Question 1

The number of presidentially appointed members who sit on the Federal Reserve Board of Governors is:

Accepted Answer

A)  none. 
B)  seven. 
C)  nine. 
D)  twelve. 
A)  none. 
B)  seven. 
C)  nine. 
D)  twelve.

Question 2

Which of the following is the most liquid store of purchasing power?

Accepted Answer

A)  A dollar bill. 
B)  Common stock. 
C)  Gold. 
D)  Real estate. 
A)  A dollar bill. 
B)  Common stock. 
C)  Gold. 
D)  Real estate.

Question 3

With respect to controlling the money supply,the law requires the Fed to take orders from:

Accepted Answer

A)  the President. 
B)  the Speaker of the House. 
C)  the Secretary of the Treasury. 
D)  no one-the Fed is an independent agency. 
A)  the President. 
B)  the Speaker of the House. 
C)  the Secretary of the Treasury. 
D)  no one-the Fed is an independent agency.

Question 4

In the United States,the purchasing power of money is determined by:

Accepted Answer

A)  the underlying precious metals that back each unit of currency. 
B)  the value of U.S. treasury bonds that back each unit of currency. 
C)  its acceptability. 
D)  Congress, which controls the money supply. 
A)  the underlying precious metals that back each unit of currency. 
B)  the value of U.S. treasury bonds that back each unit of currency. 
C)  its acceptability. 
D)  Congress, which controls the money supply.

Question 5

The Federal Reserve Board of Governors has:

Accepted Answer

A)  seven members who serve 6-year terms. 
B)  12 members who serve 14-year terms. 
C)  seven members who serve 4-year terms. 
D)  12 members who serve 4-year terms. 
E)  seven members who serve 14-year terms. 
A)  seven members who serve 6-year terms. 
B)  12 members who serve 14-year terms. 
C)  seven members who serve 4-year terms. 
D)  12 members who serve 4-year terms. 
E)  seven members who serve 14-year terms.

Question 6

Decisions regarding purchases and sales of government securities by the Fed are made by the:

Accepted Answer

A)  Federal Funds Committee. 
B)  Discount Committee. 
C)  Federal Open Market Committee. 
D)  FDIC. 
A)  Federal Funds Committee. 
B)  Discount Committee. 
C)  Federal Open Market Committee. 
D)  FDIC.

Question 7

By functioning as a unit of account,money provides a common measurement of the relative value of goods and services.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is a desirable property of money?

Accepted Answer

A)  Scarcity. 
B)  Portability. 
C)  Divisibility. 
D)  All of the above. 
A)  Scarcity. 
B)  Portability. 
C)  Divisibility. 
D)  All of the above.

Question 9

The Monetary Control Act of 1980:

Accepted Answer

A)  extended the Fed's authority to impose required-reserve ratios on all depository institutions. 
B)  excluded the required-reserve ratios as an instrument of short-term policy. 
C)  provided the Fed with the authority to use open market operations. 
D)  all of the above. 
E)  none of the above. 
A)  extended the Fed's authority to impose required-reserve ratios on all depository institutions. 
B)  excluded the required-reserve ratios as an instrument of short-term policy. 
C)  provided the Fed with the authority to use open market operations. 
D)  all of the above. 
E)  none of the above.

Question 10

Barter is the:

Accepted Answer

A)  direct exchange of goods and services. 
B)  exchange of goods, but not services. 
C)  system that does not depend on a coincidence of wants. 
D)  system used in advanced economies. 
A)  direct exchange of goods and services. 
B)  exchange of goods, but not services. 
C)  system that does not depend on a coincidence of wants. 
D)  system used in advanced economies.

Question 11

The central bank of the United States is the:

Accepted Answer

A)  Federal Reserve Banking System. 
B)  First National Bank. 
C)  Comptroller's Bank. 
D)  United States National Bank. 
E)  U.S. Treasury Bank. 
A)  Federal Reserve Banking System. 
B)  First National Bank. 
C)  Comptroller's Bank. 
D)  United States National Bank. 
E)  U.S. Treasury Bank.

