Question 1

The Federal Reserve System acts as the government's fiscal agent by

Accepted Answer

A)  auditing taxpayers. 
B)  providing checking account services for the government. 
C)  preparing the budget the President presents to Congress every year. 
D)  determining how to finance a deficit. 
A)  auditing taxpayers. 
B)  providing checking account services for the government. 
C)  preparing the budget the President presents to Congress every year. 
D)  determining how to finance a deficit.

Question 2

In economics, money is

Accepted Answer

A)  another term for income. 
B)  a financial instrument backed by some precious metal such as gold or silver. 
C)  anything that people generally accept in exchange for goods and services. 
D)  whatever the government defines it to be. 
A)  another term for income. 
B)  a financial instrument backed by some precious metal such as gold or silver. 
C)  anything that people generally accept in exchange for goods and services. 
D)  whatever the government defines it to be.

Question 3

A system in which depository institutions hold reserves that are less than the amount of total deposits is

Accepted Answer

A)  the Federal Reserve System. 
B)  the federal funds market. 
C)  sweep accounts. 
D)  fractional reserve banking. 
A)  the Federal Reserve System. 
B)  the federal funds market. 
C)  sweep accounts. 
D)  fractional reserve banking.

Question 4

When Kate and Sam use dollars to compare the market values of their automobiles, money is acting as a

Accepted Answer

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

Question 5

All of the following are functions of the Federal Reserve System (the Fed) EXCEPT

Accepted Answer

A)  supplying currency. 
B)  check clearing. 
C)  regulation of the money supply. 
D)  lender of last resort for consumers. 
A)  supplying currency. 
B)  check clearing. 
C)  regulation of the money supply. 
D)  lender of last resort for consumers.

Question 6

Which of the following is NOT a financial intermediary?

Accepted Answer

A)  commercial banks 
B)  a savings and loan association 
C)  the Federal Reserve Bank of New York 
D)  the Internal Revenue Service 
A)  commercial banks 
B)  a savings and loan association 
C)  the Federal Reserve Bank of New York 
D)  the Internal Revenue Service

Question 7

The potential money multiplier gives us

Accepted Answer

A)  the growth in real national income when the money supply increases. 
B)  the growth in the money supply when income increases. 
C)  the maximum potential change in the money supply due to a change in reserves. 
D)  the maximum potential change in the money supply due to a change in income. 
A)  the growth in real national income when the money supply increases. 
B)  the growth in the money supply when income increases. 
C)  the maximum potential change in the money supply due to a change in reserves. 
D)  the maximum potential change in the money supply due to a change in income.

Question 8

The Board of Governors of the Federal Reserve System has

Accepted Answer

A)  7 members serving 14 year terms. 
B)  7 members serving 4 year terms. 
C)  12 members serving 14 year terms. 
D)  12 members serving 4 year terms. 
A)  7 members serving 14 year terms. 
B)  7 members serving 4 year terms. 
C)  12 members serving 14 year terms. 
D)  12 members serving 4 year terms.

Question 9

The ability to quickly convert an asset into cash is

Accepted Answer

A)  disintermediation. 
B)  the standard of deferred payment. 
C)  financial intermediation. 
D)  liquidity. 
A)  disintermediation. 
B)  the standard of deferred payment. 
C)  financial intermediation. 
D)  liquidity.

Question 10

Which of the following is solely responsible for determining changes in the money supply in the United States?

Accepted Answer

A)  the U.S. Treasury 
B)  the Comptroller of the Currency 
C)  the Federal Open Market Committee 
D)  the chairman of the Federal Reserve 
A)  the U.S. Treasury 
B)  the Comptroller of the Currency 
C)  the Federal Open Market Committee 
D)  the chairman of the Federal Reserve

Question 11

The opportunity cost of holding a dollar is

Accepted Answer

A)  a dollar. 
B)  the price of a government bond. 
C)  less than a dollar. 
D)  the interest yield that could have been earned by holding some other asset. 
A)  a dollar. 
B)  the price of a government bond. 
C)  less than a dollar. 
D)  the interest yield that could have been earned by holding some other asset.

