Question 1

The maximum demand deposit creation possible from a new deposit is derived from the equation D = E x 1/r.

Accepted Answer

A) True 
 B)False

Question 2

A collateralized debt obligation (or CDO)

Accepted Answer

A) Is generally riskier than a single debt of an equal value 
B) Sells for a lower price than re-sales of individual mortgages that comprise them 
C) Is sold in the primary financial market 
D) Is a financial instrument that obscures the underlying risks of the mortgages that comprise them 
E) Is always a bad financial investment 
A) Is generally riskier than a single debt of an equal value 
B) Sells for a lower price than re-sales of individual mortgages that comprise them 
C) Is sold in the primary financial market 
D) Is a financial instrument that obscures the underlying risks of the mortgages that comprise them 
E) Is always a bad financial investment

Question 3

The reserve ratio is the rate of interest charged commercial banks when they borrow from the Federal ReservE.

Accepted Answer

A) True 
 B)False

Question 4

The Federal Open Market Committee (FOMC)is highly concerned with

Accepted Answer

A) The national unemployment rate 
B) The growth of real GDP 
C) Interest rates 
D) The level of the stock market 
E) All of the above 
A) The national unemployment rate 
B) The growth of real GDP 
C) Interest rates 
D) The level of the stock market 
E) All of the above

Question 5

During inflationary periods,the Federal Reserve should buy securities so that commercial banks will have more reserves to loan out.

Accepted Answer

A) True 
 B)False

Question 6

Liquidity of an asset increases when

Accepted Answer

A) It is easier to convert the asset into cash 
B) The asset's value is below its original price 
C) The asset is purchased 
D) The asset depreciates 
E) The asset is put on the market 
A) It is easier to convert the asset into cash 
B) The asset's value is below its original price 
C) The asset is purchased 
D) The asset depreciates 
E) The asset is put on the market

Question 7

Money does not serve as a

Accepted Answer

A) Medium of exchange 
B) Store of value 
C) Measure of value 
D) Price index 
E) It serves as all of the above 
A) Medium of exchange 
B) Store of value 
C) Measure of value 
D) Price index 
E) It serves as all of the above

Question 8

A capital gain exists

Accepted Answer

A) When one political party increases the number of its members in Congress 
B) When an interest payment is made 
C) When the price of an asset goes up 
D) When the price of an asset exceeds the price paid for it 
E) When taxes are paid on the asset 
A) When one political party increases the number of its members in Congress 
B) When an interest payment is made 
C) When the price of an asset goes up 
D) When the price of an asset exceeds the price paid for it 
E) When taxes are paid on the asset

Question 9

In the U.S.banking system,the ratio of a bank's reserves and its outstanding deposits is usually less than onE.

Accepted Answer

A) True 
 B)False

Question 10

An increase in the reserve requirement can

Accepted Answer

A) Decrease interest rates 
B) Increase liquidity 
C) Decrease the money supply 
D) Increase the money supply 
E) Decrease the profits of banks 
A) Decrease interest rates 
B) Increase liquidity 
C) Decrease the money supply 
D) Increase the money supply 
E) Decrease the profits of banks

Question 11

A commercial banking system with excess reserves has the ability to create money in the by making loans.

Accepted Answer

A) True 
 B)False

Question 12

A credit union is a cooperative banking venture where the members or owners of the organization have a common employer or union.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is true of a fractional reserve banking system?

Accepted Answer

A) Banks must hold all of depositors' deposits in their vaults 
B) Banking is only a fraction of the services banks provide to their customers 
C) Banks lend out part of their depositors' deposits 
D) The reserve ratio is 100% 
E) Banks may not hold excess reserves 
A) Banks must hold all of depositors' deposits in their vaults 
B) Banking is only a fraction of the services banks provide to their customers 
C) Banks lend out part of their depositors' deposits 
D) The reserve ratio is 100% 
E) Banks may not hold excess reserves

Question 14

The annual growth rate in the money supply has been held constant by the Federal ReservE.

Accepted Answer

A) True 
 B)False

Question 15

The Following Questions Refer to the graph below.  
-A shift from MS1 to MS2 would be the result of

Accepted Answer

A) An increase in aggregate demand 
B) An increase in aggregate supply 
C) A decision by the Fed to purchase government securities by the FOMC 
D) A decision by the Fed to sell government securities by the FOMC 
E) A change in the stock market 
A) An increase in aggregate demand 
B) An increase in aggregate supply 
C) A decision by the Fed to purchase government securities by the FOMC 
D) A decision by the Fed to sell government securities by the FOMC 
E) A change in the stock market

Question 16

When Ben Bernanke became Fed chairman,the Federal Reserve began explicitly announcing money supply targets.

Accepted Answer

A) True 
 B)False

Question 17

In the early years of the American republic,the First Bank of the United States was established through the efforts of

Accepted Answer

A) Thomas Jefferson 
B) George Washington 
C) James Madison 
D) Alexander Hamilton 
E) Aaron Burr 
A) Thomas Jefferson 
B) George Washington 
C) James Madison 
D) Alexander Hamilton 
E) Aaron Burr

Question 18

The definition of the money supply called M1 includes all of the assets included in the definition of M2.

