Question 1

The liquidity approach to measuring money stresses the role of money as a

Accepted Answer

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

Question 2

The government agency that insures deposits held in banks in the United States is

Accepted Answer

A)  the Federal Reserve System. 
B)  the Federal Bank Insurance Corporation. 
C)  the Federal Asset Insurance Corporation. 
D)  the Federal Deposit Insurance Corporation. 
A)  the Federal Reserve System. 
B)  the Federal Bank Insurance Corporation. 
C)  the Federal Asset Insurance Corporation. 
D)  the Federal Deposit Insurance Corporation.

Question 3

Small-denomination time deposits are less than

Accepted Answer

A)  $1 million. 
B)  $100,000. 
C)  $10,000. 
D)  $1,000. 
A)  $1 million. 
B)  $100,000. 
C)  $10,000. 
D)  $1,000.

Question 4

Which of the following is a financial intermediary?

Accepted Answer

A)  the Red Cross 
B)  the Internal Revenue Service 
C)  a share of corporate stock 
D)  an insurance company 
A)  the Red Cross 
B)  the Internal Revenue Service 
C)  a share of corporate stock 
D)  an insurance company

Question 5

Which of the following is NOT part of M1?

Accepted Answer

A)  Credit cards 
B)  Checking accounts 
C)  Currency 
D)  Traveler's checks 
A)  Credit cards 
B)  Checking accounts 
C)  Currency 
D)  Traveler's checks

Question 6

A purchase of U.S. government securities by the Fed causes

Accepted Answer

A)  an expansion of the money supply equal to the amount of the securities purchased. 
B)  a contraction of the money supply equal to the amount of the securities purchased. 
C)  an expansion of the money supply of more than the amount of the securities purchased. 
D)  a contraction of the money supply of more than the amount of the securities purchased. 
A)  an expansion of the money supply equal to the amount of the securities purchased. 
B)  a contraction of the money supply equal to the amount of the securities purchased. 
C)  an expansion of the money supply of more than the amount of the securities purchased. 
D)  a contraction of the money supply of more than the amount of the securities purchased.

Question 7

Which of the following is NOT a correct statement about the Federal Reserve banks?

Accepted Answer

A)  They supervise member banks within the Federal Reserve System. 
B)  They provide a system of check collection and clearing. 
C)  They provide the economy with gold backed currency. 
D)  They act as banker and fiscal agent for the U.S. government. 
A)  They supervise member banks within the Federal Reserve System. 
B)  They provide a system of check collection and clearing. 
C)  They provide the economy with gold backed currency. 
D)  They act as banker and fiscal agent for the U.S. government.

Question 8

The FDIC was created because

Accepted Answer

A)  banks failed to create money the way the Fed wanted them to. 
B)  people worried about bank failures after World War I, even though very few banks actually failed. 
C)  there were so many bank failures in the 1930s. 
D)  the Fed kept the required reserve ratio too low. 
A)  banks failed to create money the way the Fed wanted them to. 
B)  people worried about bank failures after World War I, even though very few banks actually failed. 
C)  there were so many bank failures in the 1930s. 
D)  the Fed kept the required reserve ratio too low.

Question 9

The key official definition of the money supply is

Accepted Answer

A)  only coins and paper currency in circulation. 
B)  only transactions deposits at banks. 
C)  MZM. 
D)  M2. 
A)  only coins and paper currency in circulation. 
B)  only transactions deposits at banks. 
C)  MZM. 
D)  M2.

Question 10

What type of intrinsic value or backing does U.S. currency have today?

Accepted Answer

A)  gold 
B)  government bonds 
C)  none 
D)  silver 
A)  gold 
B)  government bonds 
C)  none 
D)  silver

Question 11

The designate M1 measure of money consists of

Accepted Answer

A)  the most liquid types of money in the U.S. system. 
B)  small time deposits only. 
C)  credit cards and ATM cards. 
D)  gold and gold coins. 
A)  the most liquid types of money in the U.S. system. 
B)  small time deposits only. 
C)  credit cards and ATM cards. 
D)  gold and gold coins.

Question 12

The transactions approach to measuring money includes

Accepted Answer

A)  government bonds. 
B)  the value of shares of stock in commercial banks. 
C)  traveler's checks. 
D)  all of these. 
A)  government bonds. 
B)  the value of shares of stock in commercial banks. 
C)  traveler's checks. 
D)  all of these.

