Question 1

The designate M1 measure of money consists of

Accepted Answer

A) the most liquid types of money in the U.S. system. 
B) small time deposits only. 
C) credit cards and ATM cards. 
D) gold and gold coins. 
A) the most liquid types of money in the U.S. system. 
B) small time deposits only. 
C) credit cards and ATM cards. 
D) gold and gold coins.

Question 2

Other things being equal, if the reserve ratio is raised from 10 percent to 20 percent

Accepted Answer

A) minimum potential value of the money multiplier rises from 0.10 to 0.20. 
B) minimum potential value of the money multiplier falls from 100 to 50. 
C) maximum potential value of the money multiplier rises from 10 to 20. 
D) maximum potential value of the money multiplier falls from 10 to 5. 
A) minimum potential value of the money multiplier rises from 0.10 to 0.20. 
B) minimum potential value of the money multiplier falls from 100 to 50. 
C) maximum potential value of the money multiplier rises from 10 to 20. 
D) maximum potential value of the money multiplier falls from 10 to 5.

Question 3

Bank examinations by the FDIC help reduce the ________ problem, by preventing bank managers from allocating funds already obtained from depositors to non-creditworthy loans.

Accepted Answer

A) moral hazard 
B) principled hazard 
C) adverse selection 
D) contrary selection 
A) moral hazard 
B) principled hazard 
C) adverse selection 
D) contrary selection

Question 4

The cost of holding money is best described as

Accepted Answer

A) the cost of printing money. 
B) the cost which price decreases impose on money holders. 
C) the yield which is paid to money holders by the U.S. government. 
D) the yield that could have been earned had the asset been held in another form. 
A) the cost of printing money. 
B) the cost which price decreases impose on money holders. 
C) the yield which is paid to money holders by the U.S. government. 
D) the yield that could have been earned had the asset been held in another form.

Question 5

A checkable and debitable banking account is

Accepted Answer

A) a liability to a commercial bank. 
B) an asset to a commercial bank. 
C) a liability to the household or firm that has the account. 
D) an asset for the Federal Reserve System. 
A) a liability to a commercial bank. 
B) an asset to a commercial bank. 
C) a liability to the household or firm that has the account. 
D) an asset for the Federal Reserve System.

Question 6

The function of money that allows individuals a method to compare the relative value of goods and services is

Accepted Answer

A) medium of exchange. 
B) unit of accounting. 
C) store of value. 
D) liquidity. 
A) medium of exchange. 
B) unit of accounting. 
C) store of value. 
D) liquidity.

Question 7

If the reserve ratio is raised, the money multiplier

Accepted Answer

A) is lowered. 
B) is increased. 
C) stays the same. 
D) is doubled. 
A) is lowered. 
B) is increased. 
C) stays the same. 
D) is doubled.

Question 8

A checking account balance in a commercial bank is

Accepted Answer

A) part of the currency supply. 
B) a time deposit. 
C) not liquid enough to be considered money. 
D) an asset readily usable for most transactions. 
A) part of the currency supply. 
B) a time deposit. 
C) not liquid enough to be considered money. 
D) an asset readily usable for most transactions.

Question 9

If the reserve ratio is 10 percent and reserves in the commercial banking system increase by $10,000, the maximum possible expansion of demand deposits is

Accepted Answer

A) $10,000. 
B) $90,000. 
C) $100,000. 
D) $1,000,000. 
A) $10,000. 
B) $90,000. 
C) $100,000. 
D) $1,000,000.

Question 10

If the actual money multiplier equals the potential money multiplier and if the Federal Reserve wishes to increase the money supply by $500 when the reserve ratio is 10 percent, it should

Accepted Answer

A) sell $50 of government bonds. 
B) buy $50 of government bonds. 
C) sell $5000 of government bonds. 
D) buy $5000 of government bonds. 
A) sell $50 of government bonds. 
B) buy $50 of government bonds. 
C) sell $5000 of government bonds. 
D) buy $5000 of government bonds.

Question 11

The government agency that insures deposits held in banks in the United States is

Accepted Answer

A) the Federal Reserve System. 
B) the Federal Bank Insurance Corporation. 
C) the Federal Asset Insurance Corporation. 
D) the Federal Deposit Insurance Corporation. 
A) the Federal Reserve System. 
B) the Federal Bank Insurance Corporation. 
C) the Federal Asset Insurance Corporation. 
D) the Federal Deposit Insurance Corporation.

Question 12

Lenders generally want borrowers to agree to invest prudently, yet once a loan is made borrowers may use the funds in a highly risky fashion. This leads to the problem of

Accepted Answer

A) critical mass. 
B) deposit insurance. 
C) investor selection. 
D) moral hazard. 
A) critical mass. 
B) deposit insurance. 
C) investor selection. 
D) moral hazard.

Question 13

Which of the following assets are counted in M1?

