Question 1

Which of the following is NOT part of M1 but is included in M2?

Accepted Answer

A)  Currency 
B)  Small-denomination certificates of deposits 
C)  Traveler's checks 
D)  Cash 
A)  Currency 
B)  Small-denomination certificates of deposits 
C)  Traveler's checks 
D)  Cash

Question 2

Which of the following is NOT a function of money?

Accepted Answer

A)  medium of exchange 
B)  form of credit 
C)  store of value 
D)  standard of deferred payment 
A)  medium of exchange 
B)  form of credit 
C)  store of value 
D)  standard of deferred payment

Question 3

The Fed's buying and selling of existing government securities is called

Accepted Answer

A)  market interventions. 
B)  open market operations. 
C)  changes in the reserve requirement ratio. 
D)  changes in the difference between the discount rate and the federal funds rate. 
A)  market interventions. 
B)  open market operations. 
C)  changes in the reserve requirement ratio. 
D)  changes in the difference between the discount rate and the federal funds rate.

Question 4

Which of the following institutions has responsibility for producing the coins that are distributed in the United States?

Accepted Answer

A)  The Office of the Comptroller of the Currency 
B)  The Federal Reserve System 
C)  The U.S Bureau of Engraving and Printing 
D)  The U.S. Mint 
A)  The Office of the Comptroller of the Currency 
B)  The Federal Reserve System 
C)  The U.S Bureau of Engraving and Printing 
D)  The U.S. Mint

Question 5

Which of the following is NOT included in the MZM definition of money?

Accepted Answer

A)  currency. 
B)  money market funds. 
C)  travelers checks. 
D)  small-denomination time deposits. 
A)  currency. 
B)  money market funds. 
C)  travelers checks. 
D)  small-denomination time deposits.

Question 6

-Refer to the above table. The value of M1 is

Accepted Answer

A)  $860 billion. 
B)  $910 billion. 
C)  $1,360 billion. 
D)  $2,560 billion. 
A)  $860 billion. 
B)  $910 billion. 
C)  $1,360 billion. 
D)  $2,560 billion.

Question 7

In defining money according to the transactions approach, you would want to include

Accepted Answer

A)  those assets that are used as a store of value. 
B)  those assets that are used as a medium of exchange. 
C)  those assets that are used as a unit of account. 
D)  those assets that are used as a standard of deferred payment. 
A)  those assets that are used as a store of value. 
B)  those assets that are used as a medium of exchange. 
C)  those assets that are used as a unit of account. 
D)  those assets that are used as a standard of deferred payment.

Question 8

If you save $2,500 for a down payment on a new car, you are using money as

Accepted Answer

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

Question 9

Which of the following has been a problem faced by the FDIC in its provision of federal deposit insurance?

Accepted Answer

A)  Moral hazard arising from the tendency for the highest-risk banks to be those most interested in obtaining deposit insurance in the first place 
B)  Adverse selection arising from the tendency for banks to take on more risk after they receive deposit insurance 
C)  Moral hazard arising from the tendency for banks to take on more risk after they receive deposit insurance 
D)  A relatively low number of bank failures each year, which has reduced the need for deposit insurance 
A)  Moral hazard arising from the tendency for the highest-risk banks to be those most interested in obtaining deposit insurance in the first place 
B)  Adverse selection arising from the tendency for banks to take on more risk after they receive deposit insurance 
C)  Moral hazard arising from the tendency for banks to take on more risk after they receive deposit insurance 
D)  A relatively low number of bank failures each year, which has reduced the need for deposit insurance

Question 10

Which of the following is included in M2? I. money market mutual funds
II) small-denomination certificates of deposit

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 11

U.S. paper currency is issued by the

Accepted Answer

A)  United States Mint. 
B)  Federal Reserve System. 
C)  U.S. Treasury. 
D)  largest commercial banks. 
A)  United States Mint. 
B)  Federal Reserve System. 
C)  U.S. Treasury. 
D)  largest commercial banks.

Question 12

If a check was written on Bank A for $100 and Bank B presented the check to Bank A for payment, what will happen to the required reserves for each respective bank after payment is made?

Accepted Answer

A)  Bank A's required reserves increase; Bank B's decrease. 
B)  Bank B's required reserves increase; Bank A's decrease. 
C)  Both banks will see an increase in their required reserves. 
D)  Both banks will see a decrease in their required reserves. 
A)  Bank A's required reserves increase; Bank B's decrease. 
B)  Bank B's required reserves increase; Bank A's decrease. 
C)  Both banks will see an increase in their required reserves. 
D)  Both banks will see a decrease in their required reserves.

