Question 1

Gresham's Law states that when different forms of commodity money circulate simultaneously (e.g.,$1 gold coins and $1 silver coins),

Accepted Answer

A) the one with the more intrinsic ("commodity")value will disappear from circulation 
B) the one with the lesser intrinsic ("commodity")value will disappear from circulation 
C) both will eventually have to be withdrawn from circulation by the government 
D) the resultant disruption in the money markets will cause inflation 
E) the resultant disruption in the money markets will cause a recession 
A) the one with the more intrinsic ("commodity")value will disappear from circulation 
B) the one with the lesser intrinsic ("commodity")value will disappear from circulation 
C) both will eventually have to be withdrawn from circulation by the government 
D) the resultant disruption in the money markets will cause inflation 
E) the resultant disruption in the money markets will cause a recession

Question 2

Monetary policy is

Accepted Answer

A) controlled by the president,who appoints the members of the Board of Governors 
B) controlled by the president,who appoints the members of the Open Market Committee 
C) insulated from politics since the term of only two members of the Board of Governors expire during the tenure of any modern President of the U.S. 
D) insulated from politics because the Federal Reserve Board is the bankers' bank 
E) controlled by the president 
A) controlled by the president,who appoints the members of the Board of Governors 
B) controlled by the president,who appoints the members of the Open Market Committee 
C) insulated from politics since the term of only two members of the Board of Governors expire during the tenure of any modern President of the U.S. 
D) insulated from politics because the Federal Reserve Board is the bankers' bank 
E) controlled by the president

Question 3

Which of the following is not a thrift institution?

Accepted Answer

A) a savings and loan association 
B) a commercial bank 
C) a mutual savings bank 
D) an employee credit union 
E) a college credit union 
A) a savings and loan association 
B) a commercial bank 
C) a mutual savings bank 
D) an employee credit union 
E) a college credit union

Question 4

Before the specialization

Accepted Answer

A) families were largely self-sufficient 
B) families produced much more than they could each consume 
C) there was a great need for exchange between families 
D) families consumed much more than they could each produce 
E) None of the answers is correct 
A) families were largely self-sufficient 
B) families produced much more than they could each consume 
C) there was a great need for exchange between families 
D) families consumed much more than they could each produce 
E) None of the answers is correct

Question 5

To make sure they can accommodate withdrawal requests at any time,banks must keep a dollar on reserve in the bank vault for each dollar of deposits.

Accepted Answer

A) True 
 B)False

Question 6

One purpose of interest-rate ceilings was to

Accepted Answer

A) establish a ceiling on bank profits 
B) establish a floor on bank profits 
C) encourage competition in other areas 
D) eliminate the need for the FDIC 
E) reduce the chance of bank failures 
A) establish a ceiling on bank profits 
B) establish a floor on bank profits 
C) encourage competition in other areas 
D) eliminate the need for the FDIC 
E) reduce the chance of bank failures

Question 7

Since 1960,the purchasing power of the dollar has fallen steadily.

Accepted Answer

A) True 
 B)False

Question 8

In a barter system,

Accepted Answer

A) an individual offers one good or service to get another good or service 
B) an individual offers money to get a good or service 
C) an individual offers a good or service to get money 
D) different kinds of money are exchanged for each other 
E) individuals are self-sufficient 
A) an individual offers one good or service to get another good or service 
B) an individual offers money to get a good or service 
C) an individual offers a good or service to get money 
D) different kinds of money are exchanged for each other 
E) individuals are self-sufficient

Question 9

Exchange is necessary in an economy if

Accepted Answer

A) output is to be produced 
B) output is to be consumed 
C) individuals are self-sufficient 
D) families are self-sufficient 
E) labor is specialized 
A) output is to be produced 
B) output is to be consumed 
C) individuals are self-sufficient 
D) families are self-sufficient 
E) labor is specialized

Question 10

Who is famous for his observation that bad money drives out good money?

Accepted Answer

A) Adam Smith 
B) François Quesnay 
C) Thomas Gresham 
D) John Maynard Keynes 
E) J.B.Say 
A) Adam Smith 
B) François Quesnay 
C) Thomas Gresham 
D) John Maynard Keynes 
E) J.B.Say

Question 11

Which of the following is associated with the problem of hyperinflation?

Accepted Answer

A) Money is in short supply. 
B) The value of money rises dramatically. 
C) The government runs out of money. 
D) People look for alternatives to using money. 
E) People start to hold onto money for long periods of time. 
A) Money is in short supply. 
B) The value of money rises dramatically. 
C) The government runs out of money. 
D) People look for alternatives to using money. 
E) People start to hold onto money for long periods of time.

