Question 1

Barter may be the only alternative

Accepted Answer

A) only if the supply of money dries up 
B) if the supply of money dries up or if the price system is not allowed to function properly 
C) only if the price system is not allowed to function properly 
D) if hyperinflation sets in 
E) if fiat money is discontinued 
A) only if the supply of money dries up 
B) if the supply of money dries up or if the price system is not allowed to function properly 
C) only if the price system is not allowed to function properly 
D) if hyperinflation sets in 
E) if fiat money is discontinued

Question 2

Fiat money

Accepted Answer

A) has value because people accept it 
B) has intrinsic value 
C) is backed by commodity reserves 
D) is money because of its metallic content 
E) is frequently "clipped" 
A) has value because people accept it 
B) has intrinsic value 
C) is backed by commodity reserves 
D) is money because of its metallic content 
E) is frequently "clipped"

Question 3

Which of the following is not a function of money?

Accepted Answer

A) to act as a medium of exchange 
B) to act as a unit of account 
C) to act as a store of value 
D) to facilitate trade 
E) to provide a double coincidence of wants 
A) to act as a medium of exchange 
B) to act as a unit of account 
C) to act as a store of value 
D) to facilitate trade 
E) to provide a double coincidence of wants

Question 4

Goldsmiths are considered to be the forerunners of modern banks because they

Accepted Answer

A) had safes to keep gold secure 
B) issued gold coins 
C) created money by lending out gold reserves 
D) created legal tender 
E) verified the quality of money 
A) had safes to keep gold secure 
B) issued gold coins 
C) created money by lending out gold reserves 
D) created legal tender 
E) verified the quality of money

Question 5

The U.S.dollar is backed by gold.

Accepted Answer

A) True 
 B)False

Question 6

The Federal Reserve System was established

Accepted Answer

A) by the U.S.Constitution 
B) immediately after the Civil War 
C) in 1914 
D) during the Great Depression 
E) immediately following World War II 
A) by the U.S.Constitution 
B) immediately after the Civil War 
C) in 1914 
D) during the Great Depression 
E) immediately following World War II

Question 7

Many banks in the U.S.failed in the 1930s not because they were poorly managed but because they could not survive the panicky withdrawals of funds by their depositors.

Accepted Answer

A) True 
 B)False

Question 8

All of the following are depository institutions except one.Which is the exception?

Accepted Answer

A) commercial banks 
B) savings and loan associations 
C) stock brokers 
D) mutual savings banks 
E) credit unions 
A) commercial banks 
B) savings and loan associations 
C) stock brokers 
D) mutual savings banks 
E) credit unions

Question 9

U.S.banks have grown primarily through

Accepted Answer

A) America's longstanding preference for big banks 
B) surviving banks buying up bankrupt banks 
C) excellent customer service 
D) mergers and acquisitions 
E) All of the answers are correct 
A) America's longstanding preference for big banks 
B) surviving banks buying up bankrupt banks 
C) excellent customer service 
D) mergers and acquisitions 
E) All of the answers are correct

Question 10

The tendency of bankers to take unwarranted risks in making loans because deposits were insured is an example of what is referred to as a

Accepted Answer

A) golf course hazard 
B) weather hazard 
C) moral hazard 
D) hazard pay 
E) duke of hazard 
A) golf course hazard 
B) weather hazard 
C) moral hazard 
D) hazard pay 
E) duke of hazard

Question 11

The Board of Governors

Accepted Answer

A) composes a minority of the FOMC 
B) consists of twelve presidential appointees 
C) was authorized to set reserve requirements by the Bank Acts of 1933 and 1935 
D) serve four year terms 
E) are elected by the member banks which own the Federal Reserve 
A) composes a minority of the FOMC 
B) consists of twelve presidential appointees 
C) was authorized to set reserve requirements by the Bank Acts of 1933 and 1935 
D) serve four year terms 
E) are elected by the member banks which own the Federal Reserve

Question 12

Which of the following is not a function of the Federal Reserve System?

