Question 1

The Federal Reserve System:

Accepted Answer

A)  has the same status as the Supreme Court. 
B)  is basically an independent agency. 
C)  has the status of a congressional committee. 
D)  is an agency of the executive branch of the federal government. 
A)  has the same status as the Supreme Court. 
B)  is basically an independent agency. 
C)  has the status of a congressional committee. 
D)  is an agency of the executive branch of the federal government.

Question 2

Currency and coins held by banks are part of the M1 definition of money supply.

Accepted Answer

A) True 
 B)False

Question 3

Stabilizing a nation's price level and the purchasing power of its money can be achieved:

Accepted Answer

A)  only with fiscal policy. 
B)  only with monetary policy. 
C)  with both fiscal and monetary policy. 
D)  with neither fiscal nor monetary policy. 
A)  only with fiscal policy. 
B)  only with monetary policy. 
C)  with both fiscal and monetary policy. 
D)  with neither fiscal nor monetary policy.

Question 4

Approximately how many commercial banks are now operating in the United States?

Accepted Answer

A)  About 7,300. 
B)  About 6,000. 
C)  About 8,500. 
D)  About 6,800. 
A)  About 7,300. 
B)  About 6,000. 
C)  About 8,500. 
D)  About 6,800.

Question 5

Time deposits of $100,000 or more are:

Accepted Answer

A)  a component of M1. 
B)  a component of M2 but not of M1. 
C)  a component of M1 but not of M2. 
D)  not a component of M1 or M2. 
A)  a component of M1. 
B)  a component of M2 but not of M1. 
C)  a component of M1 but not of M2. 
D)  not a component of M1 or M2.

Question 6

What is the primary function of the Term Asset-Backed Securities Loan Facility?

Accepted Answer

A)  Provide funding support for collateralized securities such as student,auto,and credit card loans. 
B)  Provide securities loans to primary dealers for one-month terms. 
C)  Provide overnight loans to primary dealers willing to post loan-backed securities as collateral. 
D)  Provide loans to U.S.financial institutions to purchase commercial paper. 
A)  Provide funding support for collateralized securities such as student,auto,and credit card loans. 
B)  Provide securities loans to primary dealers for one-month terms. 
C)  Provide overnight loans to primary dealers willing to post loan-backed securities as collateral. 
D)  Provide loans to U.S.financial institutions to purchase commercial paper.

Question 7

The difference between M1 and M2 is that:

Accepted Answer

A)  the former includes time deposits. 
B)  the latter includes small-denominated time deposits,noncheckable savings accounts,money market deposit accounts,and money market mutual fund balances. 
C)  the latter includes negotiable government bonds. 
D)  the latter includes cash held by commercial banks and the U.S.Treasury. 
A)  the former includes time deposits. 
B)  the latter includes small-denominated time deposits,noncheckable savings accounts,money market deposit accounts,and money market mutual fund balances. 
C)  the latter includes negotiable government bonds. 
D)  the latter includes cash held by commercial banks and the U.S.Treasury.

Question 8

In the financial industry,"securitization" refers to:

Accepted Answer

A)  increasing insurance protection on bank deposits. 
B)  requiring greater down payments on home purchases to reduce mortgage default risk. 
C)  bundling groups of loans,bonds,mortgages,and other financial debts into new securities. 
D)  increasing collateral requirements on loans. 
A)  increasing insurance protection on bank deposits. 
B)  requiring greater down payments on home purchases to reduce mortgage default risk. 
C)  bundling groups of loans,bonds,mortgages,and other financial debts into new securities. 
D)  increasing collateral requirements on loans.

Question 9

Currency held within banks is part of:

Accepted Answer

A)  both the M1 and M2 definitions of the money supply. 
B)  the M2 definition of the money supply only. 
C)  the M1 definition of the money supply only. 
D)  none of these definitions of the money supply. 
A)  both the M1 and M2 definitions of the money supply. 
B)  the M2 definition of the money supply only. 
C)  the M1 definition of the money supply only. 
D)  none of these definitions of the money supply.

Question 10

Near-monies:

Accepted Answer

A)  include all financial and real assets that can be easily converted into currency. 
B)  are certain highly liquid financial assets that do not function directly as a medium of exchange but can be readily converted into M1. 
C)  are excluded from M2 because they are highly liquid. 
D)  are defined as monetary balances that are immediately available,at zero cost,for household and business transactions. 
A)  include all financial and real assets that can be easily converted into currency. 
B)  are certain highly liquid financial assets that do not function directly as a medium of exchange but can be readily converted into M1. 
C)  are excluded from M2 because they are highly liquid. 
D)  are defined as monetary balances that are immediately available,at zero cost,for household and business transactions.

Question 11

What are "mortgage-backed securities"?

Accepted Answer

A)  Company stock shares for financial institutions that lend to home buyers. 
B)  Bonds backed by mortgage payments. 
C)  Treasury bills and savings bonds that banks sold to maintain liquidity during the mortgage default crisis. 
D)  Insurance against mortgage loan defaults. 
A)  Company stock shares for financial institutions that lend to home buyers. 
B)  Bonds backed by mortgage payments. 
C)  Treasury bills and savings bonds that banks sold to maintain liquidity during the mortgage default crisis. 
D)  Insurance against mortgage loan defaults.

