Question 1

The banking crisis of the 1980s was due,in part,to all of the following except one.Which is the exception?

Accepted Answer

A) the rising interest rates of the 1970s and early 1980s 
B) the existence of deposit insurance 
C) the deregulation of deposit rates that allowed unsafe banks to grow 
D) the deregulation of lending practices 
E) the highly concentrated U.S.banking industry,where big banks had branches in nearly every state 
A) the rising interest rates of the 1970s and early 1980s 
B) the existence of deposit insurance 
C) the deregulation of deposit rates that allowed unsafe banks to grow 
D) the deregulation of lending practices 
E) the highly concentrated U.S.banking industry,where big banks had branches in nearly every state

Question 2

When a nation's official money fails to serve as a medium of exchange,

Accepted Answer

A) nothing will replace money to help facilitate exchange 
B) there will be an increase in economic efficiency 
C) resources must be diverted from production to exchange 
D) transactions costs of exchange will decrease 
E) fewer barter exchanges will be completed 
A) nothing will replace money to help facilitate exchange 
B) there will be an increase in economic efficiency 
C) resources must be diverted from production to exchange 
D) transactions costs of exchange will decrease 
E) fewer barter exchanges will be completed

Question 3

Eileen puts $10,000 in an uninsured savings account at the First National Bank.Norma borrows $10,000 from the First National Bank,flies to a South Pacific island,and is never heard from again.Which of the following is true?

Accepted Answer

A) Eileen will lose her $10,000. 
B) Eileen will lose her $10,000 if she and Norma are related. 
C) Eileen will lose her $10,000 if the First National Bank makes all of its loans to people who run off to South Pacific islands. 
D) Eileen will not lose her $10,000 no matter what happens to the First National Bank. 
E) Eileen will not lose her $10,000 unless the Fed fails. 
A) Eileen will lose her $10,000. 
B) Eileen will lose her $10,000 if she and Norma are related. 
C) Eileen will lose her $10,000 if the First National Bank makes all of its loans to people who run off to South Pacific islands. 
D) Eileen will not lose her $10,000 no matter what happens to the First National Bank. 
E) Eileen will not lose her $10,000 unless the Fed fails.

Question 4

As the number of goods and services increases,barter becomes

Accepted Answer

A) easier because the chance of there being a double coincidence of wants increases 
B) harder because the chance of there being a double coincidence of wants increases 
C) easier because the chance of there being a double coincidence of wants decreases 
D) harder because the chance of there being a double coincidence of wants decreases 
E) easier because people have more choice 
A) easier because the chance of there being a double coincidence of wants increases 
B) harder because the chance of there being a double coincidence of wants increases 
C) easier because the chance of there being a double coincidence of wants decreases 
D) harder because the chance of there being a double coincidence of wants decreases 
E) easier because people have more choice

Question 5

The chairman of the Fed serves

Accepted Answer

A) a two-year term that coincides with that of members of Congress 
B) a four-year term 
C) a four-year term beginning and ending with that of the president who made the appointment 
D) a fourteen-year term 
E) a six-year term 
A) a two-year term that coincides with that of members of Congress 
B) a four-year term 
C) a four-year term beginning and ending with that of the president who made the appointment 
D) a fourteen-year term 
E) a six-year term

Question 6

Which of the following is not a depository institution?

Accepted Answer

A) a commercial bank 
B) a thrift institution 
C) a pension fund 
D) a savings and loan institution 
E) a credit union 
A) a commercial bank 
B) a thrift institution 
C) a pension fund 
D) a savings and loan institution 
E) a credit union

Question 7

Money is legal tender if

Accepted Answer

A) people willingly accept it in payment of debts 
B) it is backed by gold or silver 
C) it is commodity money 
D) the government says it is 
E) it is in a bank account 
A) people willingly accept it in payment of debts 
B) it is backed by gold or silver 
C) it is commodity money 
D) the government says it is 
E) it is in a bank account

Question 8

Bank holding companies

Accepted Answer

A) b,c,and d are correct 
B) can often engage in interstate banking 
C) can provide financial advisory services 
D) have access to more sources of funds than individual commercial banks 
E) are subject to the same regulations as commercial banks 
A) b,c,and d are correct 
B) can often engage in interstate banking 
C) can provide financial advisory services 
D) have access to more sources of funds than individual commercial banks 
E) are subject to the same regulations as commercial banks

Question 9

One problem with fiat money,as compared to commodity money,is that

Accepted Answer

A) more resources are used to create fiat money 
B) there is frequently too little fiat money available 
C) there is a greater potential for inflation with fiat money 
D) fiat money must be turned in to the government to receive the commodity on which it is based 
E) fiat money is less divisible than commodity money 
A) more resources are used to create fiat money 
B) there is frequently too little fiat money available 
C) there is a greater potential for inflation with fiat money 
D) fiat money must be turned in to the government to receive the commodity on which it is based 
E) fiat money is less divisible than commodity money

Question 10

Which of the following statements best characterizes U.S.depository institutions over the last 50 years?

