Question 1

Which of the following is the central bank for the United States?

Accepted Answer

A)  the Federal Deposit Insurance Corporation (FDI
C)  
B)  the United States Treasury 
C)  the Comptroller of the Currency 
D)  none of the above 
A)  the Federal Deposit Insurance Corporation (FDI
C)  
B)  the United States Treasury 
C)  the Comptroller of the Currency 
D)  none of the above

Question 2

Which of the following is NOT a function of the Fed?

Accepted Answer

A)  Holding reserves for depository institutions 
B)  Supervising member banks 
C)  Regulating the money supply 
D)  Lending funds to credit-worthy private firms 
A)  Holding reserves for depository institutions 
B)  Supervising member banks 
C)  Regulating the money supply 
D)  Lending funds to credit-worthy private firms

Question 3

Beginning in late 2010, the FDIC sought to increase the public's confidence in depository institutions by

Accepted Answer

A)  lowering insurance premiums for bank deposits. 
B)  eliminating insurance premiums for bank deposits. 
C)  assessing insurance premiums on banks' total liabilities. 
D)  changing the scope of insurance to banks' assets. 
A)  lowering insurance premiums for bank deposits. 
B)  eliminating insurance premiums for bank deposits. 
C)  assessing insurance premiums on banks' total liabilities. 
D)  changing the scope of insurance to banks' assets.

Question 4

When you buy a taco for breakfast, you are using money as a

Accepted Answer

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

Question 5

When the Fed buys a U.S. bond in the open market

Accepted Answer

A)  its action has no effect on the total reserves or the money supply because the check it writes increases reserves at one bank but they fall at another. 
B)  total reserves increase by the amount of the purchase but the money supply stays the same. 
C)  its action expands total reserves and the money supply. 
D)  its action contracts total reserves and the money supply. 
A)  its action has no effect on the total reserves or the money supply because the check it writes increases reserves at one bank but they fall at another. 
B)  total reserves increase by the amount of the purchase but the money supply stays the same. 
C)  its action expands total reserves and the money supply. 
D)  its action contracts total reserves and the money supply.

Question 6

A price tag of $400 for a tablet device is an example of money as

Accepted Answer

A)  a medium of exchange. 
B)  a unit of accounting. 
C)  a store of value. 
D)  a time deposit. 
A)  a medium of exchange. 
B)  a unit of accounting. 
C)  a store of value. 
D)  a time deposit.

Question 7

Which of the following is true of M2?

Accepted Answer

A)  It is larger than M1. 
B)  It excludes savings deposits. 
C)  It does not include highly liquid components of the money supply. 
D)  It is less than M1. 
A)  It is larger than M1. 
B)  It excludes savings deposits. 
C)  It does not include highly liquid components of the money supply. 
D)  It is less than M1.

Question 8

Assuming a reserve ratio of 10 percent, if a bank sells $100,000 in securities how much can the bank loan out?

Accepted Answer

A)  $90,000 
B)  $100,000 
C)  $110,000 
D)  $10,000 
A)  $90,000 
B)  $100,000 
C)  $110,000 
D)  $10,000

Question 9

For barter to occur there has to be

Accepted Answer

A)  a commodity to serve as a medium of exchange. 
B)  a formal market where prices are quoted. 
C)  a double coincidence of wants. 
D)  a single coincidence of wants. 
A)  a commodity to serve as a medium of exchange. 
B)  a formal market where prices are quoted. 
C)  a double coincidence of wants. 
D)  a single coincidence of wants.

Question 10

The Fed buys $1 million in bonds from a bond dealer. The bond dealer's bank experiences

Accepted Answer

A)  an increase in assets of $1 million as its reserves increase and a decrease in liabilities as its transactions deposits fall. 
B)  no change in assets or liabilities. Assets both increased and decreased by the amount of the check. 
C)  a decrease in assets of $1 million as the checking account of the bond dealer increased, and a decrease in liabilities as the bank's deposits with the Fed increased by $1 million. 
D)  an increase in assets of $1 million as its reserves increase and an increase in liabilities of $1 million as the deposits in the bond dealer's transactions account increases by $1 million. 
A)  an increase in assets of $1 million as its reserves increase and a decrease in liabilities as its transactions deposits fall. 
B)  no change in assets or liabilities. Assets both increased and decreased by the amount of the check. 
C)  a decrease in assets of $1 million as the checking account of the bond dealer increased, and a decrease in liabilities as the bank's deposits with the Fed increased by $1 million. 
D)  an increase in assets of $1 million as its reserves increase and an increase in liabilities of $1 million as the deposits in the bond dealer's transactions account increases by $1 million.

Question 11

Control of the money supply is handled by

Accepted Answer

A)  Congress. 
B)  the Federal Reserve System. 
C)  all commercial banks. 
D)  Congress and all member commercial banks. 
A)  Congress. 
B)  the Federal Reserve System. 
C)  all commercial banks. 
D)  Congress and all member commercial banks.