Question 12

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

Accepted Answer

A)  To control the money supply. 
B)  To print new money. 
C)  To supervise and regulate banks. 
D)  To aid in the check clearing process. 
E)  To maintain and circulate currency. 
A)  To control the money supply. 
B)  To print new money. 
C)  To supervise and regulate banks. 
D)  To aid in the check clearing process. 
E)  To maintain and circulate currency.

Question 13

M2 is actually a smaller amount than M1.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following defines the "medium of exchange" function of money?

Accepted Answer

A)  To provide 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 manufacture money are of medium grade so that people will not hoard money for its commodity value. 
D)  Money that is widely accepted in exchange for goods and services. 
A)  To provide 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 manufacture money are of medium grade so that people will not hoard money for its commodity value. 
D)  Money that is widely accepted in exchange for goods and services.

Question 15

In order for barter to occur,traders must have a:

Accepted Answer

A)  unit of account. 
B)  coincidence of wants. 
C)  medium of exchange. 
D)  central banking facility. 
A)  unit of account. 
B)  coincidence of wants. 
C)  medium of exchange. 
D)  central banking facility.

Question 16

Which of the following is not an example of money used as a unit of account?

Accepted Answer

A)  A British pound is worth $3.00. 
B)  Auto repairs were $3,000 last year. 
C)  Business travel totaled 12,000 miles. 
D)  Gasoline sells for $1.20 per gallon and oil is $5.00 per quart. 
A)  A British pound is worth $3.00. 
B)  Auto repairs were $3,000 last year. 
C)  Business travel totaled 12,000 miles. 
D)  Gasoline sells for $1.20 per gallon and oil is $5.00 per quart.

Question 17

The main purpose of the Fed is to:

Accepted Answer

A)  serve as the bankers' bank for member banks. 
B)  regulate interest rates. 
C)  print Federal Reserve Notes. 
D)  regulate financial institutions. 
E)  maintain the proper functioning of our money system. 
A)  serve as the bankers' bank for member banks. 
B)  regulate interest rates. 
C)  print Federal Reserve Notes. 
D)  regulate financial institutions. 
E)  maintain the proper functioning of our money system.

Question 18

The chairman of its Board of Governors is appointed by the president; the Fed operates without independence from the executive branch of the government.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A)  volatility. 
B)  liquidity. 
C)  currency. 
D)  Gresham's Law. 
E)  speculative exchange. 
A)  volatility. 
B)  liquidity. 
C)  currency. 
D)  Gresham's Law. 
E)  speculative exchange.

Question 20

Which one of the following is part of the official money supply in the United States?

Accepted Answer

A)  Federal Reserve Notes. 
B)  Gold bars. 
C)  Common stock. 
D)  Silver coins. 
A)  Federal Reserve Notes. 
B)  Gold bars. 
C)  Common stock. 
D)  Silver coins.

Exam 18: Money and the Federal Reserve System

The number of presidentially appointed members who sit on the Federal Reserve Board of Governors is:

Which of the following is the most liquid store of purchasing power?

With respect to controlling the money supply,the law requires the Fed to take orders from:

In the United States,the purchasing power of money is determined by:

The Federal Reserve Board of Governors has:

Decisions regarding purchases and sales of government securities by the Fed are made by the:

By functioning as a unit of account,money provides a common measurement of the relative value of goods and services.

Which of the following is a desirable property of money?

The Monetary Control Act of 1980:

Barter is the:

The central bank of the United States is the:

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

M2 is actually a smaller amount than M1.

Which of the following defines the "medium of exchange" function of money?

In order for barter to occur,traders must have a:

Which of the following is not an example of money used as a unit of account?

The main purpose of the Fed is to:

The chairman of its Board of Governors is appointed by the president; the Fed operates without independence from the executive branch of the government.

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

Which one of the following is part of the official money supply in the United States?

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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