Question 1

Money eliminates the need to barter.

Accepted Answer

A) True 
 B)False

Question 2

The conduct of monetary policy is the responsibility of:

Accepted Answer

A)  commercial banks. 
B)  the U.S. Treasury. 
C)  the Federal Reserve System. 
D)  the Congress and the president. 
A)  commercial banks. 
B)  the U.S. Treasury. 
C)  the Federal Reserve System. 
D)  the Congress and the president.

Question 3

Are outstanding credit card balances counted as part of the money supply?

Accepted Answer

A)  Yes; they are used to purchase things, and therefore, they are included in the money supply figures. 
B)  No; money is an asset, while the credit card balances are a liability. Thus, they are not included in the money supply figures. 
C)  Partly; credit card balances of $100 or less are included in the M1 money supply, but the money supply figures do not include balances in excess of $100. 
D)  Partly; credit card balances are included in the M1 money supply, but not the M2 money supply. 
A)  Yes; they are used to purchase things, and therefore, they are included in the money supply figures. 
B)  No; money is an asset, while the credit card balances are a liability. Thus, they are not included in the money supply figures. 
C)  Partly; credit card balances of $100 or less are included in the M1 money supply, but the money supply figures do not include balances in excess of $100. 
D)  Partly; credit card balances are included in the M1 money supply, but not the M2 money supply.

Question 4

Who runs the Federal Reserve System? Describe the organizational structure of the Fed.

Accepted Answer

The Fed is run by the Board of Governors

Question 5

The Monetary Control Act of 1980:

Accepted Answer

A)  created less competition among various financial institutions. 
B)  allowed fewer institutions to offer checking account services. 
C)  restricted savings and loan associations to long-term loans. 
D)  all of the above. 
E)  none of the above. 
A)  created less competition among various financial institutions. 
B)  allowed fewer institutions to offer checking account services. 
C)  restricted savings and loan associations to long-term loans. 
D)  all of the above. 
E)  none of the above.

Question 6

The Federal Deposit Insurance Corporation:

Accepted Answer

A)  has eliminated bank failures. 
B)  insures all demand deposits without limit. 
C)  insures all demand deposits up to $250,000. 
D)  insures all demand deposits up to $10,000. 
A)  has eliminated bank failures. 
B)  insures all demand deposits without limit. 
C)  insures all demand deposits up to $250,000. 
D)  insures all demand deposits up to $10,000.

Question 7

An economy using money is more efficient that a barter economy because the use of money reduces the time spent searching for trading partners with a coincidence of wants and therefore more time can be spent producing goods and services.

Accepted Answer

A) True 
 B)False

Question 8

A majority of the commercial banks in the United States are members of the Fed.

Accepted Answer

A) True 
 B)False

Question 9

The Federal Reserve System is owned by:

Accepted Answer

A)  federal government agencies such as the Treasury. 
B)  the Congress of the United States. 
C)  the banks that are members of the Federal Reserve System. 
D)  anyone who buys stock over the counter. 
E)  people who have deposits in member banks. 
A)  federal government agencies such as the Treasury. 
B)  the Congress of the United States. 
C)  the banks that are members of the Federal Reserve System. 
D)  anyone who buys stock over the counter. 
E)  people who have deposits in member banks.

Question 10

Coins and dollar bills are money in the form of:

Accepted Answer

A)  barter. 
B)  currency. 
C)  capital stock. 
D)  investment. 
A)  barter. 
B)  currency. 
C)  capital stock. 
D)  investment.

Question 11

Which of the following is considered part of M2?

Accepted Answer

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

Question 12

Decisions to buy or sell securities at the Fed are made by the:

Accepted Answer

A)  Congress. 
B)  Federal Open Market Committee. 
C)  Federal Deposit Insurance Corporation. 
D)  President's Council of Economic Advisors. 
A)  Congress. 
B)  Federal Open Market Committee. 
C)  Federal Deposit Insurance Corporation. 
D)  President's Council of Economic Advisors.

Question 13

What is money? What are the three definitions of money in the United States?

Accepted Answer

Money is anything that serves

Question 14

Suppose you transfer $1,000 from your checking account to your savings account.How does this action affect the M1 and M2 money supplies?