Accepted Answer

A) True 
 B)False

Question 19

The Following Questions Refer to the graph below.  
-Suppose that the Fed has increased the money supply.This is shown in the diagram by

Accepted Answer

A) q1 to q0 
B) q0 to q1 
C) MS1 
D) MS2 
E) None of the above 
A) q1 to q0 
B) q0 to q1 
C) MS1 
D) MS2 
E) None of the above

Question 20

Insurance policies

Accepted Answer

A) Require an initial,one-time payment by policy holders but no further outlay 
B) Make payments to policy holders on a monthly basis 
C) Require a regular payment of insurance premiums by policy holders 
D) Require an initial payment and regular payments of insurance premiums by policy holders 
E) None of the above 
A) Require an initial,one-time payment by policy holders but no further outlay 
B) Make payments to policy holders on a monthly basis 
C) Require a regular payment of insurance premiums by policy holders 
D) Require an initial payment and regular payments of insurance premiums by policy holders 
E) None of the above

The maximum demand deposit creation possible from a new deposit is derived from the equation D = E x 1/r.

A collateralized debt obligation (or CDO)

The reserve ratio is the rate of interest charged commercial banks when they borrow from the Federal ReservE.

The Federal Open Market Committee (FOMC)is highly concerned with

During inflationary periods,the Federal Reserve should buy securities so that commercial banks will have more reserves to loan out.

Liquidity of an asset increases when

Money does not serve as a

A capital gain exists

In the U.S.banking system,the ratio of a bank's reserves and its outstanding deposits is usually less than onE.

An increase in the reserve requirement can

A commercial banking system with excess reserves has the ability to create money in the by making loans.

A credit union is a cooperative banking venture where the members or owners of the organization have a common employer or union.

Which of the following is true of a fractional reserve banking system?

The annual growth rate in the money supply has been held constant by the Federal ReservE.

The Following Questions Refer to the graph below. -A shift from MS¹ to MS² would be the result of

When Ben Bernanke became Fed chairman,the Federal Reserve began explicitly announcing money supply targets.

In the early years of the American republic,the First Bank of the United States was established through the efforts of

The definition of the money supply called M1 includes all of the assets included in the definition of M2.

The Following Questions Refer to the graph below. -Suppose that the Fed has increased the money supply.This is shown in the diagram by

Insurance policies

Alleviating Human Misery: The Role of Economic Reasoning

Economic Systems, Resource Allocation, and Social Well-Being: Lessons From Chinas Transition

Government Control of Prices in Mixed Systems: Who Are the Winners and Losers

Pollution Problems: Must We Foul Our Own Nests

Economics of Crime and Its Prevention: How Much Is Too Much

The Economics of Education: Crisis and Reform

Poverty Problems and Discrimination: Why Are so Many Still so Poor

The Economics of Monopoly Power: Can Markets Be Controlled

The Economics of Professional Sports: What Is the Real Score

Competition in the Global Market-Place: Should We Protect Ourselves From International Trade

Economic Growth: Why Is the Economic Road so Bumpy

Unemployment and Inflation: Can We Find a Balance

Government Spending,Taxation,and the National Debt: Who Wins and Who Loses

Social Security and Medicare: How Secure Is Our Safety Net for the Elderly

Filters

Exam 12: Money,Banking and the Financial System: Old Problems With New Twists

The maximum demand deposit creation possible from a new deposit is derived from the equation D = E x 1/r.

A collateralized debt obligation (or CDO)

The reserve ratio is the rate of interest charged commercial banks when they borrow from the Federal ReservE.

The Federal Open Market Committee (FOMC)is highly concerned with

During inflationary periods,the Federal Reserve should buy securities so that commercial banks will have more reserves to loan out.

Liquidity of an asset increases when

Money does not serve as a

A capital gain exists

In the U.S.banking system,the ratio of a bank's reserves and its outstanding deposits is usually less than onE.

An increase in the reserve requirement can

A commercial banking system with excess reserves has the ability to create money in the by making loans.

A credit union is a cooperative banking venture where the members or owners of the organization have a common employer or union.

Which of the following is true of a fractional reserve banking system?

The annual growth rate in the money supply has been held constant by the Federal ReservE.

The Following Questions Refer to the graph below. -A shift from MS1 to MS2 would be the result of

When Ben Bernanke became Fed chairman,the Federal Reserve began explicitly announcing money supply targets.

In the early years of the American republic,the First Bank of the United States was established through the efforts of

The definition of the money supply called M1 includes all of the assets included in the definition of M2.

The Following Questions Refer to the graph below. -Suppose that the Fed has increased the money supply.This is shown in the diagram by

Insurance policies

Alleviating Human Misery: The Role of Economic Reasoning

Economic Systems, Resource Allocation, and Social Well-Being: Lessons From Chinas Transition

Government Control of Prices in Mixed Systems: Who Are the Winners and Losers

Pollution Problems: Must We Foul Our Own Nests

Economics of Crime and Its Prevention: How Much Is Too Much

The Economics of Education: Crisis and Reform

Poverty Problems and Discrimination: Why Are so Many Still so Poor

The Economics of Monopoly Power: Can Markets Be Controlled

The Economics of Professional Sports: What Is the Real Score

Competition in the Global Market-Place: Should We Protect Ourselves From International Trade

Economic Growth: Why Is the Economic Road so Bumpy

Unemployment and Inflation: Can We Find a Balance

Government Spending,Taxation,and the National Debt: Who Wins and Who Loses

Social Security and Medicare: How Secure Is Our Safety Net for the Elderly

Filters

The Following Questions Refer to the graph below. -A shift from MS¹ to MS² would be the result of