Question 1

Money is:

Accepted Answer

A)  valuable because it is backed by gold. 
B)  any items used in barter. 
C)  an illiquid asset. 
D)  none of the above. 
A)  valuable because it is backed by gold. 
B)  any items used in barter. 
C)  an illiquid asset. 
D)  none of the above. D

Question 2

Credit cards are money because they serve the three functions of money.

Accepted Answer

A) True 
 B)False  False

Question 3

Money is said to be liquid because it is immediately available to spend for goods.

Accepted Answer

A) True 
 B)False  True

Question 4

The use of a dollar bill to buy a concert ticket represents the function of money as a:

Accepted Answer

A)  medium of exchange. 
B)  unit of account. 
C)  store of value. 
D)  all of the above. 
A)  medium of exchange. 
B)  unit of account. 
C)  store of value. 
D)  all of the above.

Question 5

Which definition of the money supply includes credit cards?

Accepted Answer

A)  M1. 
B)  M2. 
C)  M3. 
D)  None of the above includes credit card balances. 
A)  M1. 
B)  M2. 
C)  M3. 
D)  None of the above includes credit card balances.

Question 6

When M1 is expanded to M2,the money supply:

Accepted Answer

A)  almost doubles. 
B)  more than triples. 
C)  goes up tenfold in size. 
D)  changes very little. 
E)  goes up by 50 percent. 
A)  almost doubles. 
B)  more than triples. 
C)  goes up tenfold in size. 
D)  changes very little. 
E)  goes up by 50 percent.

Question 7

The Fed's responsibilities include controlling the money supply,clearing checks,and supervising and regulating banks.

Accepted Answer

A) True 
 B)False

Question 8

If every person is willing to accept money in payment,rather than goods and services,money serves as a:

Accepted Answer

A)  medium of exchange. 
B)  unit of account. 
C)  store of value. 
D)  coincident exchange. 
A)  medium of exchange. 
B)  unit of account. 
C)  store of value. 
D)  coincident exchange.

Question 9

Which of the following is not part of M1?

Accepted Answer

A)  Checking accounts. 
B)  Coins. 
C)  Credit cards. 
D)  Paper currency. 
A)  Checking accounts. 
B)  Coins. 
C)  Credit cards. 
D)  Paper currency.

Question 10

Describe the functions of the Federal Reserve System.

Accepted Answer

The Fed's functions include (1)controlli

Question 11

The M1 definition of the money supply includes currency,

Accepted Answer

A)  checkable deposits, and savings accounts. 
B)  checkable deposits, and credit cards. 
C)  checkable deposits, and debit cards. 
D)  and checkable deposits. 
A)  checkable deposits, and savings accounts. 
B)  checkable deposits, and credit cards. 
C)  checkable deposits, and debit cards. 
D)  and checkable deposits.

Question 12

Which of the following is responsible for controlling the money supply in the United States?

Accepted Answer

A)  The U.S. Congress. 
B)  The Board of Governors of the Federal Reserve System. 
C)  The U.S. Treasury. 
D)  The Council of Economic Advisors. 
A)  The U.S. Congress. 
B)  The Board of Governors of the Federal Reserve System. 
C)  The U.S. Treasury. 
D)  The Council of Economic Advisors.

Question 13

Most commercial banks belong to the Federal Reserve System.

Accepted Answer

A) True 
 B)False

Question 14

If something is a medium of exchange,then it:

Accepted Answer

A)  serves as a yardstick for measuring the value of other goods. 
B)  is a means of holding wealth for the future. 
C)  has an absolute value in gold. 
D)  is widely accepted as payment for purchases. 
A)  serves as a yardstick for measuring the value of other goods. 
B)  is a means of holding wealth for the future. 
C)  has an absolute value in gold. 
D)  is widely accepted as payment for purchases.

Question 15

M1 money includes all but which one of the following?

Accepted Answer

A)  Checkable deposits. 
B)  Savings accounts. 
C)  Paper money. 
D)  Coins. 
A)  Checkable deposits. 
B)  Savings accounts. 
C)  Paper money. 
D)  Coins.

Question 16

Who owns the Fed?

Accepted Answer

A)  The federal government. 
B)  The states. 
C)  The District Federal Reserve Banks. 
D)  All banks. 
E)  Member banks. 
A)  The federal government. 
B)  The states. 
C)  The District Federal Reserve Banks. 
D)  All banks. 
E)  Member banks.

Question 17

Which of the following defines the "unit of account" function of money?

Accepted Answer

A)  A common measurement of the relative value of different goods and services. 
B)  The ability of money to hold value over time. 
C)  The materials used to manufacture money are of medium grade or quality, so that people will not hoard money for its commodity value. 
D)  Money is widely accepted in exchange for goods and services. 
A)  A common measurement of the relative value of different goods and services. 
B)  The ability of money to hold value over time. 
C)  The materials used to manufacture money are of medium grade or quality, so that people will not hoard money for its commodity value. 
D)  Money is widely accepted in exchange for goods and services.

Question 18

The Federal Reserve System was founded in:

Accepted Answer

A)  1913. 
B)  1929. 
C)  1933. 
D)  1935. 
A)  1913. 
B)  1929. 
C)  1933. 
D)  1935.

Question 19

What establishes the value of fiat money?

Accepted Answer

A)  Our collective trust and confidence that the central government, which decrees that money cannot be refused as payment for debt. 
B)  Gold and silver owned by the large commercial banks. 
C)  The central government authority's promise to redeem fiat money for gold or silver upon demand. 
D)  None of the above. 
A)  Our collective trust and confidence that the central government, which decrees that money cannot be refused as payment for debt. 
B)  Gold and silver owned by the large commercial banks. 
C)  The central government authority's promise to redeem fiat money for gold or silver upon demand. 
D)  None of the above.

Question 20

A barter economy is one in which:

Accepted Answer

A)  money serves as a medium of exchange. 
B)  only precious metals are accepted as money. 
C)  goods are traded directly for other goods. 
D)  paper money is backed by gold. 
A)  money serves as a medium of exchange. 
B)  only precious metals are accepted as money. 
C)  goods are traded directly for other goods. 
D)  paper money is backed by gold.

Exam 18: Money and the Federal Reserve System

Money is:

Credit cards are money because they serve the three functions of money.

Money is said to be liquid because it is immediately available to spend for goods.

The use of a dollar bill to buy a concert ticket represents the function of money as a:

Which definition of the money supply includes credit cards?

When M1 is expanded to M2,the money supply:

The Fed's responsibilities include controlling the money supply,clearing checks,and supervising and regulating banks.

If every person is willing to accept money in payment,rather than goods and services,money serves as a:

Which of the following is not part of M1?

Describe the functions of the Federal Reserve System.

The M1 definition of the money supply includes currency,

Which of the following is responsible for controlling the money supply in the United States?

Most commercial banks belong to the Federal Reserve System.

If something is a medium of exchange,then it:

M1 money includes all but which one of the following?

Who owns the Fed?

Which of the following defines the "unit of account" function of money?

The Federal Reserve System was founded in:

What establishes the value of fiat money?

A barter economy is one in which:

Introducing the Economic Way of Thinking

A: Appendix: Applying Graphs to Economics

Production Possibilities,Opportunity Cost,and Economic Growth

Part 1: Market Demand and Supply

Part 2: Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

A: Appendix: The Self-Correcting Aggregate Demand and Supply Model

Fiscal Policy

The Public Sector

Federal Deficits,Surpluses,and the National Debt

Money Creation

Monetary Policy

A: Appendix: Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

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