Question 1

Which of the following describes a moral hazard problem?

Accepted Answer

A) a process by which individuals have substantial resources devoted to the exchange process and need to make a profit or they will be adversely affected 
B) a post-contractual problem that may result because participants to the exchange process have information that allows them to act in an opportunistic manner 
C) a process by which individual buyers or sellers with better information are more likely to participate in voluntary exchange 
D) a contractual problem that results because monopolies exist in all economies 
A) a process by which individuals have substantial resources devoted to the exchange process and need to make a profit or they will be adversely affected 
B) a post-contractual problem that may result because participants to the exchange process have information that allows them to act in an opportunistic manner 
C) a process by which individual buyers or sellers with better information are more likely to participate in voluntary exchange 
D) a contractual problem that results because monopolies exist in all economies

Question 2

The Board of Governors of the Federal Reserve System is

Accepted Answer

A) elected by the general public. 
B) composed of seven members who are appointed by the President and approved by the Senate. 
C) composed of representatives from the country's 12 largest commercial banks. 
D) composed of 12 members of the Senate and the U.S. House of Representatives. 
A) elected by the general public. 
B) composed of seven members who are appointed by the President and approved by the Senate. 
C) composed of representatives from the country's 12 largest commercial banks. 
D) composed of 12 members of the Senate and the U.S. House of Representatives.

Question 3

The Federal Deposit Insurance Corporation

Accepted Answer

A) insures the deposits held by the Fed. 
B) insures the deposits held in banks. 
C) insures banks against lawsuits by depositors. 
D) insures the open market operations of the Fed. 
A) insures the deposits held by the Fed. 
B) insures the deposits held in banks. 
C) insures banks against lawsuits by depositors. 
D) insures the open market operations of the Fed.

Question 4

Which of the following is NOT included in the M1 money supply?

Accepted Answer

A) currency 
B) passbook savings accounts 
C) checkable and debitable accounts 
D) traveler's checks 
A) currency 
B) passbook savings accounts 
C) checkable and debitable accounts 
D) traveler's checks

Question 5

An increase in the reserve ratio

Accepted Answer

A) has an expansionary effect on the money supply. 
B) has a contractionary effect on the money supply. 
C) increases the money multiplier. 
D) will cause banks to make more loans. 
A) has an expansionary effect on the money supply. 
B) has a contractionary effect on the money supply. 
C) increases the money multiplier. 
D) will cause banks to make more loans.

Question 6

An account issued by banks yielding a market rate of interest with a minimum balance requirement and a limit on transactions is a

Accepted Answer

A) savings deposit. 
B) money market deposit account. 
C) time deposit. 
D) certificate of deposit. 
A) savings deposit. 
B) money market deposit account. 
C) time deposit. 
D) certificate of deposit.

Question 7

An asset is liquid if it

Accepted Answer

A) is of intrinsic value. 
B) can be exchanged for other goods and services. 
C) is a store of value. 
D) can be obtained or disposed of without losing much of its nominal value. 
A) is of intrinsic value. 
B) can be exchanged for other goods and services. 
C) is a store of value. 
D) can be obtained or disposed of without losing much of its nominal value.

Question 8

The reason that the commercial banking system can generate a multiple expansion or contraction of the money supply is that

Accepted Answer

A) banks are required to hold only a fraction of their deposit liabilities as reserves. 
B) most banks maintain a relatively large stock of reserves. 
C) banks hold reserves equal to their net worth. 
D) banks generally are required to hold surplus funds on deposit with other banks. 
A) banks are required to hold only a fraction of their deposit liabilities as reserves. 
B) most banks maintain a relatively large stock of reserves. 
C) banks hold reserves equal to their net worth. 
D) banks generally are required to hold surplus funds on deposit with other banks.

Question 9

Which of the following is NOT true about the duties the Fed performs for the federal government?

Accepted Answer

A) The Federal Reserve is the banker and fiscal agent of the federal government. 
B) The U.S. Treasury controls the Fed. 
C) The Federal Reserve aids in the purchase and sale of certain government securities. 
D) The U.S. Treasury has a checking account at the Fed. 
A) The Federal Reserve is the banker and fiscal agent of the federal government. 
B) The U.S. Treasury controls the Fed. 
C) The Federal Reserve aids in the purchase and sale of certain government securities. 
D) The U.S. Treasury has a checking account at the Fed.

Question 10

Total reserves are

Accepted Answer

A) required reserves plus vault cash. 
B) required reserves plus excess reserves. 
C) required reserves. 
D) excess reserves. 
A) required reserves plus vault cash. 
B) required reserves plus excess reserves. 
C) required reserves. 
D) excess reserves.

Question 11

A system in which the value of currency issued by the government is based entirely on public faith that the currency will be acceptable in trade is

Accepted Answer

A) a fiduciary system. 
B) a private property system. 
C) a Gresham system. 
D) a socialistic system. 
A) a fiduciary system. 
B) a private property system. 
C) a Gresham system. 
D) a socialistic system.

