Question 1

Falling interest rates usually increase bank profits because

Accepted Answer

A) banks can make more loans at low rates 
B) bank deposit costs fall faster than the average return on bank lending 
C) short-term rates fall faster than long-term rates 
D) long-term rates fall faster than short-term rates 
E) none of the above is correct; banks increase profitability with rising interest rates,not falling rates 
A) banks can make more loans at low rates 
B) bank deposit costs fall faster than the average return on bank lending 
C) short-term rates fall faster than long-term rates 
D) long-term rates fall faster than short-term rates 
E) none of the above is correct; banks increase profitability with rising interest rates,not falling rates

Question 2

The discount rate is

Accepted Answer

A) the interest rate charged commercial banks for loans from a Federal Reserve bank 
B) the rate or percent of deposits which banks are required to hold on reserve 
C) the rate of interest paid on government bonds 
D) the charge for cashing a check at a Federal Reserve bank 
E) the interest rate charged to commercial banks for loans from other commercial banks 
A) the interest rate charged commercial banks for loans from a Federal Reserve bank 
B) the rate or percent of deposits which banks are required to hold on reserve 
C) the rate of interest paid on government bonds 
D) the charge for cashing a check at a Federal Reserve bank 
E) the interest rate charged to commercial banks for loans from other commercial banks

Question 3

Mary Ellen deposits $100 into her savings account every month.Her daughter Carolyn keeps all her pennies in a piggy bank.These are examples of money functioning as

Accepted Answer

A) a store of value 
B) commodity money 
C) a medium of exchange 
D) a standard of deferred payments 
E) a unit of account 
A) a store of value 
B) commodity money 
C) a medium of exchange 
D) a standard of deferred payments 
E) a unit of account

Question 4

Whatever functions as money must be

Accepted Answer

A) authorized by the government 
B) accepted for deposit by banks 
C) backed by precious metals like gold or silver 
D) completely indestructible 
E) limited in supply 
A) authorized by the government 
B) accepted for deposit by banks 
C) backed by precious metals like gold or silver 
D) completely indestructible 
E) limited in supply

Question 5

Because corporate bonds and stocks were considered too risky for commercial banks to own,Congress

Accepted Answer

A) passed the Federal Reserve Act of 1913 
B) passed the Banking Act of 1933 
C) set up the FDIC 
D) set up the FSLIC 
E) set up open market operations 
A) passed the Federal Reserve Act of 1913 
B) passed the Banking Act of 1933 
C) set up the FDIC 
D) set up the FSLIC 
E) set up open market operations

Question 6

A government receives seigniorage whenever it

Accepted Answer

A) sells gold to people for money 
B) uses silver to buy gold from people,or vice versa 
C) sells goods and services it produces for money 
D) uses money to buy goods and services 
E) mints coins whose face value is greater than the value of the resources used up in producing the money 
A) sells gold to people for money 
B) uses silver to buy gold from people,or vice versa 
C) sells goods and services it produces for money 
D) uses money to buy goods and services 
E) mints coins whose face value is greater than the value of the resources used up in producing the money

Question 7

One of the first steps that President Roosevelt took to ease the U.S.banking crisis of the 1930s was to

Accepted Answer

A) declare a bank holiday,which closed banks for a week 
B) increase loans by the Fed to member banks 
C) decrease the reserve requirement 
D) increase the reserve requirement 
E) appoint a new chairman of the Fed 
A) declare a bank holiday,which closed banks for a week 
B) increase loans by the Fed to member banks 
C) decrease the reserve requirement 
D) increase the reserve requirement 
E) appoint a new chairman of the Fed

Question 8

Suppose that partners Kemp and Sam open a goldsmith shop and general store in the Wild West.The more rapidly people "cash in" their bank notes,

Accepted Answer

A) the higher their profit from making loans will be 
B) the lower their profit from the goods in the store 
C) the fewer bank notes they will be able to issue 
D) the larger the denominations in which they will have to issue bank notes 
E) the smaller their reserve ratio 
A) the higher their profit from making loans will be 
B) the lower their profit from the goods in the store 
C) the fewer bank notes they will be able to issue 
D) the larger the denominations in which they will have to issue bank notes 
E) the smaller their reserve ratio

Question 9

Interest rate ceilings resulted in great profitability for banks in the 1970s.

Accepted Answer

A) True 
 B)False

Question 10

If the cost of producing coins is lower than the face value of the coins,then the government receives revenue called

Accepted Answer

A) token money,and produces token coins 
B) seigniorage,and produces fiat money 
C) token money,and produces fiat money 
D) seigniorage,and produces token coins 
E) token money,and produces seignior coins 
A) token money,and produces token coins 
B) seigniorage,and produces fiat money 
C) token money,and produces fiat money 
D) seigniorage,and produces token coins 
E) token money,and produces seignior coins

Question 11

The chairman of the Fed is elected by US citizens.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following was the earliest type of money?