Accepted Answer

A) The industry has been very turbulent throughout this period. 
B) The industry is highly regulated and hence is a very staid,predictable industry. 
C) The industry has been highly unprofitable throughout this period. 
D) The industry was once highly competitive,but now it is relatively quiet since deregulation began during the 1970s. 
E) Once highly regulated,the industry has changed considerably during the past 20 years. 
A) The industry has been very turbulent throughout this period. 
B) The industry is highly regulated and hence is a very staid,predictable industry. 
C) The industry has been highly unprofitable throughout this period. 
D) The industry was once highly competitive,but now it is relatively quiet since deregulation began during the 1970s. 
E) Once highly regulated,the industry has changed considerably during the past 20 years.

Question 11

Fiat money is backed by

Accepted Answer

A) gold or silver 
B) fractional reserves 
C) the promise of a bank to redeem it upon presentation 
D) the commodity in which it is denominated 
E) nothing 
A) gold or silver 
B) fractional reserves 
C) the promise of a bank to redeem it upon presentation 
D) the commodity in which it is denominated 
E) nothing

Question 12

Money market mutual funds

Accepted Answer

A) were originally introduced by the Federal Reserve Bank of New York 
B) when they were introduced,constituted serious competition to banks and thrifts for the deposits of savers 
C) were not originally offered by commercial banks and still are not offered by them 
D) represent a pooling of cash assets from many countries,like dollars,francs,and pesos 
E) are not able to offer their customers check writing privileges 
A) were originally introduced by the Federal Reserve Bank of New York 
B) when they were introduced,constituted serious competition to banks and thrifts for the deposits of savers 
C) were not originally offered by commercial banks and still are not offered by them 
D) represent a pooling of cash assets from many countries,like dollars,francs,and pesos 
E) are not able to offer their customers check writing privileges

Question 13

All of the following have contributed to the problems of U.S.depository institutions during the last 20 years except one.Which is the exception?

Accepted Answer

A) Interest rates rose during the 1970s. 
B) Interest rate ceilings limited the ability of depository institutions to compete with other financial institutions. 
C) Brokerage houses began offering money market mutual funds. 
D) The loans made by thrift institutions tended to be short-term loans. 
E) Many savers withdrew deposits from thrift institutions. 
A) Interest rates rose during the 1970s. 
B) Interest rate ceilings limited the ability of depository institutions to compete with other financial institutions. 
C) Brokerage houses began offering money market mutual funds. 
D) The loans made by thrift institutions tended to be short-term loans. 
E) Many savers withdrew deposits from thrift institutions.

Question 14

Eileen puts $10,000 in a federally insured checking account at the First National Bank.Norma borrows $10,000 from the First National Bank,flies to a South Pacific island,and is never heard from again.Which of the following is true?

Accepted Answer

A) Eileen will lose her $10,000. 
B) Eileen will lose her $10,000 if she and Norma are related. 
C) Eileen will lose her $10,000 if the First National Bank makes all of its loans to people who run off to South Pacific islands. 
D) Eileen will not lose her $10,000 no matter what happens to the First National Bank. 
E) Eileen will not lose her $10,000 unless there is a run on the First National Bank. 
A) Eileen will lose her $10,000. 
B) Eileen will lose her $10,000 if she and Norma are related. 
C) Eileen will lose her $10,000 if the First National Bank makes all of its loans to people who run off to South Pacific islands. 
D) Eileen will not lose her $10,000 no matter what happens to the First National Bank. 
E) Eileen will not lose her $10,000 unless there is a run on the First National Bank.

Question 15

Any bank that uses deposits to make loans

Accepted Answer

A) operates on a 100 percent reserve system 
B) operates on a fractional reserve system 
C) does not operate on a reserve system 
D) does not keep reserves 
E) charges an interest rate determined by the reserve ratio 
A) operates on a 100 percent reserve system 
B) operates on a fractional reserve system 
C) does not operate on a reserve system 
D) does not keep reserves 
E) charges an interest rate determined by the reserve ratio

Question 16

The Dodd-Frank Wall Street Reform and Consumer Protection Act included all of the following provisions except one.Which is the exception?