Question 12

A deposit in a financial institution that requires notice of intent to withdraw is a

Accepted Answer

A) savings deposit. 
B) money market deposit account. 
C) time deposit. 
D) certificate of deposit. 
A) savings deposit. 
B) money market deposit account. 
C) time deposit. 
D) certificate of deposit.

Question 13

According to the text, the actual M2 multiplier in the United States today is

Accepted Answer

A) about 5. 
B) between 1.0 and 2.0. 
C) negative. 
D) over 10. 
A) about 5. 
B) between 1.0 and 2.0. 
C) negative. 
D) over 10.

Question 14

Which one of the following is a function of the Federal Reserve System?

Accepted Answer

A) providing the economy with currency 
B) providing a system for check clearing 
C) serving as a lender of last resort 
D) all of the above 
A) providing the economy with currency 
B) providing a system for check clearing 
C) serving as a lender of last resort 
D) all of the above

Question 15

An asset that can be easily disposed of without high transactions costs and with relative certainty as to its value is

Accepted Answer

A) solid. 
B) liquid. 
C) M1. 
D) M2. 
A) solid. 
B) liquid. 
C) M1. 
D) M2.

Question 16

After the financial crisis of the late 2000s, President Obama and Congress considered adding to the Federal Reserve's functions by making it the nation's primary regulator of

Accepted Answer

A) systemic risk. 
B) default risk. 
C) credit risk. 
D) investment risk. 
A) systemic risk. 
B) default risk. 
C) credit risk. 
D) investment risk.

Question 17

The advantage of holding money as an asset is that

Accepted Answer

A) money earns interest. 
B) money is liquid. 
C) money is safe from thievery. 
D) the value of money appreciates over time. 
A) money earns interest. 
B) money is liquid. 
C) money is safe from thievery. 
D) the value of money appreciates over time.

Question 18

A price tag of $400 for a tablet device is an example of money as

Accepted Answer

A) a medium of exchange. 
B) a unit of accounting. 
C) a store of value. 
D) a time deposit. 
A) a medium of exchange. 
B) a unit of accounting. 
C) a store of value. 
D) a time deposit.

Question 19

Which of the following is NOT a benefit of money when used as a medium of exchange?

Accepted Answer

A) allowing individuals to specialize 
B) allowing individuals to pay off debts 
C) allowing for some economic efficiencies 
D) providing economic growth 
A) allowing individuals to specialize 
B) allowing individuals to pay off debts 
C) allowing for some economic efficiencies 
D) providing economic growth

Question 20

-Using the information in the above table, the value of M2 is

Accepted Answer

A) $3,500. 
B) $3,600. 
C) $4,500. 
D) $5,500. 
A) $3,500. 
B) $3,600. 
C) $4,500. 
D) $5,500.

Which of the following describes a moral hazard problem?

The Board of Governors of the Federal Reserve System is

The Federal Deposit Insurance Corporation

Which of the following is NOT included in the M1 money supply?

An increase in the reserve ratio

An account issued by banks yielding a market rate of interest with a minimum balance requirement and a limit on transactions is a

An asset is liquid if it

The reason that the commercial banking system can generate a multiple expansion or contraction of the money supply is that

Which of the following is NOT true about the duties the Fed performs for the federal government?

Total reserves are

A system in which the value of currency issued by the government is based entirely on public faith that the currency will be acceptable in trade is

A deposit in a financial institution that requires notice of intent to withdraw is a

According to the text, the actual M2 multiplier in the United States today is

Which one of the following is a function of the Federal Reserve System?

An asset that can be easily disposed of without high transactions costs and with relative certainty as to its value is

After the financial crisis of the late 2000s, President Obama and Congress considered adding to the Federal Reserve's functions by making it the nation's primary regulator of

The advantage of holding money as an asset is that

A price tag of $400 for a tablet device is an example of money as

Which of the following is NOT a benefit of money when used as a medium of exchange?

-Using the information in the above table, the value of M2 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

Which of the following describes a moral hazard problem?

The Board of Governors of the Federal Reserve System is

The Federal Deposit Insurance Corporation

Which of the following is NOT included in the M1 money supply?

An increase in the reserve ratio

An account issued by banks yielding a market rate of interest with a minimum balance requirement and a limit on transactions is a

An asset is liquid if it

The reason that the commercial banking system can generate a multiple expansion or contraction of the money supply is that

Which of the following is NOT true about the duties the Fed performs for the federal government?

Total reserves are

A system in which the value of currency issued by the government is based entirely on public faith that the currency will be acceptable in trade is

A deposit in a financial institution that requires notice of intent to withdraw is a

According to the text, the actual M2 multiplier in the United States today is

Which one of the following is a function of the Federal Reserve System?

An asset that can be easily disposed of without high transactions costs and with relative certainty as to its value is

After the financial crisis of the late 2000s, President Obama and Congress considered adding to the Federal Reserve's functions by making it the nation's primary regulator of

The advantage of holding money as an asset is that

A price tag of $400 for a tablet device is an example of money as

Which of the following is NOT a benefit of money when used as a medium of exchange?

-Using the information in the above table, the value of M2 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