Question 1

Regarding the nation's money supply, the Federal Reserve

Accepted Answer

A)  has no ability to influence its magnitude or its rate of growth. 
B)  precisely sets the amount of money in circulation in consultation with the Congress. 
C)  can influence its future growth. 
D)  gives the U.S. Treasury the authority to print as much as it wishes. 
A)  has no ability to influence its magnitude or its rate of growth. 
B)  precisely sets the amount of money in circulation in consultation with the Congress. 
C)  can influence its future growth. 
D)  gives the U.S. Treasury the authority to print as much as it wishes.

Question 2

Total reserves are

Accepted Answer

A)  required reserves plus vault cash. 
B)  required reserves plus excess reserves. 
C)  required reserves. 
D)  excess reserves. 
A)  required reserves plus vault cash. 
B)  required reserves plus excess reserves. 
C)  required reserves. 
D)  excess reserves.

Question 3

Suppose you are offered a new iPod in exchange for thirty hours of your work in your friend's garden. This is an example of

Accepted Answer

A)  money as a medium of exchange. 
B)  money as a store of value. 
C)  barter. 
D)  money as a standard of deferred payment. 
A)  money as a medium of exchange. 
B)  money as a store of value. 
C)  barter. 
D)  money as a standard of deferred payment.

Question 4

The most important function of money is when money is used as a

Accepted Answer

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

Question 5

The money supply that consists of currency, transaction deposits, and traveler's checks is

Accepted Answer

A)  M1. 
B)  M2. 
C)  the fiduciary monetary system. 
D)  the liquidity approach. 
A)  M1. 
B)  M2. 
C)  the fiduciary monetary system. 
D)  the liquidity approach.

Question 6

The potential for a financial breakdown at one financial institution to spread throughout the financial system is known as a

Accepted Answer

A)  lending risk. 
B)  moral hazard. 
C)  liquidity risk. 
D)  systemic risk. 
A)  lending risk. 
B)  moral hazard. 
C)  liquidity risk. 
D)  systemic risk.

Question 7

Money in a fiduciary monetary system is backed by

Accepted Answer

A)  gold. 
B)  the public's confidence that the assets will continue to serve as money. 
C)  the intrinsic value of the materials used to make the assets that serve as money. 
D)  assets owned by the government that are intrinsically valuable. 
A)  gold. 
B)  the public's confidence that the assets will continue to serve as money. 
C)  the intrinsic value of the materials used to make the assets that serve as money. 
D)  assets owned by the government that are intrinsically valuable.

Question 8

Deposit insurance shields depositors from the adverse effects of risky decisions and thereby

Accepted Answer

A)  encourages riskier behavior on the part of managers of depository institutions. 
B)  encourages depositors to monitor the managers of depository institutions more closely. 
C)  encourages moral hazard on the part of depositors. 
D)  generates a more efficient banking system. 
A)  encourages riskier behavior on the part of managers of depository institutions. 
B)  encourages depositors to monitor the managers of depository institutions more closely. 
C)  encourages moral hazard on the part of depositors. 
D)  generates a more efficient banking system.

Question 9

The function of money that allows individuals a method to compare the relative value of goods and services is

Accepted Answer

A)  medium of exchange. 
B)  unit of accounting. 
C)  store of value. 
D)  liquidity. 
A)  medium of exchange. 
B)  unit of accounting. 
C)  store of value. 
D)  liquidity.

Question 10

The part of the Federal Reserve System (the Fed) that directs the buying and selling of U.S. government securities is

Accepted Answer

A)  the Federal Open Market Committee. 
B)  the Federal Advisory Committee. 
C)  the Federal Reserve district banks. 
D)  the Board of Governors. 
A)  the Federal Open Market Committee. 
B)  the Federal Advisory Committee. 
C)  the Federal Reserve district banks. 
D)  the Board of Governors.

Question 11

A fiduciary monetary system is dependent on

Accepted Answer

A)  acceptability and predictability of value. 
B)  precious metals backing fiat money. 
C)  Congressional monetary support. 
D)  a negative inflation rate. 
A)  acceptability and predictability of value. 
B)  precious metals backing fiat money. 
C)  Congressional monetary support. 
D)  a negative inflation rate.

Question 12

A "banker's bank" is another name for

Accepted Answer

A)  a financial intermediary. 
B)  a government bank. 
C)  a central bank. 
D)  the Federal Depository Insurance Agency. 
A)  a financial intermediary. 
B)  a government bank. 
C)  a central bank. 
D)  the Federal Depository Insurance Agency.

Question 13

If something is to serve as money it must be a store of value. This means that it must

Accepted Answer

A)  be divisible. 
B)  be the standard by which all goods are compared in setting prices. 
C)  hold its purchasing power over time. 
D)  be liquid. 
A)  be divisible. 
B)  be the standard by which all goods are compared in setting prices. 
C)  hold its purchasing power over time. 
D)  be liquid.