Question 12

Which of the following programs involves the Federal Reserve directly purchasing short-term lending instruments from corporations?

Accepted Answer

A)  Term Asset-Backed Securities Loan Facility. 
B)  Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility. 
C)  Commercial Paper Funding Facility. 
D)  Term Securities Lending Facility. 
A)  Term Asset-Backed Securities Loan Facility. 
B)  Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility. 
C)  Commercial Paper Funding Facility. 
D)  Term Securities Lending Facility.

Question 13

(Consider This)Credit card balances are:

Accepted Answer

A)  a component of M1. 
B)  a component of M2 but not of M1. 
C)  a component of M1 but not of M2. 
D)  not a component of M1 or M2. 
A)  a component of M1. 
B)  a component of M2 but not of M1. 
C)  a component of M1 but not of M2. 
D)  not a component of M1 or M2.

Question 14

Currency in circulation is part of:

Accepted Answer

A)  M1 only. 
B)  M2 not including M1. 
C)  neither M1 nor M2. 
D)  both M1 and M2. 
A)  M1 only. 
B)  M2 not including M1. 
C)  neither M1 nor M2. 
D)  both M1 and M2.

Question 15

Which one of the following is true about the U.S.Federal Reserve System?

Accepted Answer

A)  There are 12 regional Federal Reserve Banks. 
B)  The head of the U.S.Treasury also chairs the Federal Reserve Board. 
C)  There are 14 members of the Federal Reserve Board. 
D)  The Open Market Committee is smaller in size than the Federal Reserve Board. 
A)  There are 12 regional Federal Reserve Banks. 
B)  The head of the U.S.Treasury also chairs the Federal Reserve Board. 
C)  There are 14 members of the Federal Reserve Board. 
D)  The Open Market Committee is smaller in size than the Federal Reserve Board.

Question 16

Answer the question on the basis of the following table: $\begin{array}{ccc}
\underline{\text { Year }} &\underline{ \text { Price Level} } &\underline{ \text { Value of Dollar }} \
1& 1.00 & \$ 1.00 \
2 & 1.25 & \
3 & 0.80 & \
4& 0.50 &
\end{array}$  Refer to the table.The value of the dollar in year 3 is:

Accepted Answer

A)  $1.20. 
B)  $1.25. 
C)  $0.80. 
D)  $1.10. 
A)  $1.20. 
B)  $1.25. 
C)  $0.80. 
D)  $1.10.

Question 17

Smith Barney,Charles Schwab,and Merrill Lynch are all primarily:

Accepted Answer

A)  investment banks. 
B)  mutual fund companies. 
C)  insurance companies. 
D)  securities firms. 
A)  investment banks. 
B)  mutual fund companies. 
C)  insurance companies. 
D)  securities firms.

Question 18

As of March 2009,the federal government and the Federal Reserve had spent $170 billion to keep AIG financially afloat.

Accepted Answer

A) True 
 B)False

Question 19

Coins in people's pockets and purses are:

Accepted Answer

A)  included in M1 but not in M2. 
B)  included both in M1 and in M2. 
C)  included in M2 but not in M1. 
D)  excluded from M1 and M2 because people can exchange them for Federal Reserve notes. 
A)  included in M1 but not in M2. 
B)  included both in M1 and in M2. 
C)  included in M2 but not in M1. 
D)  excluded from M1 and M2 because people can exchange them for Federal Reserve notes.

Question 20

If you place a part of your summer earnings in a savings account,you are using money primarily as a:

Accepted Answer

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

Exam 33: Money, Banking, and Financial Institutions

The Federal Reserve System:

Currency and coins held by banks are part of the M1 definition of money supply.

Stabilizing a nation's price level and the purchasing power of its money can be achieved:

Approximately how many commercial banks are now operating in the United States?

Time deposits of $100,000 or more are:

What is the primary function of the Term Asset-Backed Securities Loan Facility?

The difference between M1 and M2 is that:

In the financial industry,"securitization" refers to:

Currency held within banks is part of:

Near-monies:

What are "mortgage-backed securities"?

Which of the following programs involves the Federal Reserve directly purchasing short-term lending instruments from corporations?

(Consider This)Credit card balances are:

Currency in circulation is part of:

Which one of the following is true about the U.S.Federal Reserve System?

Answer the question on the basis of the following table: 1 1.00 \ 1.00 2 1.25 3 0.80 4 0.50 Refer to the table.The value of the dollar in year 3 is:

Smith Barney,Charles Schwab,and Merrill Lynch are all primarily:

As of March 2009,the federal government and the Federal Reserve had spent $170 billion to keep AIG financially afloat.

Coins in people's pockets and purses are:

If you place a part of your summer earnings in a savings account,you are using money primarily as a:

Income Inequality Poverty and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

The Balance of Payments, Exchange Rates, and Trade Deficits

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

The United States and the Global Economy

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