Accepted Answer

A) transaction deposits 
B) mutual funds accounts 
C) bonds 
D) line of credit 
A) transaction deposits 
B) mutual funds accounts 
C) bonds 
D) line of credit

Question 14

As a result of money in an economy,

Accepted Answer

A) people are greedier than in a barter economy. 
B) stealing exists and people have to find ways to prevent theft. 
C) transaction costs are higher than would be the case in a barter economy. 
D) real Gross Domestic Product (GDP)and economic growth are greater than they would be in a barter economy. 
A) people are greedier than in a barter economy. 
B) stealing exists and people have to find ways to prevent theft. 
C) transaction costs are higher than would be the case in a barter economy. 
D) real Gross Domestic Product (GDP)and economic growth are greater than they would be in a barter economy.

Question 15

Stock market price quotations are an example of money serving as a

Accepted Answer

A) store of value. 
B) medium of exchange. 
C) unit of accounting. 
D) economic value. 
A) store of value. 
B) medium of exchange. 
C) unit of accounting. 
D) economic value.

Question 16

If the FOMC decides that the Fed should buy bonds it

Accepted Answer

A) instructs the New York Federal Reserve Bank's trading desk to buy them. 
B) asks the Congress for permission to buy them. 
C) requires the President's signature on the buy order. 
D) requires the permission of the Financial Oversight Committee. 
A) instructs the New York Federal Reserve Bank's trading desk to buy them. 
B) asks the Congress for permission to buy them. 
C) requires the President's signature on the buy order. 
D) requires the permission of the Financial Oversight Committee.

Question 17

Which of the following is responsible for the distribution of paper currency in the United States?

Accepted Answer

A) the U.S. Treasury 
B) the Office of the Comptroller of the currency 
C) the Federal Reserve 
D) all of the above 
A) the U.S. Treasury 
B) the Office of the Comptroller of the currency 
C) the Federal Reserve 
D) all of the above

Question 18

The degree to which an asset can be acquired or disposed of without much loss of nominal value or transaction costs is known as

Accepted Answer

A) fiat money. 
B) liquidity. 
C) fiducia. 
D) credit. 
A) fiat money. 
B) liquidity. 
C) fiducia. 
D) credit.

Question 19

Who benefits from the process of financial intermediation?

Accepted Answer

A) savers only 
B) borrowers only 
C) both savers and borrowers 
D) There is no benefit, because money does not create wealth. 
A) savers only 
B) borrowers only 
C) both savers and borrowers 
D) There is no benefit, because money does not create wealth.

Question 20

All transaction deposits are included in

Accepted Answer

A) M1 only. 
B) M2 only. 
C) both M1 and M2. 
D) savings balances only. 
A) M1 only. 
B) M2 only. 
C) both M1 and M2. 
D) savings balances only.

The designate M1 measure of money consists of

Other things being equal, if the reserve ratio is raised from 10 percent to 20 percent

Bank examinations by the FDIC help reduce the ________ problem, by preventing bank managers from allocating funds already obtained from depositors to non-creditworthy loans.

The cost of holding money is best described as

A checkable and debitable banking account is

The function of money that allows individuals a method to compare the relative value of goods and services is

If the reserve ratio is raised, the money multiplier

A checking account balance in a commercial bank is

If the reserve ratio is 10 percent and reserves in the commercial banking system increase by $10,000, the maximum possible expansion of demand deposits is

If the actual money multiplier equals the potential money multiplier and if the Federal Reserve wishes to increase the money supply by $500 when the reserve ratio is 10 percent, it should

The government agency that insures deposits held in banks in the United States is

Lenders generally want borrowers to agree to invest prudently, yet once a loan is made borrowers may use the funds in a highly risky fashion. This leads to the problem of

Which of the following assets are counted in M1?

As a result of money in an economy,

Stock market price quotations are an example of money serving as a

If the FOMC decides that the Fed should buy bonds it

Which of the following is responsible for the distribution of paper currency in the United States?

The degree to which an asset can be acquired or disposed of without much loss of nominal value or transaction costs is known as

Who benefits from the process of financial intermediation?

All transaction deposits are included in

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 designate M1 measure of money consists of

Other things being equal, if the reserve ratio is raised from 10 percent to 20 percent

Bank examinations by the FDIC help reduce the ________ problem, by preventing bank managers from allocating funds already obtained from depositors to non-creditworthy loans.

The cost of holding money is best described as

A checkable and debitable banking account is

The function of money that allows individuals a method to compare the relative value of goods and services is

If the reserve ratio is raised, the money multiplier

A checking account balance in a commercial bank is

If the reserve ratio is 10 percent and reserves in the commercial banking system increase by $10,000, the maximum possible expansion of demand deposits is

If the actual money multiplier equals the potential money multiplier and if the Federal Reserve wishes to increase the money supply by $500 when the reserve ratio is 10 percent, it should

The government agency that insures deposits held in banks in the United States is

Lenders generally want borrowers to agree to invest prudently, yet once a loan is made borrowers may use the funds in a highly risky fashion. This leads to the problem of

Which of the following assets are counted in M1?

As a result of money in an economy,

Stock market price quotations are an example of money serving as a

If the FOMC decides that the Fed should buy bonds it

Which of the following is responsible for the distribution of paper currency in the United States?

The degree to which an asset can be acquired or disposed of without much loss of nominal value or transaction costs is known as

Who benefits from the process of financial intermediation?

All transaction deposits are included in

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