Question 12

When the price level goes up, the purchasing power of the dollar

Accepted Answer

A)  also increases. 
B)  falls. 
C)  remains constant. 
D)  varies directly with the value of the euro. 
A)  also increases. 
B)  falls. 
C)  remains constant. 
D)  varies directly with the value of the euro.

Question 13

The property of money that allows for the settling of debts that mature in the future is

Accepted Answer

A)  liquidity. 
B)  acceptability. 
C)  store of value. 
D)  standard of deferred payment. 
A)  liquidity. 
B)  acceptability. 
C)  store of value. 
D)  standard of deferred payment.

Question 14

The current chair of the Board of Governors of the Federal Reserve is

Accepted Answer

A)  Alan Greenspan. 
B)  John Snow. 
C)  Ben Bernanke. 
D)  Henry Paulson. 
A)  Alan Greenspan. 
B)  John Snow. 
C)  Ben Bernanke. 
D)  Henry Paulson.

Question 15

Money is defined as

Accepted Answer

A)  a person's net worth. 
B)  anything people generally accept in exchange for goods and services. 
C)  a by product of a barter economy. 
D)  any financial instrument that is backed by gold. 
A)  a person's net worth. 
B)  anything people generally accept in exchange for goods and services. 
C)  a by product of a barter economy. 
D)  any financial instrument that is backed by gold.

Question 16

Asymmetric information is a situation in which

Accepted Answer

A)  information possessed by one party in a transaction is not known by another party. 
B)  information possessed by one party in a transaction is also known by another party. 
C)  the government has information that it chooses to pass along to private firms. 
D)  private firms have information that they choose to pass along to the government. 
A)  information possessed by one party in a transaction is not known by another party. 
B)  information possessed by one party in a transaction is also known by another party. 
C)  the government has information that it chooses to pass along to private firms. 
D)  private firms have information that they choose to pass along to the government.

Question 17

According to the text, the actual M2 multiplier in the United States today is

Accepted Answer

A)  about 5. 
B)  between 1.0 and 2.0. 
C)  negative. 
D)  over 10. 
A)  about 5. 
B)  between 1.0 and 2.0. 
C)  negative. 
D)  over 10.

Question 18

Why might the Federal Reserve intervene in foreign currency markets?

Accepted Answer

A)  to ensure the safety of overseas investments for banks 
B)  to ensure the safety of overseas investments for private investors 
C)  to ensure the safety of overseas investments for pension funds 
D)  to maintain a desired exchange rate for the dollar 
A)  to ensure the safety of overseas investments for banks 
B)  to ensure the safety of overseas investments for private investors 
C)  to ensure the safety of overseas investments for pension funds 
D)  to maintain a desired exchange rate for the dollar

Question 19

As of 2010, the FDIC insured deposit accounts up to which of the following amounts?

Accepted Answer

A)  $10,000. 
B)  $25,000. 
C)  $100,000. 
D)  $250,000. 
A)  $10,000. 
B)  $25,000. 
C)  $100,000. 
D)  $250,000.

Question 20

Suppose that the reserve ratio is 5%. What is the value of the potential money multiplier?

Accepted Answer

A)  2 
B)  5 
C)  10 
D)  20 
A)  2 
B)  5 
C)  10 
D)  20

Exam 15: Money, Banking, and Central Banking

The Federal Reserve System acts as the government's fiscal agent by

In economics, money is

A system in which depository institutions hold reserves that are less than the amount of total deposits is

When Kate and Sam use dollars to compare the market values of their automobiles, money is acting as a

All of the following are functions of the Federal Reserve System (the Fed) EXCEPT

Which of the following is NOT a financial intermediary?

The potential money multiplier gives us

The Board of Governors of the Federal Reserve System has

The ability to quickly convert an asset into cash is

Which of the following is solely responsible for determining changes in the money supply in the United States?

The opportunity cost of holding a dollar is

When the price level goes up, the purchasing power of the dollar

The property of money that allows for the settling of debts that mature in the future is

The current chair of the Board of Governors of the Federal Reserve is

Money is defined as

Asymmetric information is a situation in which

According to the text, the actual M2 multiplier in the United States today is

Why might the Federal Reserve intervene in foreign currency markets?

As of 2010, the FDIC insured deposit accounts up to which of the following amounts?

Suppose that the reserve ratio is 5%. What is the value of the potential money multiplier?

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

Filters