Question 1

In the United States,the amount of cash per capita is about $4,000.This figure:

Accepted Answer

A)  shows how much currency each American holds in their checking accounts. 
B)  misrepresents actual currency holdings in the United States because a lot of dollars are held outside the country. 
C)  accurately represents the size of the underground economy in the United States. 
D)  shows how much the world depends on the U.S.monetary system. 
A)  shows how much currency each American holds in their checking accounts. 
B)  misrepresents actual currency holdings in the United States because a lot of dollars are held outside the country. 
C)  accurately represents the size of the underground economy in the United States. 
D)  shows how much the world depends on the U.S.monetary system.

Question 2

Which is an example of moral hazard?

Accepted Answer

A)  Only people with very high risk of default on loans borrow from banks. 
B)  Drivers have less incentive to avoid accidents after getting auto insurance. 
C)  When one bank fails,other banks become more cautious in lending. 
D)  People living along the Gulf Coast are more likely to buy flood insurance. 
A)  Only people with very high risk of default on loans borrow from banks. 
B)  Drivers have less incentive to avoid accidents after getting auto insurance. 
C)  When one bank fails,other banks become more cautious in lending. 
D)  People living along the Gulf Coast are more likely to buy flood insurance.

Question 3

Which is MOST liquid?

Accepted Answer

A)  a mortgage loan 
B)  checkable deposits in a bank 
C)  a new truck 
D)  a diamond 
A)  a mortgage loan 
B)  checkable deposits in a bank 
C)  a new truck 
D)  a diamond

Question 4

Which asset is the LEAST liquid?

Accepted Answer

A)  a bar of gold 
B)  a $100 bill 
C)  a pile of dog fur 
D)  a current-edition used textbook 
A)  a bar of gold 
B)  a $100 bill 
C)  a pile of dog fur 
D)  a current-edition used textbook

Question 5

Which would typically NOT occur following an increase in the money supply?

Accepted Answer

A)  a decrease in interest rates 
B)  an increase in investment 
C)  an increase in AD 
D)  a decrease in the overall price level 
A)  a decrease in interest rates 
B)  an increase in investment 
C)  an increase in AD 
D)  a decrease in the overall price level

Question 6

Which is the LEAST liquid asset?

Accepted Answer

A)  currencies 
B)  checkable deposits 
C)  small-time deposits 
D)  savings deposits 
A)  currencies 
B)  checkable deposits 
C)  small-time deposits 
D)  savings deposits

Question 7

The Term Auction Facility involves the Federal Reserve:

Accepted Answer

A)  buying and selling government bonds. 
B)  lending reserves directly to banks. 
C)  providing reserves to banks through an auction. 
D)  competing with investment banks for Treasury securities. 
A)  buying and selling government bonds. 
B)  lending reserves directly to banks. 
C)  providing reserves to banks through an auction. 
D)  competing with investment banks for Treasury securities.

Question 8

Which tool can the Federal Reserve use to control the money supply?

Accepted Answer

A)  open market operations 
B)  the Term Auction Facility 
C)  paying interest on reserves 
D)  open market operations,the Term Auction Facility,and paying interest on reserves 
A)  open market operations 
B)  the Term Auction Facility 
C)  paying interest on reserves 
D)  open market operations,the Term Auction Facility,and paying interest on reserves

Question 9

Quantitative easing occurs when the:

Accepted Answer

A)  Fed sells long-term securities. 
B)  Fed buys long-term securities. 
C)  government lowers income and other taxes. 
D)  government raises income and other taxes. 
A)  Fed sells long-term securities. 
B)  Fed buys long-term securities. 
C)  government lowers income and other taxes. 
D)  government raises income and other taxes.

Question 10

Most of the time,a majority of banks borrow from the Federal Reserve.

Accepted Answer

A) True 
 B)False

Question 11

Which is NOT used by the Fed to control the money supply?

