Question 1

Money functions as a(n)

Accepted Answer

A)  store of value. 
B)  unit of account. 
C)  medium of exchange. 
D)  all of the above. 
A)  store of value. 
B)  unit of account. 
C)  medium of exchange. 
D)  all of the above.

Question 2

A fiduciary monetary system ultimately rests on

Accepted Answer

A)  the value of the metal backing up the system. 
B)  the public's confidence in the system. 
C)  the value of the assets backing up the system. 
D)  the difficulty of counterfeiting the currency. 
A)  the value of the metal backing up the system. 
B)  the public's confidence in the system. 
C)  the value of the assets backing up the system. 
D)  the difficulty of counterfeiting the currency.

Question 3

The Federal Open Market Committee (FOMC)

Accepted Answer

A)  determines the tax policy of the government. 
B)  influences the future growth of the money supply. 
C)  oversees all transactions on the stock market. 
D)  lends to the least credit-worthy customers. 
A)  determines the tax policy of the government. 
B)  influences the future growth of the money supply. 
C)  oversees all transactions on the stock market. 
D)  lends to the least credit-worthy customers.

Question 4

To contract the money supply, the Fed should

Accepted Answer

A)  reduce the differential between the discount rate and the federal funds rate. 
B)  increase government spending and cut taxes. 
C)  lower the required reserve ratio. 
D)  sell U.S. government securities. 
A)  reduce the differential between the discount rate and the federal funds rate. 
B)  increase government spending and cut taxes. 
C)  lower the required reserve ratio. 
D)  sell U.S. government securities.

Question 5

When a bank sells a bond to the Fed,

Accepted Answer

A)  its liabilities decrease. 
B)  its liabilities increase. 
C)  its reserves initially decrease. 
D)  its reserves initially increase. 
A)  its liabilities decrease. 
B)  its liabilities increase. 
C)  its reserves initially decrease. 
D)  its reserves initially increase.

Question 6

When we examine the U.S. money supply, the smallest component of M1 is

Accepted Answer

A)  currency and coins. 
B)  transaction deposits. 
C)  certificates of deposit. 
D)  traveler's checks. 
A)  currency and coins. 
B)  transaction deposits. 
C)  certificates of deposit. 
D)  traveler's checks.

Question 7

For barter to occur there must be

Accepted Answer

A)  hyperinflation. 
B)  a double coincidence of wants for each good to be exchanged. 
C)  one person who pays cash. 
D)  two people willing to pay with credit. 
A)  hyperinflation. 
B)  a double coincidence of wants for each good to be exchanged. 
C)  one person who pays cash. 
D)  two people willing to pay with credit.

Question 8

Checkable deposit account balances are

Accepted Answer

A)  counted in the calculation of the money supply. 
B)  part of M2 but not part of M1. 
C)  considered credit, but not money. 
D)  only a small component of the money supply. 
A)  counted in the calculation of the money supply. 
B)  part of M2 but not part of M1. 
C)  considered credit, but not money. 
D)  only a small component of the money supply.

Question 9

The function of money that provides for a commonly recognized measure of value for the price system 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 10

Which of the following is a liability to a bank?

Accepted Answer

A)  total reserves 
B)  transaction deposits 
C)  government securities 
D)  loans 
A)  total reserves 
B)  transaction deposits 
C)  government securities 
D)  loans

Question 11

The price tag on a pair of Nike shoes illustrates how money performs the function of a

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 12

A measure by which prices are expressed 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 13

Which function of money allows people to specialize in areas in which they have a comparative advantage?

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

A fiduciary monetary system has to have all of the following EXCEPT

Accepted Answer

A)  trust. 
B)  the Federal Reserve System. 
C)  acceptability. 
D)  predictability of value. 
A)  trust. 
B)  the Federal Reserve System. 
C)  acceptability. 
D)  predictability of value.

Question 15

Fractional reserve banking can be thought of as a bank

Accepted Answer

A)  withholding a portion of its total deposits that are not loaned out. 
B)  holding deposits equal to its net worth. 
C)  paying a fraction of its profit to depositors. 
D)  loaning out all of its reserves. 
A)  withholding a portion of its total deposits that are not loaned out. 
B)  holding deposits equal to its net worth. 
C)  paying a fraction of its profit to depositors. 
D)  loaning out all of its reserves.

Question 16

When money provides a yardstick that allows individuals to compare the relative values of goods and services, it is functioning as a

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 17

Which of the following is the most liquid?

Accepted Answer

A)  real estate 
B)  currency. 
C)  U.S. treasury bonds. 
D)  shares of stock. 
A)  real estate 
B)  currency. 
C)  U.S. treasury bonds. 
D)  shares of stock.

Question 18

The Federal Reserve System has

Accepted Answer

A)  7 district banks. 
B)  12 district banks. 
C)  24 district banks. 
D)  50 district banks. 
A)  7 district banks. 
B)  12 district banks. 
C)  24 district banks. 
D)  50 district banks.

Question 19

A sale of U.S. government securities by the Fed causes a(n)

Accepted Answer

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

Question 20

Which of the following depository institutions is NOT regulated by a government agency?

Accepted Answer

A)  Savings and loan associations 
B)  Credit unions 
C)  Commercial banks that are not part of the Federal Reserve System 
D)  None of the above: All depository institutions are regulated by some government agency 
A)  Savings and loan associations 
B)  Credit unions 
C)  Commercial banks that are not part of the Federal Reserve System 
D)  None of the above: All depository institutions are regulated by some government agency

Exam 15: Money, Banking, and Central Banking

Money functions as a(n)

A fiduciary monetary system ultimately rests on

The Federal Open Market Committee (FOMC)

To contract the money supply, the Fed should

When a bank sells a bond to the Fed,

When we examine the U.S. money supply, the smallest component of M1 is

For barter to occur there must be

Checkable deposit account balances are

The function of money that provides for a commonly recognized measure of value for the price system is a(n)

Which of the following is a liability to a bank?

The price tag on a pair of Nike shoes illustrates how money performs the function of a

A measure by which prices are expressed is a(n)

Which function of money allows people to specialize in areas in which they have a comparative advantage?

A fiduciary monetary system has to have all of the following EXCEPT

Fractional reserve banking can be thought of as a bank

When money provides a yardstick that allows individuals to compare the relative values of goods and services, it is functioning as a

Which of the following is the most liquid?

The Federal Reserve System has

A sale of U.S. government securities by the Fed causes a(n)

Which of the following depository institutions is NOT regulated by a government agency?

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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