Accepted Answer

A) holding deposits of member banks 
B) clearing checks 
C) making loans to member banks 
D) serving as a bank to the Federal government 
E) making loans to the public 
A) holding deposits of member banks 
B) clearing checks 
C) making loans to member banks 
D) serving as a bank to the Federal government 
E) making loans to the public

Question 13

The Fed's tools for regulating the money supply include

Accepted Answer

A) setting excess reserves 
B) capping the federal funds rate 
C) setting the discount rates 
D) open-market operations 
E) setting reserve requirements 
A) setting excess reserves 
B) capping the federal funds rate 
C) setting the discount rates 
D) open-market operations 
E) setting reserve requirements

Question 14

The currency of Camelot is the noble.King Arthur orders the minting of a five-noble gold coin,but it costs only four nobles to mine and process the amount of gold in the coin.Which of the following statements is true?

Accepted Answer

A) The seigniorage that King Arthur has to pay is five nobles. 
B) The seigniorage that King Arthur has to pay is four nobles. 
C) The seigniorage that King Arthur has to pay is one noble. 
D) The five-noble coin is token money. 
E) The five-noble coin is fiat money. 
A) The seigniorage that King Arthur has to pay is five nobles. 
B) The seigniorage that King Arthur has to pay is four nobles. 
C) The seigniorage that King Arthur has to pay is one noble. 
D) The five-noble coin is token money. 
E) The five-noble coin is fiat money.

Question 15

Specialization of labor means that

Accepted Answer

A) production requires a special kind of labor 
B) the overall skill level of labor is increasing 
C) individuals produce goods other than those they want to consume 
D) individuals achieve self-sufficiency in production 
E) exchange within the economy consists of trading in services 
A) production requires a special kind of labor 
B) the overall skill level of labor is increasing 
C) individuals produce goods other than those they want to consume 
D) individuals achieve self-sufficiency in production 
E) exchange within the economy consists of trading in services

Question 16

When silver and gold were used as money,both their quantity and quality were open to question.The solution was

Accepted Answer

A) seashells 
B) seigniorage 
C) token money 
D) coinage 
E) fiat money 
A) seashells 
B) seigniorage 
C) token money 
D) coinage 
E) fiat money

Question 17

The original bankers were

Accepted Answer

A) seigniors 
B) governments 
C) savings and loan institutions 
D) farmers 
E) goldsmiths 
A) seigniors 
B) governments 
C) savings and loan institutions 
D) farmers 
E) goldsmiths

Question 18

The chairman of the Fed is appointed by the president.

Accepted Answer

A) True 
 B)False

Question 19

Since 1980,bank failures peaked in 2010.

Accepted Answer

A) True 
 B)False

Question 20

The greater the degree of specialization in the economy,

Accepted Answer

A) the easier it is to discover a double coincidence of wants 
B) the more feasible a barter system is 
C) the less likely it is that monetary exchange will develop 
D) the harder it is to negotiate an exchange rate between all pairs of goods 
E) the more likely it is that individual consumers are self-sufficient 
A) the easier it is to discover a double coincidence of wants 
B) the more feasible a barter system is 
C) the less likely it is that monetary exchange will develop 
D) the harder it is to negotiate an exchange rate between all pairs of goods 
E) the more likely it is that individual consumers are self-sufficient

Exam 14: Money and the Financial System

Barter may be the only alternative

Fiat money

Which of the following is not a function of money?

Goldsmiths are considered to be the forerunners of modern banks because they

The U.S.dollar is backed by gold.

The Federal Reserve System was established

Many banks in the U.S.failed in the 1930s not because they were poorly managed but because they could not survive the panicky withdrawals of funds by their depositors.

All of the following are depository institutions except one.Which is the exception?

U.S.banks have grown primarily through

The tendency of bankers to take unwarranted risks in making loans because deposits were insured is an example of what is referred to as a

The Board of Governors

Which of the following is not a function of the Federal Reserve System?

The Fed's tools for regulating the money supply include

The currency of Camelot is the noble.King Arthur orders the minting of a five-noble gold coin,but it costs only four nobles to mine and process the amount of gold in the coin.Which of the following statements is true?

Specialization of labor means that

When silver and gold were used as money,both their quantity and quality were open to question.The solution was

The original bankers were

The chairman of the Fed is appointed by the president.

Since 1980,bank failures peaked in 2010.

The greater the degree of specialization in the economy,

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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