Question 1

If something is a unit of account,then it:

Accepted Answer

A)  serves as a yardstick for measuring the relative value of other goods 
B)  is a means of holding wealth for the future 
C)  is fairly stable 
D)  is durable and portable 
E)  is accepted as payment for any purchase 
A)  serves as a yardstick for measuring the relative value of other goods 
B)  is a means of holding wealth for the future 
C)  is fairly stable 
D)  is durable and portable 
E)  is accepted as payment for any purchase

Question 2

Which of the following defines the "store of value" 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)  That the materials used to manufacture money are of medium grade or quality, so that people will not hoard money for its commodity value. 
D)  That 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)  That the materials used to manufacture money are of medium grade or quality, so that people will not hoard money for its commodity value. 
D)  That money is widely accepted in exchange for goods and services.

Question 3

Which of the following is not a store of value?

Accepted Answer

A)  Federal Reserve notes. 
B)  Credit card. 
C)  Debit card. 
D)  Passbook savings deposit. 
A)  Federal Reserve notes. 
B)  Credit card. 
C)  Debit card. 
D)  Passbook savings deposit.

Question 4

M2 money includes all but which one of the following?

Accepted Answer

A)  Checkable deposits. 
B)  Savings accounts. 
C)  Large denomination time deposits. 
D)  Money market deposit accounts. 
E)  Money market mutual accounts. 
A)  Checkable deposits. 
B)  Savings accounts. 
C)  Large denomination time deposits. 
D)  Money market deposit accounts. 
E)  Money market mutual accounts.

Question 5

Which of the following is not counted as part of M1?

Accepted Answer

A)  Coins. 
B)  Federal Reserve notes or " paper money." 
C)  Passbook savings deposits. 
D)  Checkable deposits. 
A)  Coins. 
B)  Federal Reserve notes or " paper money." 
C)  Passbook savings deposits. 
D)  Checkable deposits.

Question 6

A direct exchange of fish for corn is an example of:

Accepted Answer

A)  storing value. 
B)  a modern exchange method. 
C)  barter. 
D)  a non-coincidence of wants. 
A)  storing value. 
B)  a modern exchange method. 
C)  barter. 
D)  a non-coincidence of wants.

Question 7

The largest component of the M1 definition of the money supply is:

Accepted Answer

A)  traveler's checks. 
B)  savings accounts. 
C)  money market accounts. 
D)  checkable deposits 
A)  traveler's checks. 
B)  savings accounts. 
C)  money market accounts. 
D)  checkable deposits

Question 8

Which of the following is counted as part of M2?

Accepted Answer

A)  Currency. 
B)  Checkable deposits. 
C)  Money-market mutual funds. 
D)  All of the above. 
A)  Currency. 
B)  Checkable deposits. 
C)  Money-market mutual funds. 
D)  All of the above.

Question 9

Which of the following assets is most liquid?

Accepted Answer

A)  Funds in a checking account. 
B)  A car. 
C)  A home. 
D)  A municipal bond. 
A)  Funds in a checking account. 
B)  A car. 
C)  A home. 
D)  A municipal bond.

Question 10

M1 is actually a smaller amount than M2.

Accepted Answer

A) True 
 B)False

Question 11

The President and the Congress jointly determine the nation's monetary policies,and the Fed is required by law to implement those policies.

Accepted Answer

A) True 
 B)False

Question 12

The Fed's principal decision-making body,which directs buying and selling U.S.government securities,is known as the:

Accepted Answer

A)  Federal Deposit Insurance Corporation. 
B)  District Board of Governors. 
C)  Federal Open Market Committee. 
D)  Reserve Requirement Regulation Conference. 
A)  Federal Deposit Insurance Corporation. 
B)  District Board of Governors. 
C)  Federal Open Market Committee. 
D)  Reserve Requirement Regulation Conference.

