Question 1

A checkable and debitable account

Accepted Answer

A)  is a very illiquid asset. 
B)  is one on which the holder can write checks. 
C)  must be traded on the stock exchange. 
D)  cannot serve as a store of value. 
A)  is a very illiquid asset. 
B)  is one on which the holder can write checks. 
C)  must be traded on the stock exchange. 
D)  cannot serve as a store of value.

Question 2

Assets that can be easily converted into money without significant loss of value are

Accepted Answer

A)  transactions balances. 
B)  near monies. 
C)  currencies. 
D)  liabilities. 
A)  transactions balances. 
B)  near monies. 
C)  currencies. 
D)  liabilities.

Question 3

The reserve ratio is 20 percent. The Fed buys $1 million in government securities from a bond dealer by transmitting the funds to the dealer's deposit account at Bank A. Bank A makes the maximum loan possible to a construction company, which buys materials with the loan. The check is deposited in Bank B, which loans out all it can to a car dealership. To this point, the money supply has increased by

Accepted Answer

A)  $1 million. 
B)  $1.8 million. 
C)  $2.44 million. 
D)  $3 million. 
A)  $1 million. 
B)  $1.8 million. 
C)  $2.44 million. 
D)  $3 million.

Question 4

When people decide to increase the amount of currency they are currently holding

Accepted Answer

A)  the potential money multiplier will increase. 
B)  the potential money multiplier will decrease. 
C)  the actual money multiplier will increase. 
D)  the actual money multiplier will decrease. 
A)  the potential money multiplier will increase. 
B)  the potential money multiplier will decrease. 
C)  the actual money multiplier will increase. 
D)  the actual money multiplier will decrease.

Question 5

As a unit of account, money is used

Accepted Answer

A)  to define prices of all other goods. 
B)  to pay off future debts. 
C)  to hold purchasing power over time. 
D)  to exchange for goods and services. 
A)  to define prices of all other goods. 
B)  to pay off future debts. 
C)  to hold purchasing power over time. 
D)  to exchange for goods and services.

Question 6

The formula   is the

Accepted Answer

A)  federal funds rate. 
B)  discount rate. 
C)  potential money multiplier. 
D)  actual change in the money supply. 
A)  federal funds rate. 
B)  discount rate. 
C)  potential money multiplier. 
D)  actual change in the money supply.

Question 7

In a barter system, we would expect to see

Accepted Answer

A)  many different units of money. 
B)  money and goods exchanged for each other. 
C)  wide-spread financial institutions. 
D)  goods traded directly for other goods and services. 
A)  many different units of money. 
B)  money and goods exchanged for each other. 
C)  wide-spread financial institutions. 
D)  goods traded directly for other goods and services.

Question 8

As a "lender of last resort," the Fed

Accepted Answer

A)  is obligated to bail out any depository institution in the country that is in financial difficulty. 
B)  protects the deposits of $100,000 or less in all commercial banks in the country. 
C)  provides loans to banks experiencing temporary liquidity problems. 
D)  bails out any corporation the government has decided should not fail. 
A)  is obligated to bail out any depository institution in the country that is in financial difficulty. 
B)  protects the deposits of $100,000 or less in all commercial banks in the country. 
C)  provides loans to banks experiencing temporary liquidity problems. 
D)  bails out any corporation the government has decided should not fail.

Question 9

United States coins and currency are backed by

Accepted Answer

A)  silver. 
B)  gold. 
C)  reserves of foreign currencies. 
D)  confidence that they will retain their value. 
A)  silver. 
B)  gold. 
C)  reserves of foreign currencies. 
D)  confidence that they will retain their value.

Question 10

Transaction deposits

Accepted Answer

A)  are deposits in a thrift institution or a commercial bank on which a check may be written. 
B)  are only deposits that you can check on through the Internet. 
C)  include savings accounts. 
D)  are accounts that pay interest to the depositor. 
A)  are deposits in a thrift institution or a commercial bank on which a check may be written. 
B)  are only deposits that you can check on through the Internet. 
C)  include savings accounts. 
D)  are accounts that pay interest to the depositor.