Question 13

When the Fed buys government securities,

Accepted Answer

A)  reserves increase, leading to a decrease in the money supply by an amount more than the purchase of the government securities. 
B)  reserves decrease, leading to a increase in the money supply by an amount more than the purchase of the government securities. 
C)  reserves increase, leading to a increase in the money supply by an amount more than the purchase of the government securities. 
D)  reserves decrease, leading to a decrease in the money supply by an amount more than the purchase of the government securities. 
A)  reserves increase, leading to a decrease in the money supply by an amount more than the purchase of the government securities. 
B)  reserves decrease, leading to a increase in the money supply by an amount more than the purchase of the government securities. 
C)  reserves increase, leading to a increase in the money supply by an amount more than the purchase of the government securities. 
D)  reserves decrease, leading to a decrease in the money supply by an amount more than the purchase of the government securities.

Question 14

To be accepted as money, an item must perform all of the following functions EXCEPT

Accepted Answer

A)  serve as a store of value. 
B)  be easily reproduced. 
C)  be a medium of exchange. 
D)  serve as a standard of deferred payment. 
A)  serve as a store of value. 
B)  be easily reproduced. 
C)  be a medium of exchange. 
D)  serve as a standard of deferred payment.

Question 15

An asset is liquid if

Accepted Answer

A)  it earns interest. 
B)  it is backed by a government guarantee. 
C)  it can be exchanged for other items of value without high transaction costs. 
D)  All of the above are correct. 
A)  it earns interest. 
B)  it is backed by a government guarantee. 
C)  it can be exchanged for other items of value without high transaction costs. 
D)  All of the above are correct.

Question 16

A major function of the Federal Reserve System is

Accepted Answer

A)  the implementation of fiscal policy for the federal government. 
B)  the control of the money supply. 
C)  the control of government spending. 
D)  the control of taxing policy. 
A)  the implementation of fiscal policy for the federal government. 
B)  the control of the money supply. 
C)  the control of government spending. 
D)  the control of taxing policy.

Question 17

Which of the following is true of the Federal Reserve System? I. It was established in the early 1980s.
II) It serves as the central bank of the United States.

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 18

Total reserves are

Accepted Answer

A)  deposits held by Federal Reserve district banks for depository institutions, plus depository institutions' vault cash. 
B)  reserves that a depository institution must hold in the form of vault cash. 
C)  reserves that depository institutions are allowed to claim as reserves. 
D)  any item that legally functions as money. 
A)  deposits held by Federal Reserve district banks for depository institutions, plus depository institutions' vault cash. 
B)  reserves that a depository institution must hold in the form of vault cash. 
C)  reserves that depository institutions are allowed to claim as reserves. 
D)  any item that legally functions as money.

Question 19

Why is money as a medium of exchange important in an economy?

Accepted Answer

Money permits more specialization and re

Question 20

Bank runs are a possibility because

Accepted Answer

A)  the FDIC is inefficient. 
B)  bankers are often poor businesspeople. 
C)  in difficult times people want currency instead of demand deposits. 
D)  banks do not keep enough reserves to cover all their depository liabilities. 
A)  the FDIC is inefficient. 
B)  bankers are often poor businesspeople. 
C)  in difficult times people want currency instead of demand deposits. 
D)  banks do not keep enough reserves to cover all their depository liabilities.

Exam 15: Money, Banking, and Central Banking

The liquidity approach to measuring money stresses the role of money as a

The government agency that insures deposits held in banks in the United States is

Small-denomination time deposits are less than

Which of the following is a financial intermediary?

Which of the following is NOT part of M1?

A purchase of U.S. government securities by the Fed causes

Which of the following is NOT a correct statement about the Federal Reserve banks?

The FDIC was created because

The key official definition of the money supply is

What type of intrinsic value or backing does U.S. currency have today?

The designate M1 measure of money consists of

The transactions approach to measuring money includes

When the Fed buys government securities,

To be accepted as money, an item must perform all of the following functions EXCEPT

An asset is liquid if

A major function of the Federal Reserve System is

Which of the following is true of the Federal Reserve System? I. It was established in the early 1980s. II) It serves as the central bank of the United States.

Total reserves are

Why is money as a medium of exchange important in an economy?

Bank runs are a possibility because

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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