Accepted Answer

A)  open market operations 
B)  discount rate lending 
C)  paying an interest rate on bank reserves held at the Fed 
D)  prime interest rate lending 
A)  open market operations 
B)  discount rate lending 
C)  paying an interest rate on bank reserves held at the Fed 
D)  prime interest rate lending

Question 12

The Federal Reserve's major tool(s)to control the money supply is(are):

Accepted Answer

A)  open market operations. 
B)  discount rate lending. 
C)  paying interest on reserves. 
D)  open market operations,discount rate lending,and paying interest on reserves. 
A)  open market operations. 
B)  discount rate lending. 
C)  paying interest on reserves. 
D)  open market operations,discount rate lending,and paying interest on reserves.

Question 13

A liquid bank has short-term liabilities that are greater than its short-term assets but overall has assets that are greater than its liabilities.

Accepted Answer

A) True 
 B)False

Question 14

How many regional banks compose the Federal Reserve System?

Accepted Answer

A)  4 
B)  10 
C)  12 
D)  16 
A)  4 
B)  10 
C)  12 
D)  16

Question 15

_____ refers to the Federal Reserve's purchase of longer-term government bonds or other securities.

Accepted Answer

A)  An open market purchase 
B)  An open market sale 
C)  Quantitative easing 
D)  Quantitative tightening 
A)  An open market purchase 
B)  An open market sale 
C)  Quantitative easing 
D)  Quantitative tightening

Question 16

Explain how the Federal Reserve controls the money supply.

Accepted Answer

The Fed uses three major tools: (1)open

Question 17

Which is NOT a means of payment?

Accepted Answer

A)  currency 
B)  checkable deposits 
C)  savings deposits 
D)  a credit card account limit 
A)  currency 
B)  checkable deposits 
C)  savings deposits 
D)  a credit card account limit

Question 18

An asset that without loss of value can be quickly converted into money:

Accepted Answer

A)  is a liquid asset. 
B)  is nonexistent. 
C)  is housing. 
D)  must rise in value over time. 
A)  is a liquid asset. 
B)  is nonexistent. 
C)  is housing. 
D)  must rise in value over time.

Question 19

Checkable deposits are part of:

Accepted Answer

A)  the monetary base. 
B)  M1. 
C)  M2. 
D)  M1 and M2. 
A)  the monetary base. 
B)  M1. 
C)  M2. 
D)  M1 and M2.

Question 20

The world's largest bank customer is:

Accepted Answer

A)  the Federal Reserve. 
B)  the U.S.Treasury. 
C)  the FDIC. 
D)  the SEC. 
A)  the Federal Reserve. 
B)  the U.S.Treasury. 
C)  the FDIC. 
D)  the SEC.

Exam 15: The Federal Reserve System

In the United States,the amount of cash per capita is about $4,000.This figure:

Which is an example of moral hazard?

Which is MOST liquid?

Which asset is the LEAST liquid?

Which would typically NOT occur following an increase in the money supply?

Which is the LEAST liquid asset?

The Term Auction Facility involves the Federal Reserve:

Which tool can the Federal Reserve use to control the money supply?

Quantitative easing occurs when the:

Most of the time,a majority of banks borrow from the Federal Reserve.

Which is NOT used by the Fed to control the money supply?

The Federal Reserve's major tool(s)to control the money supply is(are):

A liquid bank has short-term liabilities that are greater than its short-term assets but overall has assets that are greater than its liabilities.

How many regional banks compose the Federal Reserve System?

_____ refers to the Federal Reserve's purchase of longer-term government bonds or other securities.

Explain how the Federal Reserve controls the money supply.

Which is NOT a means of payment?

An asset that without loss of value can be quickly converted into money:

Checkable deposits are part of:

The world's largest bank customer is:

The Big Ideas

The Power of Trade

Supply and Demand

Equilibrium- How Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth,capital Accumulation

Saving,investment,and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations

Transmission and Amplification Mechanisms

Monetary Policy

The Federal Budget- Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

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