Question 12

Which of the following is NOT included in M1?

Accepted Answer

A)  Currency. 
B)  Transaction deposits. 
C)  Saving deposits. 
D)  Traveler's checks. 
A)  Currency. 
B)  Transaction deposits. 
C)  Saving deposits. 
D)  Traveler's checks.

Question 13

A monetary system is preferable over the barter system because of the problems associated with

Accepted Answer

A)  cash leakages. 
B)  the double coincidence of wants. 
C)  the law of diminishing marginal utility. 
D)  the law of increasing relative costs. 
A)  cash leakages. 
B)  the double coincidence of wants. 
C)  the law of diminishing marginal utility. 
D)  the law of increasing relative costs.

Question 14

A central bank is

Accepted Answer

A)  the largest bank in the country. 
B)  the largest bank in the country's capital. 
C)  a banker's bank. 
D)  an international bank. 
A)  the largest bank in the country. 
B)  the largest bank in the country's capital. 
C)  a banker's bank. 
D)  an international bank.

Question 15

The process in which financial institutions accept savings from businesses, households, and governments and lend the funds to other businesses, households, and governments is called

Accepted Answer

A)  central banking system. 
B)  financial intermediation. 
C)  moral hazard. 
D)  adverse selection. 
A)  central banking system. 
B)  financial intermediation. 
C)  moral hazard. 
D)  adverse selection.

Question 16

Federal Reserve notes are

Accepted Answer

A)  a liability of the Federal Reserve System. 
B)  an asset to the Federal Reserve System. 
C)  both an asset and a liability to the Federal Reserve System. 
D)  a liability to the United States Treasury. 
A)  a liability of the Federal Reserve System. 
B)  an asset to the Federal Reserve System. 
C)  both an asset and a liability to the Federal Reserve System. 
D)  a liability to the United States Treasury.

Question 17

Which term below fits closest to money functioning as a unit of accounting?

Accepted Answer

A)  Exchange 
B)  Specialization 
C)  Yardstick 
D)  Liquid 
A)  Exchange 
B)  Specialization 
C)  Yardstick 
D)  Liquid

Question 18

When the Fed buys a $10,000 bond from a bond dealer,

Accepted Answer

A)  reserves of the banking system increase by $10,000, but the money supply will only be able to increase by something less than this amount. 
B)  reserves of the banking system increase by $10,000, but the money supply can increase by more than $10,000. 
C)  reserves of the banking system remain unchanged, but the money supply increases by $10,000. 
D)  reserves of the banking system remain unchanged, but the money supply decreases by $10,000. 
A)  reserves of the banking system increase by $10,000, but the money supply will only be able to increase by something less than this amount. 
B)  reserves of the banking system increase by $10,000, but the money supply can increase by more than $10,000. 
C)  reserves of the banking system remain unchanged, but the money supply increases by $10,000. 
D)  reserves of the banking system remain unchanged, but the money supply decreases by $10,000.

Question 19

A fractional reserve banking system is a system whereby

Accepted Answer

A)  banks keep at least 100 percent of their deposits on hand as reserves. 
B)  banks keep only a fraction of their deposits on hand as reserves. 
C)  a central bank tells all banks what fraction of the population they can serve. 
D)  banks specialize so that one type of bank handles one kind of deposit and another type of bank handles another type of deposit. 
A)  banks keep at least 100 percent of their deposits on hand as reserves. 
B)  banks keep only a fraction of their deposits on hand as reserves. 
C)  a central bank tells all banks what fraction of the population they can serve. 
D)  banks specialize so that one type of bank handles one kind of deposit and another type of bank handles another type of deposit.

Question 20

Why does the money supply increase when the Fed buys a bond but does not change when a business buys a bond?

Accepted Answer

The reserves in the banking system incre

Exam 15: Money, Banking, and Central Banking

Which of the following is the central bank for the United States?

Which of the following is NOT a function of the Fed?

Beginning in late 2010, the FDIC sought to increase the public's confidence in depository institutions by

When you buy a taco for breakfast, you are using money as a

When the Fed buys a U.S. bond in the open market

A price tag of $400 for a tablet device is an example of money as

Which of the following is true of M2?

Assuming a reserve ratio of 10 percent, if a bank sells $100,000 in securities how much can the bank loan out?

For barter to occur there has to be

The Fed buys $1 million in bonds from a bond dealer. The bond dealer's bank experiences

Control of the money supply is handled by

Which of the following is NOT included in M1?

A monetary system is preferable over the barter system because of the problems associated with

A central bank is

The process in which financial institutions accept savings from businesses, households, and governments and lend the funds to other businesses, households, and governments is called

Federal Reserve notes are

Which term below fits closest to money functioning as a unit of accounting?

When the Fed buys a $10,000 bond from a bond dealer,

A fractional reserve banking system is a system whereby

Why does the money supply increase when the Fed buys a bond but does not change when a business buys a bond?

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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