Question 14

Which of the following is NOT a benefit of money when used as a medium of exchange?

Accepted Answer

A)  Allowing individuals to specialize 
B)  Allowing individuals to pay off debts 
C)  Allowing for some economic efficiencies 
D)  Providing economic growth 
A)  Allowing individuals to specialize 
B)  Allowing individuals to pay off debts 
C)  Allowing for some economic efficiencies 
D)  Providing economic growth

Question 15

For the past several decades, the U.S. M1 multiplier has been between ________.

Accepted Answer

A)  1.0 and 2.0. 
B)  2.5 and 3.0. 
C)  3.0 and 6.0. 
D)  6.5 and 10.0. 
A)  1.0 and 2.0. 
B)  2.5 and 3.0. 
C)  3.0 and 6.0. 
D)  6.5 and 10.0.

Question 16

The initial impact of the Fed's open market sale of government securities by the Federal Reserve is

Accepted Answer

A)  an increase in the money supply by some multiple of the dollar volume of the sale. 
B)  an increase in commercial bank deposits at the Fed. 
C)  a fall in the money supply by some multiple of the dollar volume of the sale. 
D)  a reduction of the commercial banking system's reserve deposits at the Fed. 
A)  an increase in the money supply by some multiple of the dollar volume of the sale. 
B)  an increase in commercial bank deposits at the Fed. 
C)  a fall in the money supply by some multiple of the dollar volume of the sale. 
D)  a reduction of the commercial banking system's reserve deposits at the Fed.

Question 17

When the Fed buys U.S. government securities, the money supply

Accepted Answer

A)  increases because there is an increase in transaction deposits at the bank of the bond dealer but there is no decrease in transaction deposits at any other bank. 
B)  decreases because there is an increase in the reserves of the bond dealer's bank. 
C)  remains unchanged because the increase in transaction deposits at the bond dealer's bank is offset by a reduction in transaction deposits at the Fed. 
D)  remains unchanged because the increase in transaction deposits at the bond dealer's bank is offset by a fall in transaction deposits at another bank. 
A)  increases because there is an increase in transaction deposits at the bank of the bond dealer but there is no decrease in transaction deposits at any other bank. 
B)  decreases because there is an increase in the reserves of the bond dealer's bank. 
C)  remains unchanged because the increase in transaction deposits at the bond dealer's bank is offset by a reduction in transaction deposits at the Fed. 
D)  remains unchanged because the increase in transaction deposits at the bond dealer's bank is offset by a fall in transaction deposits at another bank.

Question 18

Two people are involved in a borrower/lender situation, and one person has superior knowledge of its own current and future prospects over the other person. This is known as

Accepted Answer

A)  preventable information. 
B)  symmetric information. 
C)  asymmetric information. 
D)  deceptive knowledge. 
A)  preventable information. 
B)  symmetric information. 
C)  asymmetric information. 
D)  deceptive knowledge.

Question 19

Giving the store clerk a $20 bill for a sweater priced at $20 is an example of money serving as a

Accepted Answer

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

Question 20

The M1 measure of money is suggested by the ________ approach to measuring money.

Accepted Answer

A)  investment 
B)  liquidity 
C)  transactions 
D)  security 
A)  investment 
B)  liquidity 
C)  transactions 
D)  security

Exam 15: Money, Banking, and Central Banking

Regarding the nation's money supply, the Federal Reserve

Total reserves are

Suppose you are offered a new iPod in exchange for thirty hours of your work in your friend's garden. This is an example of

The most important function of money is when money is used as a

The money supply that consists of currency, transaction deposits, and traveler's checks is

The potential for a financial breakdown at one financial institution to spread throughout the financial system is known as a

Money in a fiduciary monetary system is backed by

Deposit insurance shields depositors from the adverse effects of risky decisions and thereby

The function of money that allows individuals a method to compare the relative value of goods and services is

The part of the Federal Reserve System (the Fed) that directs the buying and selling of U.S. government securities is

A fiduciary monetary system is dependent on

A "banker's bank" is another name for

If something is to serve as money it must be a store of value. This means that it must

Which of the following is NOT a benefit of money when used as a medium of exchange?

For the past several decades, the U.S. M1 multiplier has been between ________.

The initial impact of the Fed's open market sale of government securities by the Federal Reserve is

When the Fed buys U.S. government securities, the money supply

Two people are involved in a borrower/lender situation, and one person has superior knowledge of its own current and future prospects over the other person. This is known as

Giving the store clerk a $20 bill for a sweater priced at $20 is an example of money serving as a

The M1 measure of money is suggested by the ________ approach to measuring money.

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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