Question 1

The reason we are willing to accept money with no intrinsic value is that

Accepted Answer

A) paper currency may be exchanged for full-bodied money. 
B) the money supply is backed by an equal amount of gold and silver. 
C) we have a fiduciary monetary system in which currency has both acceptability and predictability of value. 
D) the value of the money varies directly with changes in the price level. 
A) paper currency may be exchanged for full-bodied money. 
B) the money supply is backed by an equal amount of gold and silver. 
C) we have a fiduciary monetary system in which currency has both acceptability and predictability of value. 
D) the value of the money varies directly with changes in the price level.

Question 2

Which of the following is NOT a function of the Fed?

Accepted Answer

A) holding reserves for depository institutions 
B) supervising member banks 
C) regulating the money supply 
D) lending funds to credit-worthy private firms 
A) holding reserves for depository institutions 
B) supervising member banks 
C) regulating the money supply 
D) lending funds to credit-worthy private firms

Question 3

Which of the following is NOT a function of the Federal Reserve System?

Accepted Answer

A) providing for check collection and clearing 
B) holding deposits of member banks 
C) supervising member banks 
D) making loans to college students 
A) providing for check collection and clearing 
B) holding deposits of member banks 
C) supervising member banks 
D) making loans to college students

Question 4

Which of the following assets is the most liquid in the United States?

Accepted Answer

A) U.S. Treasury Bonds 
B) U.S. currency 
C) corporate bonds 
D) an antique car 
A) U.S. Treasury Bonds 
B) U.S. currency 
C) corporate bonds 
D) an antique car

Question 5

If a check was written on Bank A for $100 and Bank B presented the check to Bank A for payment, what will happen to the required reserves for each respective bank after payment is made?

Accepted Answer

A) Bank A's required reserves increase; Bank B's decrease. 
B) Bank B's required reserves increase; Bank A's decrease. 
C) Both banks will see an increase in their required reserves. 
D) Both banks will see a decrease in their required reserves. 
A) Bank A's required reserves increase; Bank B's decrease. 
B) Bank B's required reserves increase; Bank A's decrease. 
C) Both banks will see an increase in their required reserves. 
D) Both banks will see a decrease in their required reserves.

Question 6

It is widely believed that the Federal Reserve's most important function is

Accepted Answer

A) to provide loans to the federal government. 
B) to regulate the money supply. 
C) to set the legal, controlled consumer interest rates. 
D) to lend to risky customers. 
A) to provide loans to the federal government. 
B) to regulate the money supply. 
C) to set the legal, controlled consumer interest rates. 
D) to lend to risky customers.

Question 7

When the Fed buys U.S. government securities on the open market

Accepted Answer

A) the reserves of the banking system expand. 
B) the reserves of the banking system contract. 
C) the money supply contracts. 
D) the total reserves of the banking system will fall below required reserves. 
A) the reserves of the banking system expand. 
B) the reserves of the banking system contract. 
C) the money supply contracts. 
D) the total reserves of the banking system will fall below required reserves.

Question 8

To function as money, something must hold its purchasing power over time. That is, it must be a

Accepted Answer

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

Question 9

In defining money as M1, economists exclude time deposits because

Accepted Answer

A) they have no intrinsic value. 
B) they do not directly serve as a medium of exchange. 
C) they are not recognized as legal tender. 
D) they earn an interest for their holders. 
A) they have no intrinsic value. 
B) they do not directly serve as a medium of exchange. 
C) they are not recognized as legal tender. 
D) they earn an interest for their holders.

Question 10

A medium of exchange is

Accepted Answer

A) any asset that sellers will accept as payment. 
B) a measure by which prices are expressed. 
C) an asset that is used to settle future debts. 
D) the thing traded when barter takes place. 
A) any asset that sellers will accept as payment. 
B) a measure by which prices are expressed. 
C) an asset that is used to settle future debts. 
D) the thing traded when barter takes place.

Question 11

Transactions deposits include

Accepted Answer

A) credit cards. 
B) certificates of deposit. 
C) lines of credit. 
D) checkable and debitable accounts. 
A) credit cards. 
B) certificates of deposit. 
C) lines of credit. 
D) checkable and debitable accounts.

Question 12

An increase in the interest rate would induce people to

Accepted Answer

A) sell shares of stock and buy bonds, but would have no effect on their desire to hold money. 
B) get rid of all their money and buy stocks with it. 
C) sell their least liquid assets and hold more money in case interest rates go up again. 
D) hold a smaller fraction of their wealth in the form of money. 
A) sell shares of stock and buy bonds, but would have no effect on their desire to hold money. 
B) get rid of all their money and buy stocks with it. 
C) sell their least liquid assets and hold more money in case interest rates go up again. 
D) hold a smaller fraction of their wealth in the form of money.

