Question 1

A bank holding company is

Accepted Answer

A) a conglomerate that owns a bank to service the other businesses it owns 
B) a loose federation of private banks that hold assets in common 
C) a corporation that owns one or more banks 
D) a bank that is owned by the depositors 
E) a subsidiary of a major corporation 
A) a conglomerate that owns a bank to service the other businesses it owns 
B) a loose federation of private banks that hold assets in common 
C) a corporation that owns one or more banks 
D) a bank that is owned by the depositors 
E) a subsidiary of a major corporation

Question 2

The deregulation of U.S.banking in the 1980s led to

Accepted Answer

A) increased profits at all banks 
B) no change in banks' conduct 
C) more bank failures than in the 1930s 
D) many bank failures as banks began to hold riskier assets 
E) the end of FDIC insurance for banks that held risky assets 
A) increased profits at all banks 
B) no change in banks' conduct 
C) more bank failures than in the 1930s 
D) many bank failures as banks began to hold riskier assets 
E) the end of FDIC insurance for banks that held risky assets

Question 3

Which type of money has the lowest opportunity cost?

Accepted Answer

A) silver coin 
B) gold coin 
C) commodity money 
D) token coins 
E) fiat money 
A) silver coin 
B) gold coin 
C) commodity money 
D) token coins 
E) fiat money

Question 4

The purpose of deregulating banks during the 1980s was to

Accepted Answer

A) eliminate the risk that banks incurred 
B) allow banks to compete with other financial institutions 
C) allow U.S.banks to compete with foreign banks 
D) help consumers 
E) decrease the cost of banking regulation 
A) eliminate the risk that banks incurred 
B) allow banks to compete with other financial institutions 
C) allow U.S.banks to compete with foreign banks 
D) help consumers 
E) decrease the cost of banking regulation

Question 5

Four of the top ten banks in the world are in China.

Accepted Answer

A) True 
 B)False

Question 6

Open-market operations involve

Accepted Answer

A) clearing checks 
B) lending money to member banks 
C) accepting deposits from member banks 
D) the Fed's purchase and sale of government securities 
E) any monetary policy actions 
A) clearing checks 
B) lending money to member banks 
C) accepting deposits from member banks 
D) the Fed's purchase and sale of government securities 
E) any monetary policy actions

Question 7

The first bankers were probably

Accepted Answer

A) carpenters 
B) stock brokers 
C) goldsmiths 
D) sea captains 
E) grain merchants 
A) carpenters 
B) stock brokers 
C) goldsmiths 
D) sea captains 
E) grain merchants

Question 8

Each member of the Federal Reserve's Board of Governors is appointed for life.

Accepted Answer

A) True 
 B)False

Question 9

Whatever serves as a medium of exchange is

Accepted Answer

A) money 
B) money,so long as it also is the best such medium of exchange available 
C) money,so long as it is not also a commodity 
D) money,so long as it is not also legal tender 
E) not money unless it continues to be backed by its issuing institution 
A) money 
B) money,so long as it also is the best such medium of exchange available 
C) money,so long as it is not also a commodity 
D) money,so long as it is not also legal tender 
E) not money unless it continues to be backed by its issuing institution

Question 10

The Federal Open Market Committee (FOMC)consists of

Accepted Answer

A) the Board of Governors and the Secretary of the Treasury 
B) the presidents of the 12 Federal Reserve Banks 
C) the Board of Governors and Federal Reserve Bank presidents 
D) the Comptroller of the Currency and seven Reserve Bank presidents 
E) representatives from banks throughout the U.S. 
A) the Board of Governors and the Secretary of the Treasury 
B) the presidents of the 12 Federal Reserve Banks 
C) the Board of Governors and Federal Reserve Bank presidents 
D) the Comptroller of the Currency and seven Reserve Bank presidents 
E) representatives from banks throughout the U.S.

Question 11

The unit of account function of money

Accepted Answer

A) all of the following are correct 
B) means that money makes price information more accessible 
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 price information more accessible 
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 12

The law that established the Federal Reserve System is the

Accepted Answer

A) Federal Reserve Act of 1913 
B) National Banking Act of 1863 
C) Banking Act of 1933 
D) law that also established the FDIC 
E) law that also established the Comptroller of the Currency 
A) Federal Reserve Act of 1913 
B) National Banking Act of 1863 
C) Banking Act of 1933 
D) law that also established the FDIC 
E) law that also established the Comptroller of the Currency

Question 13

Which of the following did not contribute to the thousands of U.S.bank failures in the 1930s?

