Question 1

The Bureau of Consumer Financial Protection was created in 2010 to become part of the:

Accepted Answer

A)  U.S. Treasury Department 
B)  Federal Reserve System 
C)  Department of Commerce 
D)  Office of the President 
A)  U.S. Treasury Department 
B)  Federal Reserve System 
C)  Department of Commerce 
D)  Office of the President

Question 2

The Federal backing for money in the United States comes from:

Accepted Answer

A)  Providing sufficient quantities of precious metals such as gold and silver to cover the amount of paper money in circulation 
B)  Pledging physical assets, such as land, natural resources, and public buildings as collateral for outstanding currency 
C)  Controlling the money supply in order to keep the value of money relatively stable over time 
D)  Protecting checkable deposits at financial institutions with deposit guarantees 
A)  Providing sufficient quantities of precious metals such as gold and silver to cover the amount of paper money in circulation 
B)  Pledging physical assets, such as land, natural resources, and public buildings as collateral for outstanding currency 
C)  Controlling the money supply in order to keep the value of money relatively stable over time 
D)  Protecting checkable deposits at financial institutions with deposit guarantees

Question 3

The reason for the Fed being set up as an independent agency of government is to:

Accepted Answer

A)  Protect it from political pressure 
B)  Allow it to earn profits like private firms 
C)  Make it be managed and controlled by member banks 
D)  Let it be able to compete with other financial institutions 
A)  Protect it from political pressure 
B)  Allow it to earn profits like private firms 
C)  Make it be managed and controlled by member banks 
D)  Let it be able to compete with other financial institutions

Question 4

Refer to the table above. The size of the M2 money supply is:

Accepted Answer

A)  $2,054 billion 
B)  $2,696 billion 
C)  $5,899 billion 
D)  $6,792 billion 
A)  $2,054 billion 
B)  $2,696 billion 
C)  $5,899 billion 
D)  $6,792 billion

Question 5

Which of the following "backs" the value of money in the United States?

Accepted Answer

A)  The gold stored in the Federal Reserve Bank of New York 
B)  The acceptability of it as a medium of exchange 
C)  The willingness of foreign government to hold U.S. dollars 
D)  The size of the budget surplus in the U.S. government 
A)  The gold stored in the Federal Reserve Bank of New York 
B)  The acceptability of it as a medium of exchange 
C)  The willingness of foreign government to hold U.S. dollars 
D)  The size of the budget surplus in the U.S. government

Question 6

What function is money serving when you use it when you go shopping?

Accepted Answer

A)  A store of value 
B)  A unit of account 
C)  A medium of deferred payment 
D)  A medium of exchange 
A)  A store of value 
B)  A unit of account 
C)  A medium of deferred payment 
D)  A medium of exchange

Question 7

The M1 money supply is composed of:

Accepted Answer

A)  All coins and paper money held by the general public and the banks 
B)  Bank deposits of households and business firms 
C)  Bank deposits and mutual funds 
D)  Checkable deposits and currency in circulation 
A)  All coins and paper money held by the general public and the banks 
B)  Bank deposits of households and business firms 
C)  Bank deposits and mutual funds 
D)  Checkable deposits and currency in circulation

Question 8

Use the following list to answer the question about the money supply. Items
1) Money market mutual funds held by individuals
2) Savings deposits, including money market deposit accounts
3) Money market mutual funds held by businesses
4) Currency held by the public
5) Small time deposits
6) Checkable deposits
Refer to the list above. Which items are included in the M2 money supply, but not the M1 money supply?

Accepted Answer

A)  1 and 7 
B)  3 and 5 
C)  1 and 2 
D)  1, 2, and 5 
A)  1 and 7 
B)  3 and 5 
C)  1 and 2 
D)  1, 2, and 5

Question 9

One reason that "near-monies" are important is because:

Accepted Answer

A)  They simplify the definition of money and therefore the formulation of monetary policy 
B)  They can be easily converted into money or vice versa, and thereby can influence the stability of the economy 
C)  They do not reflect the level of consumer spending but they have a critical impact on saving and investment in the economy 
D)  Credit cards synchronize one's expenditures and income, thereby reducing the cash and checkable deposits one must hold 
A)  They simplify the definition of money and therefore the formulation of monetary policy 
B)  They can be easily converted into money or vice versa, and thereby can influence the stability of the economy 
C)  They do not reflect the level of consumer spending but they have a critical impact on saving and investment in the economy 
D)  Credit cards synchronize one's expenditures and income, thereby reducing the cash and checkable deposits one must hold

Question 10

The following financial institutions traditionally accept deposits from savers, except:

Accepted Answer

A)  Thrifts 
B)  Mutual fund companies 
C)  Investment banks 
D)  Pension funds 
A)  Thrifts 
B)  Mutual fund companies 
C)  Investment banks 
D)  Pension funds

Question 11

Which of the following is not true about the use of a credit card?