Accepted Answer

A)  M1 and M2 are both unchanged. 
B)  M1 falls by $1,000, and M2 rises by $1,000. 
C)  M1 is unchanged, and M2 rises by $1,000. 
D)  M1 falls by $1,000, and M2 is unchanged. 
A)  M1 and M2 are both unchanged. 
B)  M1 falls by $1,000, and M2 rises by $1,000. 
C)  M1 is unchanged, and M2 rises by $1,000. 
D)  M1 falls by $1,000, and M2 is unchanged.

Question 15

For barter exchange to take place,

Accepted Answer

A)  there has to be a coincidence of wants. 
B)  the products in question have to be divisible. 
C)  money has to be used to put a value on the transaction. 
D)  there has to be a single coincidence of wants. 
E)  gold has to be one of the goods traded. 
A)  there has to be a coincidence of wants. 
B)  the products in question have to be divisible. 
C)  money has to be used to put a value on the transaction. 
D)  there has to be a single coincidence of wants. 
E)  gold has to be one of the goods traded.

Question 16

The Federal Reserve Board of Governors consists of:

Accepted Answer

A)  50 members selected by state legislatures. 
B)  12 members, one from each Federal Reserve District. 
C)  12 members nominated by the President and confirmed by the Senate. 
D)  seven members elected by Congress. 
E)  seven members nominated by the President and confirmed by the Senate. 
A)  50 members selected by state legislatures. 
B)  12 members, one from each Federal Reserve District. 
C)  12 members nominated by the President and confirmed by the Senate. 
D)  seven members elected by Congress. 
E)  seven members nominated by the President and confirmed by the Senate.

Question 17

The Federal Reserve System was created by act of Congress in 1931 in an effort to end a wave of bank failures brought on by the Great Depression.

Accepted Answer

A) True 
 B)False

Question 18

Economists who prefer a broader definition of money prefer the:

Accepted Answer

A)  M4 measure of the money supply to the M1 measure. 
B)  M2 measure of the money supply to the M1 measure. 
C)  M3 measure of the money supply to the M2 measure. 
D)  prefer the M1 measure of the money supply to the M2 measure. 
A)  M4 measure of the money supply to the M1 measure. 
B)  M2 measure of the money supply to the M1 measure. 
C)  M3 measure of the money supply to the M2 measure. 
D)  prefer the M1 measure of the money supply to the M2 measure.

Question 19

Fiat money is money:

Accepted Answer

A)  accepted by law regardless of its intrinsic value. 
B)  that is not included as part of the M1 money supply. 
C)  that is backed by gold or silver held on reserve by the government. 
D)  such as coins that are made from metal. 
A)  accepted by law regardless of its intrinsic value. 
B)  that is not included as part of the M1 money supply. 
C)  that is backed by gold or silver held on reserve by the government. 
D)  such as coins that are made from metal.

Question 20

Which of the following is not part of the Federal Reserve System?

Accepted Answer

A)  Council of Economic Advisors. 
B)  Board of Governors. 
C)  Federal Open Market Committee. 
D)  12 Federal Reserve District Banks. 
E)  Federal Advisory Council. 
A)  Council of Economic Advisors. 
B)  Board of Governors. 
C)  Federal Open Market Committee. 
D)  12 Federal Reserve District Banks. 
E)  Federal Advisory Council.

Exam 18: Money and the Federal Reserve System

Money eliminates the need to barter.

The conduct of monetary policy is the responsibility of:

Are outstanding credit card balances counted as part of the money supply?

Who runs the Federal Reserve System? Describe the organizational structure of the Fed.

The Monetary Control Act of 1980:

The Federal Deposit Insurance Corporation:

An economy using money is more efficient that a barter economy because the use of money reduces the time spent searching for trading partners with a coincidence of wants and therefore more time can be spent producing goods and services.

A majority of the commercial banks in the United States are members of the Fed.

The Federal Reserve System is owned by:

Coins and dollar bills are money in the form of:

Which of the following is considered part of M2?

Decisions to buy or sell securities at the Fed are made by the:

What is money? What are the three definitions of money in the United States?

Suppose you transfer $1,000 from your checking account to your savings account.How does this action affect the M1 and M2 money supplies?

For barter exchange to take place,

The Federal Reserve Board of Governors consists of:

The Federal Reserve System was created by act of Congress in 1931 in an effort to end a wave of bank failures brought on by the Great Depression.

Economists who prefer a broader definition of money prefer the:

Fiat money is money:

Which of the following is not part of 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

Filters