Question 11

When you make a purchase at a retail store by giving your bank an instruction to transfer funds directly from your bank account to the store's bank account, you have most likely made the purchase using

Accepted Answer

A)  cash. 
B)  a loan. 
C)  a debit card. 
D)  credit. 
A)  cash. 
B)  a loan. 
C)  a debit card. 
D)  credit.

Question 12

The reason that the commercial banking system can generate a multiple expansion or contraction of the money supply is that

Accepted Answer

A)  banks are required to hold only a fraction of their deposit liabilities as reserves. 
B)  most banks maintain a relatively large stock of reserves. 
C)  banks hold reserves equal to their net worth. 
D)  banks generally are required to hold surplus funds on deposit with other banks. 
A)  banks are required to hold only a fraction of their deposit liabilities as reserves. 
B)  most banks maintain a relatively large stock of reserves. 
C)  banks hold reserves equal to their net worth. 
D)  banks generally are required to hold surplus funds on deposit with other banks.

Question 13

A checking account balance in a commercial bank is

Accepted Answer

A)  part of the currency supply. 
B)  a time deposit. 
C)  not liquid enough to be considered money. 
D)  an asset readily usable for most transactions. 
A)  part of the currency supply. 
B)  a time deposit. 
C)  not liquid enough to be considered money. 
D)  an asset readily usable for most transactions.

Question 14

As far as reserves and deposits are concerned, describe the assets and liabilities of a bank.

Accepted Answer

The major liabilities of a bank are the

Question 15

By affecting the amount of reserves in the banking system, the Fed can

Accepted Answer

A)  affect the size of the money supply. 
B)  change the marginal tax rates. 
C)  increase government purchases. 
D)  reduce government purchases. 
A)  affect the size of the money supply. 
B)  change the marginal tax rates. 
C)  increase government purchases. 
D)  reduce government purchases.

Question 16

The best measure of money is

Accepted Answer

A)  coins and currency. 
B)  the one based on the transactions approach. 
C)  the one based on the liquidity approach. 
D)  something economists have never agreed on. 
A)  coins and currency. 
B)  the one based on the transactions approach. 
C)  the one based on the liquidity approach. 
D)  something economists have never agreed on.

Question 17

The degree to which an asset can be acquired or disposed of without much loss of nominal value or transaction costs is known as

Accepted Answer

A)  fiat money. 
B)  liquidity. 
C)  fiducia. 
D)  credit. 
A)  fiat money. 
B)  liquidity. 
C)  fiducia. 
D)  credit.

Question 18

The liquidity approach to measuring the money supply uses

Accepted Answer

A)  M1 only. 
B)  near moneys only. 
C)  M1 plus some highly liquid assets. 
D)  M2 plus some highly liquid assets. 
A)  M1 only. 
B)  near moneys only. 
C)  M1 plus some highly liquid assets. 
D)  M2 plus some highly liquid assets.

Question 19

What is a fiduciary monetary system?

Accepted Answer

A fiduciary monetary system is a system

Question 20

Who appoints the Federal Reserve System's Board of Governors?

Accepted Answer

A)  The Secretary of the Treasury 
B)  The President of the United States 
C)  The Speaker of the House of Representatives 
D)  The American Banking Association 
A)  The Secretary of the Treasury 
B)  The President of the United States 
C)  The Speaker of the House of Representatives 
D)  The American Banking Association

Exam 15: Money, Banking, and Central Banking

A checkable and debitable account

Assets that can be easily converted into money without significant loss of value are

When people decide to increase the amount of currency they are currently holding

As a unit of account, money is used

The formula is the

In a barter system, we would expect to see

As a "lender of last resort," the Fed

United States coins and currency are backed by

Transaction deposits

When you make a purchase at a retail store by giving your bank an instruction to transfer funds directly from your bank account to the store's bank account, you have most likely made the purchase using

The reason that the commercial banking system can generate a multiple expansion or contraction of the money supply is that

A checking account balance in a commercial bank is

As far as reserves and deposits are concerned, describe the assets and liabilities of a bank.

By affecting the amount of reserves in the banking system, the Fed can

The best measure of money is

The degree to which an asset can be acquired or disposed of without much loss of nominal value or transaction costs is known as

The liquidity approach to measuring the money supply uses

What is a fiduciary monetary system?

Who appoints the Federal Reserve System's Board of Governors?

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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