money are

To expand the money supply, the Fed should

Which of the following statements is NOT true about money?

Thrift institutions

Who appoints the chair of the Federal Reserve System?

A system in which depository institutions hold reserves that are less than the amount of total deposits is called

In economics, money is

Which of the following is the most liquid?

An item to which a business holds legal claim is called a(n)

Federal Reserve notes are

Which of the following statements does NOT describe a function of money?

Deposit insurance shields depositors from the adverse effects of risky decisions and thereby

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

The Federal Reserve System is divided into how many districts?

The Fed is the bankers' bank. What functions of the Fed are involved in this role? What are the other important functions of the Fed?

When the Fed buys a U.S. bond in the open market

The potential for a financial breakdown at large institutions to spread throughout the financial system is called

To contract the money supply, the Fed should

The largest component of M1 is

Total reserves are

Asymmetric information before a transaction takes place generates the problem of

The two basic ways to define money are

To expand the money supply, the Fed should

Which of the following statements is NOT true about money?

Thrift institutions

Who appoints the chair of the Federal Reserve System?

A system in which depository institutions hold reserves that are less than the amount of total deposits is called

In economics, money is

Which of the following is the most liquid?

An item to which a business holds legal claim is called a(n)

Federal Reserve notes are

Which of the following statements does NOT describe a function of money?

Deposit insurance shields depositors from the adverse effects of risky decisions and thereby

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