Accepted Answer

A)  It is a means of deferring payment for a short period of time 
B)  It allows people to "economize" on the use of money 
C)  Credit-card balances are part of M2, but not part of M1 
D)  A credit card transaction is not the same as a debit card transaction 
A)  It is a means of deferring payment for a short period of time 
B)  It allows people to "economize" on the use of money 
C)  Credit-card balances are part of M2, but not part of M1 
D)  A credit card transaction is not the same as a debit card transaction

Question 12

What function is money serving when you deposit money in a savings account?

Accepted Answer

A)  A store of value 
B)  A unit of account 
C)  A checkable deposit 
D)  A medium of exchange 
A)  A store of value 
B)  A unit of account 
C)  A checkable deposit 
D)  A medium of exchange

Question 13

Debit card balances are part of money supply M1, but credit card balances are not.

Accepted Answer

A) True 
 B)False

Question 14

Credit card balances are part of money supply M2.

Accepted Answer

A) True 
 B)False

Question 15

Money performs its function as a store of value very well, because it protects one against the erosion of purchasing power from inflation.

Accepted Answer

A) True 
 B)False

Question 16

When you use money to purchase groceries, money is functioning as a store of value.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is NOT true about subprime mortgage loans:

Accepted Answer

A)  They played a central role in the financial crisis of 2007-2008 
B)  They were encouraged by the Federal government for many years before the financial crisis 
C)  They had always been discouraged by the government, and even banned in some cases 
D)  They were considered high-risk loans because the borrowers had poor credit ratings 
A)  They played a central role in the financial crisis of 2007-2008 
B)  They were encouraged by the Federal government for many years before the financial crisis 
C)  They had always been discouraged by the government, and even banned in some cases 
D)  They were considered high-risk loans because the borrowers had poor credit ratings

Question 18

Which of the following would be considered to be the most liquid?

Accepted Answer

A)  Checkable deposits 
B)  Small time deposits 
C)  Money market mutual funds 
D)  Savings deposits 
A)  Checkable deposits 
B)  Small time deposits 
C)  Money market mutual funds 
D)  Savings deposits

Question 19

When a consumer wants to compare the price of one product with another, money is primarily functioning as a:

Accepted Answer

A)  Store of value 
B)  Unit of account 
C)  Checkable deposit 
D)  Medium of exchange 
A)  Store of value 
B)  Unit of account 
C)  Checkable deposit 
D)  Medium of exchange

Question 20

Currency and checkable deposits are:

Accepted Answer

A)  Assets of the Federal Reserve Banks or of financial institutions 
B)  Redeemable for gold and silver from the Federal Reserve System 
C)  Of intrinsic value which determines the relative worth of money 
D)  The major components of money supply M1 
A)  Assets of the Federal Reserve Banks or of financial institutions 
B)  Redeemable for gold and silver from the Federal Reserve System 
C)  Of intrinsic value which determines the relative worth of money 
D)  The major components of money supply M1

Exam 14: Money, Banking, and Financial Institutions

The Bureau of Consumer Financial Protection was created in 2010 to become part of the:

The Federal backing for money in the United States comes from:

The reason for the Fed being set up as an independent agency of government is to:

Refer to the table above. The size of the M2 money supply is:

Which of the following "backs" the value of money in the United States?

What function is money serving when you use it when you go shopping?

The M1 money supply is composed of:

One reason that "near-monies" are important is because:

The following financial institutions traditionally accept deposits from savers, except:

Which of the following is not true about the use of a credit card?

What function is money serving when you deposit money in a savings account?

Debit card balances are part of money supply M1, but credit card balances are not.

Credit card balances are part of money supply M2.

Money performs its function as a store of value very well, because it protects one against the erosion of purchasing power from inflation.

When you use money to purchase groceries, money is functioning as a store of value.

Which of the following is NOT true about subprime mortgage loans:

Which of the following would be considered to be the most liquid?

When a consumer wants to compare the price of one product with another, money is primarily functioning as a:

Currency and checkable deposits are:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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