Question 12

When many depository institutions--especially thrifts--failed in the 1970s and 1980s,

Accepted Answer

A) most depositors got their money back 
B) most depositors lost everything 
C) most of the losses to depositors were paid out of the pockets of the owners of these institutions 
D) the U.S.taxpayer,fortunately,avoided bearing any of the financial burden of the losses 
E) the entire economy collapsed and the country was plunged into a severe depression 
A) most depositors got their money back 
B) most depositors lost everything 
C) most of the losses to depositors were paid out of the pockets of the owners of these institutions 
D) the U.S.taxpayer,fortunately,avoided bearing any of the financial burden of the losses 
E) the entire economy collapsed and the country was plunged into a severe depression

Question 13

Under the Federal Reserve System,

Accepted Answer

A) there is one Federal Reserve Bank,located in Washington,DC 
B) there is one Federal Reserve Bank,whose location changes every 14 years 
C) there is a Federal Reserve bank in each Congressional district 
D) there is a Federal Reserve bank in each state 
E) there are 12 Federal Reserve banks 
A) there is one Federal Reserve Bank,located in Washington,DC 
B) there is one Federal Reserve Bank,whose location changes every 14 years 
C) there is a Federal Reserve bank in each Congressional district 
D) there is a Federal Reserve bank in each state 
E) there are 12 Federal Reserve banks

Question 14

The unit of account function of money

Accepted Answer

A) all of the following are correct 
B) means that money makes the relative values of goods and services more easily known 
C) requires that money be made of something valuable 
D) means that money can be used to save up purchasing power 
E) means that money is more easily counted than goods 
A) all of the following are correct 
B) means that money makes the relative values of goods and services more easily known 
C) requires that money be made of something valuable 
D) means that money can be used to save up purchasing power 
E) means that money is more easily counted than goods

Question 15

The duties of the Federal Reserve include all of the following except one.Which is the exception?

Accepted Answer

A) regulating banks' reserve ratios 
B) extending loans to banks on occasion 
C) offering deposit insurance 
D) controlling the monetary system of the U.S. 
E) providing gold in exchange for Federal Reserve notes 
A) regulating banks' reserve ratios 
B) extending loans to banks on occasion 
C) offering deposit insurance 
D) controlling the monetary system of the U.S. 
E) providing gold in exchange for Federal Reserve notes

Question 16

Four of the top ten banks in the world are in the United States.

Accepted Answer

A) True 
 B)False

Question 17

Federal Reserve banks do all of the following except one.Which is the exception?

Accepted Answer

A) hold member banks' reserves on deposit 
B) make loans to member banks 
C) issue bank notes 
D) serve as bankers to the federal government 
E) hold deposits of households and firms 
A) hold member banks' reserves on deposit 
B) make loans to member banks 
C) issue bank notes 
D) serve as bankers to the federal government 
E) hold deposits of households and firms

Question 18

The Federal Reserve banks could probably have prevented many of the bank failures in the early 1930s by

Accepted Answer

A) raising the reserve requirement of the commercial banks 
B) lending money to the commercial banks 
C) improving the system whereby checks are cleared 
D) helping to create a commission of experts to engage in a prolonged study of the problem 
E) selling large amounts of government bonds 
A) raising the reserve requirement of the commercial banks 
B) lending money to the commercial banks 
C) improving the system whereby checks are cleared 
D) helping to create a commission of experts to engage in a prolonged study of the problem 
E) selling large amounts of government bonds

Question 19

Which of the following is true of the Federal Reserve System?

Accepted Answer

A) It is one central bank located in Washington,DC. 
B) It was created just before World War II. 
C) All Federal Reserve banks are required to become state banks also. 
D) With the formation of the Fed,the power to issue bank notes was taken away from national banks and turned over to the state banks. 
E) It was notably unsuccessful in averting the Great Depression. 
A) It is one central bank located in Washington,DC. 
B) It was created just before World War II. 
C) All Federal Reserve banks are required to become state banks also. 
D) With the formation of the Fed,the power to issue bank notes was taken away from national banks and turned over to the state banks. 
E) It was notably unsuccessful in averting the Great Depression.

Question 20

Money does not solve the double coincidence of wants problem unless it is generally acceptable.

Accepted Answer

A) True 
 B)False

Exam 14: Money and the Financial System

Gresham's Law states that when different forms of commodity money circulate simultaneously (e.g.,$1 gold coins and $1 silver coins),

Monetary policy is

Which of the following is not a thrift institution?

Before the specialization

To make sure they can accommodate withdrawal requests at any time,banks must keep a dollar on reserve in the bank vault for each dollar of deposits.

One purpose of interest-rate ceilings was to

Since 1960,the purchasing power of the dollar has fallen steadily.

In a barter system,

Exchange is necessary in an economy if

Who is famous for his observation that bad money drives out good money?

Which of the following is associated with the problem of hyperinflation?

When many depository institutions--especially thrifts--failed in the 1970s and 1980s,

Under the Federal Reserve System,

The unit of account function of money

The duties of the Federal Reserve include all of the following except one.Which is the exception?

Four of the top ten banks in the world are in the United States.

Federal Reserve banks do all of the following except one.Which is the exception?

The Federal Reserve banks could probably have prevented many of the bank failures in the early 1930s by

Which of the following is true of the Federal Reserve System?

Money does not solve the double coincidence of wants problem unless it is generally acceptable.

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand, supply, and Markets

Introduction to Macroeconomics

Tracking the Useconomy

Unemployment and Inflation

Productivity and Growth

Aaggregate Expenditure and Aggregate Demand

Baggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Banking and the Money Supply

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

International Trade

Externalities and the Environment

International Finance

Economic Development

understanding Graphs

National Income Accounts

The Algebra of Demand-Side Equilibrium

Filters