Question 13

Any asset that sellers will accept as payment 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 14

An asset is liquid if it

Accepted Answer

A)  is of intrinsic value. 
B)  can be exchanged for other goods and services. 
C)  is a store of value. 
D)  can be obtained or disposed of without losing much of its nominal value. 
A)  is of intrinsic value. 
B)  can be exchanged for other goods and services. 
C)  is a store of value. 
D)  can be obtained or disposed of without losing much of its nominal value.

Question 15

A system in which the value of currency issued by the government is based entirely on public faith that the currency will be acceptable in trade is

Accepted Answer

A)  a fiduciary system. 
B)  a private property system. 
C)  a Gresham system. 
D)  a socialistic system. 
A)  a fiduciary system. 
B)  a private property system. 
C)  a Gresham system. 
D)  a socialistic system.

Question 16

A statement of assets and liabilities of any business entity is

Accepted Answer

A)  a sweep account. 
B)  a balance sheet. 
C)  net worth. 
D)  legal reserves. 
A)  a sweep account. 
B)  a balance sheet. 
C)  net worth. 
D)  legal reserves.

Question 17

With fractional reserve banking,

Accepted Answer

A)  banks can not generate profits. 
B)  monetary policy will be ineffective. 
C)  banks retain only a portion of their deposits in their vaults or at Federal Reserve banks. 
D)  banks can act as securities brokers. 
A)  banks can not generate profits. 
B)  monetary policy will be ineffective. 
C)  banks retain only a portion of their deposits in their vaults or at Federal Reserve banks. 
D)  banks can act as securities brokers.

Question 18

Without an accepted medium of exchange, people

Accepted Answer

A)  have to specialize in one area of production. 
B)  have to rely on gold or silver in order to exchange goods and services. 
C)  have to resort to barter in order to exchange goods and services. 
D)  can efficiently obtain goods and services. 
A)  have to specialize in one area of production. 
B)  have to rely on gold or silver in order to exchange goods and services. 
C)  have to resort to barter in order to exchange goods and services. 
D)  can efficiently obtain goods and services.

Question 19

The Fed sells a U.S. government security and a bank dealer writes a check for the amount. When the check clears,

Accepted Answer

A)  reserves remain unchanged because the decrease of reserves at the dealer's bank is offset by an increase in the reserves at the Fed. 
B)  reserves have fallen by the amount of the check because the Fed clears the check by reducing the bank's deposits at the Fed. 
C)  reserves increase by the amount of the check because the Fed clears the check by increasing the amount of the bank's deposits with the Fed. 
D)  reserves have fallen by the amount of the reserves times the reserve ratio, and the money supply falls by the difference between the amount of the check and the fall in the reserves. 
A)  reserves remain unchanged because the decrease of reserves at the dealer's bank is offset by an increase in the reserves at the Fed. 
B)  reserves have fallen by the amount of the check because the Fed clears the check by reducing the bank's deposits at the Fed. 
C)  reserves increase by the amount of the check because the Fed clears the check by increasing the amount of the bank's deposits with the Fed. 
D)  reserves have fallen by the amount of the reserves times the reserve ratio, and the money supply falls by the difference between the amount of the check and the fall in the reserves.

Question 20

Goldsmiths were able to practice an early form of fractional reserve banking because they knew that

Accepted Answer

A)  people were relatively unsophisticated in their financial transactions. 
B)  gold was the major form of money. 
C)  not all depositors would claim their gold at the same time. 
D)  gold did not serve as a unit of account. 
A)  people were relatively unsophisticated in their financial transactions. 
B)  gold was the major form of money. 
C)  not all depositors would claim their gold at the same time. 
D)  gold did not serve as a unit of account.

Exam 15: Money, Banking, and Central Banking

Which of the following is NOT part of M1 but is included in M2?

Which of the following is NOT a function of money?

The Fed's buying and selling of existing government securities is called

Which of the following institutions has responsibility for producing the coins that are distributed in the United States?

Which of the following is NOT included in the MZM definition of money?

-Refer to the above table. The value of M1 is

In defining money according to the transactions approach, you would want to include

If you save $2,500 for a down payment on a new car, you are using money as

Which of the following has been a problem faced by the FDIC in its provision of federal deposit insurance?

Which of the following is included in M2? I. money market mutual funds II) small-denomination certificates of deposit

U.S. paper currency is issued by the

If a check was written on Bank A for $100 and Bank B presented the check to Bank A for payment, what will happen to the required reserves for each respective bank after payment is made?

Any asset that sellers will accept as payment is a(n)

An asset is liquid if it

A system in which the value of currency issued by the government is based entirely on public faith that the currency will be acceptable in trade is

A statement of assets and liabilities of any business entity is

With fractional reserve banking,

Without an accepted medium of exchange, people

The Fed sells a U.S. government security and a bank dealer writes a check for the amount. When the check clears,

Goldsmiths were able to practice an early form of fractional reserve banking because they knew that

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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