Question 1

The ease with which an asset can be converted into a medium of exchange is:

Accepted Answer

A)  currency convertibility. 
B)  asset convertibility. 
C)  convertibility. 
D)  money convertibility. 
E)  liquidity. 
A)  currency convertibility. 
B)  asset convertibility. 
C)  convertibility. 
D)  money convertibility. 
E)  liquidity.

Question 2

Which one of the following is part of the M2 definition of the money supply,but not part of M1?

Accepted Answer

A)  Checkable deposits. 
B)  Currency held in banks. 
C)  Currency in circulation. 
D)  Small time deposits of less than $100,000. 
A)  Checkable deposits. 
B)  Currency held in banks. 
C)  Currency in circulation. 
D)  Small time deposits of less than $100,000.

Question 3

The Federal Deposit Insurance Corporation (FDIC):

Accepted Answer

A)  insures all demand deposit accounts up to $10 million in banks choosing FDIC protection. 
B)  was created as a government-owned corporation following the creation of the World Bank and the International Monetary Fund after World War II. 
C)  rarely evaluates bank performance to detect weaknesses in operation. 
D)  creates monetary policy in conjunction with the Federal Reserve Board. 
E)  was created to reduce the risk of banking by compensating depositors and keeping bank failures from spreading. 
A)  insures all demand deposit accounts up to $10 million in banks choosing FDIC protection. 
B)  was created as a government-owned corporation following the creation of the World Bank and the International Monetary Fund after World War II. 
C)  rarely evaluates bank performance to detect weaknesses in operation. 
D)  creates monetary policy in conjunction with the Federal Reserve Board. 
E)  was created to reduce the risk of banking by compensating depositors and keeping bank failures from spreading.

Question 4

Although the chairman of its Board of Governors is appointed by the Treasury Department,the Fed operates with considerable independence from the executive branch of the government.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following items does not provide a store of value?

Accepted Answer

A)  Currency. 
B)  Checkable deposits. 
C)  Credit cards. 
D)  All of the above are correct. 
A)  Currency. 
B)  Checkable deposits. 
C)  Credit cards. 
D)  All of the above are correct.

Question 6

Which of the following types of financial institutions is required to belong to the Federal Reserve System?

Accepted Answer

A)  National banks. 
B)  State-chartered banks. 
C)  Savings and loan institutions. 
D)  Credit unions. 
A)  National banks. 
B)  State-chartered banks. 
C)  Savings and loan institutions. 
D)  Credit unions.

Question 7

By definition,M1 includes:

Accepted Answer

A)  savings accounts. 
B)  money market mutual accounts. 
C)  small denomination time deposits. 
D)  checkable deposits. 
A)  savings accounts. 
B)  money market mutual accounts. 
C)  small denomination time deposits. 
D)  checkable deposits.

Question 8

Barter requires:

Accepted Answer

A)  that the exchanged goods be portable. 
B)  that the exchanged goods be durable. 
C)  a coincidence of wants. 
D)  that the exchange medium be divisible. 
E)  an effective middleman. 
A)  that the exchanged goods be portable. 
B)  that the exchanged goods be durable. 
C)  a coincidence of wants. 
D)  that the exchange medium be divisible. 
E)  an effective middleman.

Question 9

Credit cards are:

Accepted Answer

A)  M1 money. 
B)  M2 money. 
C)  near money. 
D)  not money. 
A)  M1 money. 
B)  M2 money. 
C)  near money. 
D)  not money.

Question 10

Any item can successfully serve as money.

Accepted Answer

A) True 
 B)False

Question 11

Comparing how many dollars it takes to attend college each year to annual earnings on a job represents the use of money as a:

Accepted Answer

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

Question 12

Which of the following statements is false?

Accepted Answer

A)  Round stones with holes in the center can serve as money. 
B)  Money eases the process of exchanging goods and services in a modern economy. 
C)  Money serves as a measure of value only when it is backed by gold or silver. 
D)  Money is used as a measure of the relative value of goods and services in an economy. 
A)  Round stones with holes in the center can serve as money. 
B)  Money eases the process of exchanging goods and services in a modern economy. 
C)  Money serves as a measure of value only when it is backed by gold or silver. 
D)  Money is used as a measure of the relative value of goods and services in an economy.

