Question 1

If something serves as a store of value, we expect it to be

Accepted Answer

A)  divisible. 
B)  durable. 
C)  of intrinsic value. 
D)  light. 
A)  divisible. 
B)  durable. 
C)  of intrinsic value. 
D)  light.

Question 2

What is money?

Accepted Answer

Money is any medium that is un

Question 3

Savings accounts, certificates of deposit, and bonds pay interest and stocks pay dividends. Why does anyone hold on to currency or other forms of money and lose this extra income?

Accepted Answer

Money is more liquid than these other as

Question 4

Which of the following statements is/are correct? I. Depository institution managers undertake riskier actions than they otherwise would because of the existence of deposit insurance
II) Because of the existence of deposit insurance, depositors in savings and loans and other banks have little incentive to investigate the financial stability of these institutions

Accepted Answer

A)  I only 
B)  II only 
C)  Both I and II 
D)  Neither I nor II 
A)  I only 
B)  II only 
C)  Both I and II 
D)  Neither I nor II

Question 5

The transactions approach to measuring money (M1) includes all of the following EXCEPT

Accepted Answer

A)  traveler's checks. 
B)  certificates of deposit. 
C)  checking accounts. 
D)  currency. 
A)  traveler's checks. 
B)  certificates of deposit. 
C)  checking accounts. 
D)  currency.

Question 6

Open market operations are

Accepted Answer

A)  the buying and selling of existing U.S. government securities in open private markets by the Fed in order to change the money supply. 
B)  the buying and selling of existing U.S. government securities in open private markets by citizens. 
C)  the selling of new government securities by banks in order to increase the money supply. 
D)  the selling of new government securities in open private markets by banks in order to finance the deficit. 
A)  the buying and selling of existing U.S. government securities in open private markets by the Fed in order to change the money supply. 
B)  the buying and selling of existing U.S. government securities in open private markets by citizens. 
C)  the selling of new government securities by banks in order to increase the money supply. 
D)  the selling of new government securities in open private markets by banks in order to finance the deficit.

Question 7

Cigarettes served as money in some prisoner of war (POW) camps during World War II. Given this, we would expect to observe

Accepted Answer

A)  no one ever smoking a cigarette. 
B)  people usually resorting to barter rather than using cigarettes as money. 
C)  prices of other goods expressed in terms of cigarettes. 
D)  only government-issued cigarettes being accepted as money. 
A)  no one ever smoking a cigarette. 
B)  people usually resorting to barter rather than using cigarettes as money. 
C)  prices of other goods expressed in terms of cigarettes. 
D)  only government-issued cigarettes being accepted as money.

Question 8

A property of an asset that makes it desirable for use as a means of settling debts maturing in the future is a(n)

Accepted Answer

A)  medium of exchange. 
B)  unit of accounting. 
C)  store of value. 
D)  standard of deferred payment. 
A)  medium of exchange. 
B)  unit of accounting. 
C)  store of value. 
D)  standard of deferred payment.

Question 9

If proceeds from loans are NOT deposited back in the banking system, then

Accepted Answer

A)  the magnitude of the multiplier process is reduced. 
B)  there is no effect on the magnitude of the multiplier process. 
C)  the magnitude of the multiplier process is increased. 
D)  the Fed intervenes by selling more Federal government bonds. 
A)  the magnitude of the multiplier process is reduced. 
B)  there is no effect on the magnitude of the multiplier process. 
C)  the magnitude of the multiplier process is increased. 
D)  the Fed intervenes by selling more Federal government bonds.

Question 10

All of the following are examples of financial intermediaries EXCEPT

Accepted Answer

A)  credit unions. 
B)  insurance companies. 
C)  retirement funds. 
D)  stock exchanges. 
A)  credit unions. 
B)  insurance companies. 
C)  retirement funds. 
D)  stock exchanges.

Question 11

A highly liquid asset

Accepted Answer

A)  has high transaction costs associated with its sale. 
B)  must be held for a substantial period of time. 
C)  generally has a very limited market for its resale. 
D)  can be disposed of easily without loss of value. 
A)  has high transaction costs associated with its sale. 
B)  must be held for a substantial period of time. 
C)  generally has a very limited market for its resale. 
D)  can be disposed of easily without loss of value.

Question 12

Thrift institutions

Accepted Answer

A)  receive most of their funds from the public's savings deposits. 
B)  include commercial banks and investment firms. 
C)  include credit unions but not savings and loan associations. 
D)  do not offer transaction deposits. 
A)  receive most of their funds from the public's savings deposits. 
B)  include commercial banks and investment firms. 
C)  include credit unions but not savings and loan associations. 
D)  do not offer transaction deposits.