Accepted Answer

A) coins 
B) barter 
C) commodity money 
D) token money 
E) fiat money 
A) coins 
B) barter 
C) commodity money 
D) token money 
E) fiat money

Question 13

In order for something to be used as money,it must be

Accepted Answer

A) issued by the government 
B) issued by banks 
C) declared to be money 
D) generally acceptable 
E) made of something valuable 
A) issued by the government 
B) issued by banks 
C) declared to be money 
D) generally acceptable 
E) made of something valuable

Question 14

Interest-rate ceilings on deposits

Accepted Answer

A) meant banks were guaranteed "cheap money" from depositors 
B) were imposed because without them,as was the case in the 1970s,banks couldn't be profitable 
C) led to banks losing deposits whenever market rates went above the ceiling rates 
D) are only effective when market rates are below the ceiling rates 
E) were developed by money market mutual funds as a marketing device 
A) meant banks were guaranteed "cheap money" from depositors 
B) were imposed because without them,as was the case in the 1970s,banks couldn't be profitable 
C) led to banks losing deposits whenever market rates went above the ceiling rates 
D) are only effective when market rates are below the ceiling rates 
E) were developed by money market mutual funds as a marketing device

Question 15

Which of the following is most critical for the maintenance of an efficient,productive economy?

Accepted Answer

A) money backed by gold or silver 
B) steadily rising prices 
C) an unlimited and unregulated supply of money 
D) a properly functioning monetary system 
E) a well-organized barter system 
A) money backed by gold or silver 
B) steadily rising prices 
C) an unlimited and unregulated supply of money 
D) a properly functioning monetary system 
E) a well-organized barter system

Question 16

The discount rate is the interest rate that

Accepted Answer

A) banks charge on large loans 
B) banks charge on loans to other banks 
C) the Fed charges on loans to branches of the U.S.government 
D) the Fed charges on loans to depository institutions 
E) the Fed charges on loans to the public 
A) banks charge on large loans 
B) banks charge on loans to other banks 
C) the Fed charges on loans to branches of the U.S.government 
D) the Fed charges on loans to depository institutions 
E) the Fed charges on loans to the public

Question 17

The emergence of the subprime mortgage market following the recession of 2001 set off a boom in the housing industry.

Accepted Answer

A) True 
 B)False

Question 18

Each member of the Board of Governors serves

Accepted Answer

A) a four-year term that begins at the same time as that of the newly elected president 
B) a four-year term that does not coincide with that of the current president 
C) until a new president is elected 
D) a fourteen-year term 
E) a six-year term 
A) a four-year term that begins at the same time as that of the newly elected president 
B) a four-year term that does not coincide with that of the current president 
C) until a new president is elected 
D) a fourteen-year term 
E) a six-year term

Question 19

The first checks were probably notes written to a goldsmith asking him to transfer ownership of some designated amount of gold from the writer of the note to its bearer.

Accepted Answer

A) True 
 B)False

Question 20

All of the following are goals of the Fed except one.Which is the exception?

Accepted Answer

A) a high level of employment 
B) stability in interest rates 
C) rising prices (to encourage production) 
D) stability in financial markets 
E) stability in foreign-exchange markets 
A) a high level of employment 
B) stability in interest rates 
C) rising prices (to encourage production) 
D) stability in financial markets 
E) stability in foreign-exchange markets

Exam 14: Money and the Financial System

Falling interest rates usually increase bank profits because

The discount rate is

Mary Ellen deposits $100 into her savings account every month.Her daughter Carolyn keeps all her pennies in a piggy bank.These are examples of money functioning as

Whatever functions as money must be

Because corporate bonds and stocks were considered too risky for commercial banks to own,Congress

A government receives seigniorage whenever it

One of the first steps that President Roosevelt took to ease the U.S.banking crisis of the 1930s was to

Suppose that partners Kemp and Sam open a goldsmith shop and general store in the Wild West.The more rapidly people "cash in" their bank notes,

Interest rate ceilings resulted in great profitability for banks in the 1970s.

If the cost of producing coins is lower than the face value of the coins,then the government receives revenue called

The chairman of the Fed is elected by US citizens.

Which of the following was the earliest type of money?

In order for something to be used as money,it must be

Interest-rate ceilings on deposits

Which of the following is most critical for the maintenance of an efficient,productive economy?

The discount rate is the interest rate that

The emergence of the subprime mortgage market following the recession of 2001 set off a boom in the housing industry.

Each member of the Board of Governors serves

The first checks were probably notes written to a goldsmith asking him to transfer ownership of some designated amount of gold from the writer of the note to its bearer.

All of the following are goals of the Fed except one.Which is the exception?

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

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