Question 13

Which of the following assets is the most liquid?

Accepted Answer

A)  Money. 
B)  Gold. 
C)  Land. 
D)  Stocks. 
A)  Money. 
B)  Gold. 
C)  Land. 
D)  Stocks.

Question 14

M1 refers to:

Accepted Answer

A)  Federal Reserve Notes and gold certificates. 
B)  Currency held by the public plus checking account balances. 
C)  The largest of the money-supply definitions. 
D)  None of the above. 
A)  Federal Reserve Notes and gold certificates. 
B)  Currency held by the public plus checking account balances. 
C)  The largest of the money-supply definitions. 
D)  None of the above.

Question 15

The M1 money supply is defined to be the sum of currency,and:

Accepted Answer

A)  checkable deposits. 
B)  Treasury bonds. 
C)  savings accounts. 
D)  large time deposits. 
A)  checkable deposits. 
B)  Treasury bonds. 
C)  savings accounts. 
D)  large time deposits.

Question 16

Which of the following forms of money is the least liquid?

Accepted Answer

A)  Dollars. 
B)  Checking account deposits. 
C)  Passbook savings. 
D)  Certificates of deposit. 
A)  Dollars. 
B)  Checking account deposits. 
C)  Passbook savings. 
D)  Certificates of deposit.

Question 17

The Fed is often considered the bankers' bank because it:

Accepted Answer

A)  demands much more currency than it has available. 
B)  no longer has a monopoly on printing paper currency. 
C)  lowers the discount rate in order to restrict the money supply. 
D)  holds bankers reserves, provides banks with currency and loans, and clears their checks. 
E)  refuses to uses its power of open market operations when a quorum of state-chartered bankers petitions it. 
A)  demands much more currency than it has available. 
B)  no longer has a monopoly on printing paper currency. 
C)  lowers the discount rate in order to restrict the money supply. 
D)  holds bankers reserves, provides banks with currency and loans, and clears their checks. 
E)  refuses to uses its power of open market operations when a quorum of state-chartered bankers petitions it.

Question 18

Which of the following is not considered part of M2?

Accepted Answer

A)  Small time deposits of less than $100,000. 
B)  Money market mutual fund shares. 
C)  Savings deposits. 
D)  Large time deposits of more than $100,000. 
A)  Small time deposits of less than $100,000. 
B)  Money market mutual fund shares. 
C)  Savings deposits. 
D)  Large time deposits of more than $100,000.

Question 19

Which one of the following items would be the most liquid?

Accepted Answer

A)  Pizza. 
B)  Ticket to next week's basketball game. 
C)  Stereo. 
D)  Dollar bill. 
E)  U.S. savings bond. 
A)  Pizza. 
B)  Ticket to next week's basketball game. 
C)  Stereo. 
D)  Dollar bill. 
E)  U.S. savings bond.

Question 20

Which of the following is not a store of value?

Accepted Answer

A)  Dollar bills. 
B)  Credit card. 
C)  Coins. 
D)  Gold. 
A)  Dollar bills. 
B)  Credit card. 
C)  Coins. 
D)  Gold.

Exam 18: Money and the Federal Reserve System

The ease with which an asset can be converted into a medium of exchange is:

Which one of the following is part of the M2 definition of the money supply,but not part of M1?

The Federal Deposit Insurance Corporation (FDIC):

Although the chairman of its Board of Governors is appointed by the Treasury Department,the Fed operates with considerable independence from the executive branch of the government.

Which of the following items does not provide a store of value?

Which of the following types of financial institutions is required to belong to the Federal Reserve System?

By definition,M1 includes:

Barter requires:

Credit cards are:

Any item can successfully serve as money.

Comparing how many dollars it takes to attend college each year to annual earnings on a job represents the use of money as a:

Which of the following statements is false?

Which of the following assets is the most liquid?

M1 refers to:

The M1 money supply is defined to be the sum of currency,and:

Which of the following forms of money is the least liquid?

The Fed is often considered the bankers' bank because it:

Which of the following is not considered part of M2?

Which one of the following items would be the most liquid?

Which of the following is not a store of value?

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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