Question 13

The property of money that allows for the settling of debts that mature in the future is

Accepted Answer

A) liquidity. 
B) acceptability. 
C) store of value. 
D) standard of deferred payment. 
A) liquidity. 
B) acceptability. 
C) store of value. 
D) standard of deferred payment.

Question 14

What is money?

Accepted Answer

Money is any medium that is un

Question 15

When you set aside the money you have today in order to purchase goods and services later on, you are using money as a

Accepted Answer

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

Question 16

Which of the following institutions has the responsibility for producing the coins that are distributed in the United States?

Accepted Answer

A) the Office of the Comptroller of the Currency 
B) the Federal Reserve System 
C) the U.S. Treasury Department 
D) the U.S. Mint 
A) the Office of the Comptroller of the Currency 
B) the Federal Reserve System 
C) the U.S. Treasury Department 
D) the U.S. Mint

Question 17

Financial intermediaries are institutions that

Accepted Answer

A) produce money for the federal government. 
B) regulate the activities of stock and bond markets. 
C) act as middlemen in the process of directing funds from savers to investors. 
D) oversee the activities of government institutions such as the Federal Reserve. 
A) produce money for the federal government. 
B) regulate the activities of stock and bond markets. 
C) act as middlemen in the process of directing funds from savers to investors. 
D) oversee the activities of government institutions such as the Federal Reserve.

Question 18

Without an accepted medium of exchange, people

Accepted Answer

A) have to specialize in one area of production. 
B) have to rely on gold or silver in order to exchange goods and services. 
C) have to resort to barter in order to exchange goods and services. 
D) can efficiently obtain goods and services. 
A) have to specialize in one area of production. 
B) have to rely on gold or silver in order to exchange goods and services. 
C) have to resort to barter in order to exchange goods and services. 
D) can efficiently obtain goods and services.

Question 19

When the Federal Reserve sells a government security to a commercial bank

Accepted Answer

A) the cash reserves of the commercial bank decrease. 
B) the net worth of the commercial bank increases. 
C) the loans of the commercial bank will increase. 
D) the balance sheet of the commercial bank is thrown off balance. 
A) the cash reserves of the commercial bank decrease. 
B) the net worth of the commercial bank increases. 
C) the loans of the commercial bank will increase. 
D) the balance sheet of the commercial bank is thrown off balance.

Question 20

Why does the money supply increase when the Fed buys a bond but does not change when a business buys a bond?

Accepted Answer

The reserves in the banking system incre

The reason we are willing to accept money with no intrinsic value is that

Which of the following is NOT a function of the Fed?

Which of the following is NOT a function of the Federal Reserve System?

Which of the following assets is the most liquid in the United States?

If a check was written on Bank A for $100 and Bank B presented the check to Bank A for payment, what will happen to the required reserves for each respective bank after payment is made?

It is widely believed that the Federal Reserve's most important function is

When the Fed buys U.S. government securities on the open market

To function as money, something must hold its purchasing power over time. That is, it must be a

In defining money as M1, economists exclude time deposits because

A medium of exchange is

Transactions deposits include

An increase in the interest rate would induce people to

The property of money that allows for the settling of debts that mature in the future is

What is money?

When you set aside the money you have today in order to purchase goods and services later on, you are using money as a

Which of the following institutions has the responsibility for producing the coins that are distributed in the United States?

Financial intermediaries are institutions that

Without an accepted medium of exchange, people

When the Federal Reserve sells a government security to a commercial bank

Why does the money supply increase when the Fed buys a bond but does not change when a business buys a bond?

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 reason we are willing to accept money with no intrinsic value is that

Which of the following is NOT a function of the Fed?

Which of the following is NOT a function of the Federal Reserve System?

Which of the following assets is the most liquid in the United States?

If a check was written on Bank A for $100 and Bank B presented the check to Bank A for payment, what will happen to the required reserves for each respective bank after payment is made?

It is widely believed that the Federal Reserve's most important function is

When the Fed buys U.S. government securities on the open market

To function as money, something must hold its purchasing power over time. That is, it must be a

In defining money as M1, economists exclude time deposits because

A medium of exchange is

Transactions deposits include

An increase in the interest rate would induce people to

The property of money that allows for the settling of debts that mature in the future is

What is money?

When you set aside the money you have today in order to purchase goods and services later on, you are using money as a

Which of the following institutions has the responsibility for producing the coins that are distributed in the United States?

Financial intermediaries are institutions that

Without an accepted medium of exchange, people

When the Federal Reserve sells a government security to a commercial bank

Why does the money supply increase when the Fed buys a bond but does not change when a business buys a bond?

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