Accepted Answer

A) the law requires mortgage originators to verify a borrowers income,credit history,and job status 
B) the law authorizes the Federal Reserve to regulate companies other than banks - such as insurance companies and investment firms 
C) the law establishes the Financial Stability Oversight Council,a super-regulator that will monitor Wall Street's largest firms 
D) the law gives the Federal Reserve the authority to establish a reserve requirement for all financial institutions 
E) the law requires issuers of mortgage-backed securities to retain at least 5 percent of the credit risk associated with the mortgages 
A) the law requires mortgage originators to verify a borrowers income,credit history,and job status 
B) the law authorizes the Federal Reserve to regulate companies other than banks - such as insurance companies and investment firms 
C) the law establishes the Financial Stability Oversight Council,a super-regulator that will monitor Wall Street's largest firms 
D) the law gives the Federal Reserve the authority to establish a reserve requirement for all financial institutions 
E) the law requires issuers of mortgage-backed securities to retain at least 5 percent of the credit risk associated with the mortgages

Question 17

During which of the following periods did the Fed act effectively as a lender of last resort?

Accepted Answer

A) the Panic of 1907 
B) at the outbreak of World War I 
C) the Crash of 1929 
D) the bank runs of the Great Depression 
E) the stock market crash of 1987 
A) the Panic of 1907 
B) at the outbreak of World War I 
C) the Crash of 1929 
D) the bank runs of the Great Depression 
E) the stock market crash of 1987

Question 18

All of the following occurred under the restructuring of the Fed in the 1930s,except one.Which is the exception?

Accepted Answer

A) the FOMC was created to conduct open-market operations 
B) the Board of Governors was given the power to change member bank reserve requirements 
C) the Fed's power was centralized to give it greater monetary control 
D) the Fed was expanded to include all depository institutions as members 
E) the Fed could buy and sell securities 
A) the FOMC was created to conduct open-market operations 
B) the Board of Governors was given the power to change member bank reserve requirements 
C) the Fed's power was centralized to give it greater monetary control 
D) the Fed was expanded to include all depository institutions as members 
E) the Fed could buy and sell securities

Question 19

To minimize the effect of short-term political pressure on the Fed's Board of Governors,the governors are all appointed to their terms

Accepted Answer

A) in different years,and their terms are long 
B) in different years,and their terms are short 
C) in the same year,and their terms are long 
D) in the same year,and their terms are short 
E) in the same year,and their terms are shorter than that of the chairman of the Federal Reserve Board 
A) in different years,and their terms are long 
B) in different years,and their terms are short 
C) in the same year,and their terms are long 
D) in the same year,and their terms are short 
E) in the same year,and their terms are shorter than that of the chairman of the Federal Reserve Board

Question 20

The Board of Governors consists of

Accepted Answer

A) seven elected members 
B) seven members appointed by the president 
C) a representative from each of the 12 district banks 
D) 12 elected members 
E) 12 members appointed by the president 
A) seven elected members 
B) seven members appointed by the president 
C) a representative from each of the 12 district banks 
D) 12 elected members 
E) 12 members appointed by the president

Exam 14: Money and the Financial System

The banking crisis of the 1980s was due,in part,to all of the following except one.Which is the exception?

When a nation's official money fails to serve as a medium of exchange,

Eileen puts $10,000 in an uninsured savings account at the First National Bank.Norma borrows $10,000 from the First National Bank,flies to a South Pacific island,and is never heard from again.Which of the following is true?

As the number of goods and services increases,barter becomes

The chairman of the Fed serves

Which of the following is not a depository institution?

Money is legal tender if

Bank holding companies

One problem with fiat money,as compared to commodity money,is that

Which of the following statements best characterizes U.S.depository institutions over the last 50 years?

Fiat money is backed by

Money market mutual funds

All of the following have contributed to the problems of U.S.depository institutions during the last 20 years except one.Which is the exception?

Eileen puts $10,000 in a federally insured checking account at the First National Bank.Norma borrows $10,000 from the First National Bank,flies to a South Pacific island,and is never heard from again.Which of the following is true?

Any bank that uses deposits to make loans

The Dodd-Frank Wall Street Reform and Consumer Protection Act included all of the following provisions except one.Which is the exception?

During which of the following periods did the Fed act effectively as a lender of last resort?

All of the following occurred under the restructuring of the Fed in the 1930s,except one.Which is the exception?

To minimize the effect of short-term political pressure on the Fed's Board of Governors,the governors are all appointed to their terms

The Board of Governors consists of

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