Question 13

According to the text, the actual M1 multiplier in the U.S. today is

Accepted Answer

A)  between 0 and 1. 
B)  between 1.5 and 2.0. 
C)  negative. 
D)  over 10. 
A)  between 0 and 1. 
B)  between 1.5 and 2.0. 
C)  negative. 
D)  over 10.

Question 14

Small-denomination time deposits are

Accepted Answer

A)  considered part of near money. 
B)  included in the definition of both M1 and M2. 
C)  included in the definition of M1, but not in M2. 
D)  the same as transaction deposits. 
A)  considered part of near money. 
B)  included in the definition of both M1 and M2. 
C)  included in the definition of M1, but not in M2. 
D)  the same as transaction deposits.

Question 15

When money is accepted as payment in a market transaction, it is functioning as a

Accepted Answer

A)  store of value. 
B)  unit of accounting. 
C)  medium of exchange. 
D)  unit of investment. 
A)  store of value. 
B)  unit of accounting. 
C)  medium of exchange. 
D)  unit of investment.

Question 16

The term "depository institution" refers to

Accepted Answer

A)  commercial banks only. 
B)  credit unions only. 
C)  savings and loan associations only. 
D)  commercial banks, credit unions, and savings and loan associations. 
A)  commercial banks only. 
B)  credit unions only. 
C)  savings and loan associations only. 
D)  commercial banks, credit unions, and savings and loan associations.

Question 17

The M2 money supply is equal to the M1 money supply plus

Accepted Answer

A)  small time deposits, savings deposits, and retail money market mutual fund shares. 
B)  all credit card balances and retail money market mutual fund shares. 
C)  large time deposits and retail money market mutual fund shares. 
D)  every account held by commercial banks. 
A)  small time deposits, savings deposits, and retail money market mutual fund shares. 
B)  all credit card balances and retail money market mutual fund shares. 
C)  large time deposits and retail money market mutual fund shares. 
D)  every account held by commercial banks.

Question 18

A fiduciary monetary system is

Accepted Answer

A)  fully backed by gold. 
B)  dependent on barter for exchanges of goods and services. 
C)  one which cannot have any inflation. 
D)  dependent on the public's faith to accept the currency. 
A)  fully backed by gold. 
B)  dependent on barter for exchanges of goods and services. 
C)  one which cannot have any inflation. 
D)  dependent on the public's faith to accept the currency.

Question 19

Since 1982, banks and thrift institutions have offered a type of savings account that yields a market rate of interest with a minimum balance and a limit on transactions. These accounts, which have no minimum maturity, are known as

Accepted Answer

A)  certificates of deposit. 
B)  money market mutual funds. 
C)  mutual funds. 
D)  repurchase agreements. 
A)  certificates of deposit. 
B)  money market mutual funds. 
C)  mutual funds. 
D)  repurchase agreements.

Question 20

Following a new deposit of $50 at a bank, drawn on funds previously held on deposit at another bank, when the reserve ratio is 10 percent, the maximum potential increase in the money supply will be

Accepted Answer

A)  $0. 
B)  $50. 
C)  $400. 
D)  $500. 
A)  $0. 
B)  $50. 
C)  $400. 
D)  $500.

Exam 15: Money, Banking, and Central Banking

If something serves as a store of value, we expect it to be

What is money?

Savings accounts, certificates of deposit, and bonds pay interest and stocks pay dividends. Why does anyone hold on to currency or other forms of money and lose this extra income?

The transactions approach to measuring money (M1) includes all of the following EXCEPT

Open market operations are

Cigarettes served as money in some prisoner of war (POW) camps during World War II. Given this, we would expect to observe

A property of an asset that makes it desirable for use as a means of settling debts maturing in the future is a(n)

If proceeds from loans are NOT deposited back in the banking system, then

All of the following are examples of financial intermediaries EXCEPT

A highly liquid asset

Thrift institutions

According to the text, the actual M1 multiplier in the U.S. today is

Small-denomination time deposits are

When money is accepted as payment in a market transaction, it is functioning as a

The term "depository institution" refers to

The M2 money supply is equal to the M1 money supply plus

A fiduciary monetary system is

Since 1982, banks and thrift institutions have offered a type of savings account that yields a market rate of interest with a minimum balance and a limit on transactions. These accounts, which have no minimum maturity, are known as

Following a new deposit of $50 at a bank, drawn on funds previously held on deposit at another bank, when the reserve ratio is 10 percent, the maximum potential increase in the money supply will be

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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