Accepted Answer

A) Businesses failed,so loans were not repaid. 
B) As the public grew concerned about the safety of its deposits,people withdrew more of their cash from banks. 
C) Banks sold more securities. 
D) The value of banks' assets declined. 
E) The Fed loaned too many reserves to member banks. 
A) Businesses failed,so loans were not repaid. 
B) As the public grew concerned about the safety of its deposits,people withdrew more of their cash from banks. 
C) Banks sold more securities. 
D) The value of banks' assets declined. 
E) The Fed loaned too many reserves to member banks.

Question 14

In the United States,only Federal Reserve Banks can issue paper currency but their power to do so is virtually unlimited.

Accepted Answer

A) True 
 B)False

Question 15

The emergence of the subprime mortgage market following the recession of 2001 made it increasingly difficult for low income individuals to obtain a mortgage.

Accepted Answer

A) True 
 B)False

Question 16

The reason why the Banking Act of 1933 prohibited commercial banks from buying and selling corporate stocks and bonds was that

Accepted Answer

A) there was concern that banks would be able to "take over" and monopolize these companies 
B) they would earn so much profit that they would stop lending to home buyers and small borrowers 
C) the instability inherent in the asset value of such a corporation would destabilize the banking system 
D) this would give large banks an unfair advantage over smaller banks 
E) the statement is incorrect; banks have always been allowed to purchase these stocks and bonds 
A) there was concern that banks would be able to "take over" and monopolize these companies 
B) they would earn so much profit that they would stop lending to home buyers and small borrowers 
C) the instability inherent in the asset value of such a corporation would destabilize the banking system 
D) this would give large banks an unfair advantage over smaller banks 
E) the statement is incorrect; banks have always been allowed to purchase these stocks and bonds

Question 17

An important function of commercial banks is to

Accepted Answer

A) print new currency 
B) issue fiat money 
C) mint coins 
D) redeem currency for precious metals 
E) make loans 
A) print new currency 
B) issue fiat money 
C) mint coins 
D) redeem currency for precious metals 
E) make loans

Question 18

Financial intermediaries do all of the following except one.Which is the exception?

Accepted Answer

A) link savers and borrowers 
B) earn profits by loaning money 
C) offer lower interest rates on savings than they charge on loans 
D) print money 
E) accept deposits 
A) link savers and borrowers 
B) earn profits by loaning money 
C) offer lower interest rates on savings than they charge on loans 
D) print money 
E) accept deposits

Question 19

The U.S.dollar is a good example of fiat money.

Accepted Answer

A) True 
 B)False

Question 20

How does money function as a unit of account?

Accepted Answer

A) Money has intrinsic worth as a commodity. 
B) Money is convertible into commodities that have intrinsic worth. 
C) The prices of all goods and services are measured in terms of money. 
D) Things that function as money can do so because people know there is a standard of value that ultimately backs the money even if it is only faith. 
E) Bank accounts make it easy for people to store their wealth. 
A) Money has intrinsic worth as a commodity. 
B) Money is convertible into commodities that have intrinsic worth. 
C) The prices of all goods and services are measured in terms of money. 
D) Things that function as money can do so because people know there is a standard of value that ultimately backs the money even if it is only faith. 
E) Bank accounts make it easy for people to store their wealth.

Exam 14: Money and the Financial System

A bank holding company is

The deregulation of U.S.banking in the 1980s led to

Which type of money has the lowest opportunity cost?

The purpose of deregulating banks during the 1980s was to

Four of the top ten banks in the world are in China.

Open-market operations involve

The first bankers were probably

Each member of the Federal Reserve's Board of Governors is appointed for life.

Whatever serves as a medium of exchange is

The Federal Open Market Committee (FOMC)consists of

The unit of account function of money

The law that established the Federal Reserve System is the

Which of the following did not contribute to the thousands of U.S.bank failures in the 1930s?

In the United States,only Federal Reserve Banks can issue paper currency but their power to do so is virtually unlimited.

The emergence of the subprime mortgage market following the recession of 2001 made it increasingly difficult for low income individuals to obtain a mortgage.

The reason why the Banking Act of 1933 prohibited commercial banks from buying and selling corporate stocks and bonds was that

An important function of commercial banks is to

Financial intermediaries do all of the following except one.Which is the exception?

The U.S.dollar is a good example of fiat money.

How does money function as a unit of account?

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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