Question 13

The characteristics that money should have include:

Accepted Answer

A)  portability, durability, and flexibility. 
B)  durability, flexibility and stability. 
C)  durability, portability, and non-homogeneity. 
D)  scarcity, portability, and divisibility. 
E)  portability, homogeneity, and flexibility. 
A)  portability, durability, and flexibility. 
B)  durability, flexibility and stability. 
C)  durability, portability, and non-homogeneity. 
D)  scarcity, portability, and divisibility. 
E)  portability, homogeneity, and flexibility.

Question 14

Checkable deposits are not classified as money because they fail to provide a store of value.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following laws increased competition among financial institutions and gave the Fed greater control over nonmember banks?

Accepted Answer

A)  The Federal Reserve Act. 
B)  The Equal Credit Opportunity Act. 
C)  The Monetary Control Act. 
D)  The Thrift Bailout Bill. 
A)  The Federal Reserve Act. 
B)  The Equal Credit Opportunity Act. 
C)  The Monetary Control Act. 
D)  The Thrift Bailout Bill.

Question 16

Which of the following compose the M2 money supply?

Accepted Answer

A)  Currency only. 
B)  Currency, checkable deposits, and traveler's checks. 
C)  M1 plus large denomination time deposits and Eurodollar deposits. 
D)  M1 plus savings deposits and small-denomination time deposits. 
A)  Currency only. 
B)  Currency, checkable deposits, and traveler's checks. 
C)  M1 plus large denomination time deposits and Eurodollar deposits. 
D)  M1 plus savings deposits and small-denomination time deposits.

Question 17

Which of the following is the most important protection against fears of bank collapse?

Accepted Answer

A)  The Federal Reserve. 
B)  The Federal Reserve Open Market Committee. 
C)  The Federal Deposit Insurance Corporation. 
D)  The gold and silver that backs Federal Reserve notes. 
A)  The Federal Reserve. 
B)  The Federal Reserve Open Market Committee. 
C)  The Federal Deposit Insurance Corporation. 
D)  The gold and silver that backs Federal Reserve notes.

Question 18

One hundred dollars on deposit in a checking account represents the use of money as a:

Accepted Answer

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

Question 19

The Federal Reserve System is a branch of the Treasury Department.

Accepted Answer

A) True 
 B)False

Question 20

The Federal Reserve System:

Accepted Answer

A)  was created by and is owned by the government. 
B)  pursues independent fiscal policy at the behest of Congress. 
C)  never acts to control inflation. 
D)  pursues an independent monetary policy which can conflict with the government's economic policy. 
E)  only acts to lower taxes and increase spending when there are recessionary tendencies in the economy. 
A)  was created by and is owned by the government. 
B)  pursues independent fiscal policy at the behest of Congress. 
C)  never acts to control inflation. 
D)  pursues an independent monetary policy which can conflict with the government's economic policy. 
E)  only acts to lower taxes and increase spending when there are recessionary tendencies in the economy.

Exam 18: Money and the Federal Reserve System

If something is a unit of account,then it:

Which of the following defines the "store of value" function of money?

Which of the following is not a store of value?

M2 money includes all but which one of the following?

Which of the following is not counted as part of M1?

A direct exchange of fish for corn is an example of:

The largest component of the M1 definition of the money supply is:

Which of the following is counted as part of M2?

Which of the following assets is most liquid?

M1 is actually a smaller amount than M2.

The President and the Congress jointly determine the nation's monetary policies,and the Fed is required by law to implement those policies.

The Fed's principal decision-making body,which directs buying and selling U.S.government securities,is known as the:

The characteristics that money should have include:

Checkable deposits are not classified as money because they fail to provide a store of value.

Which of the following laws increased competition among financial institutions and gave the Fed greater control over nonmember banks?

Which of the following compose the M2 money supply?

Which of the following is the most important protection against fears of bank collapse?

One hundred dollars on deposit in a checking account represents the use of money as a:

The Federal Reserve System is a branch of the Treasury Department.

The Federal Reserve System:

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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