Question 1

A fiduciary monetary system has to have all of the following EXCEPT

Accepted Answer

A)  trust. 
B)  a central bank. 
C)  acceptability. 
D)  predictability of value. 
A)  trust. 
B)  a central bank. 
C)  acceptability. 
D)  predictability of value.

Question 2

Control of the money supply is handled by

Accepted Answer

A)  Congress. 
B)  the Federal Reserve System. 
C)  all commercial banks. 
D)  Congress and all member commercial banks. 
A)  Congress. 
B)  the Federal Reserve System. 
C)  all commercial banks. 
D)  Congress and all member commercial banks.

Question 3

You go to work today, but will get your paycheck at the end of the month. This is an example of money serving as a

Accepted Answer

A)  medium of exchange. 
B)  unit of accounting. 
C)  store of value. 
D)  standard of deferred payment. 
A)  medium of exchange. 
B)  unit of accounting. 
C)  store of value. 
D)  standard of deferred payment.

Question 4

What are the functions of money?

Accepted Answer

Money serves as a medium of exchange, wh

Question 5

An item to which a business holds legal claim is called a(n)

Accepted Answer

A)  asset. 
B)  liability. 
C)  loan. 
D)  time deposit. 
A)  asset. 
B)  liability. 
C)  loan. 
D)  time deposit.

Question 6

Financial intermediaries are important because

Accepted Answer

A)  they bring lenders and borrowers together in a way that lowers transaction costs. 
B)  they provide large funds to the stock market. 
C)  they employ large numbers of people. 
D)  they increase costs for banks. 
A)  they bring lenders and borrowers together in a way that lowers transaction costs. 
B)  they provide large funds to the stock market. 
C)  they employ large numbers of people. 
D)  they increase costs for banks.

Question 7

Which of the following statements is/are correct? I. Depository institution managers undertake riskier actions than they otherwise would because of the existence of deposit insurance.
II) Because of the existence of deposit insurance, depositors in savings and loans and other banks have little incentive to investigate the financial stability of these institutions.

Accepted Answer

A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II 
A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II

Question 8

The fiscal agent for the U.S. federal government is

Accepted Answer

A)  the United States Treasury. 
B)  the Internal Revenue Service. 
C)  the Comptroller of Currency. 
D)  the Federal Reserve System. 
A)  the United States Treasury. 
B)  the Internal Revenue Service. 
C)  the Comptroller of Currency. 
D)  the Federal Reserve System.

Question 9

If a bank's deposits at the Fed increase by $10 million, then

Accepted Answer

A)  both the bank's assets and the Fed's assets increase by $10 million. 
B)  both the bank's liabilities and the Fed's liabilities increase by $10 million. 
C)  the bank's assets increase by $10 million and the Fed's liabilities increase by $10 million. 
D)  the bank's assets increase by $10 million, but there is no change at the Fed since it does not really have assets or liabilities. 
A)  both the bank's assets and the Fed's assets increase by $10 million. 
B)  both the bank's liabilities and the Fed's liabilities increase by $10 million. 
C)  the bank's assets increase by $10 million and the Fed's liabilities increase by $10 million. 
D)  the bank's assets increase by $10 million, but there is no change at the Fed since it does not really have assets or liabilities.

Question 10

Suppose you place your savings in a time deposit at the bank, and that bank lends some of those funds to a business that desires a loan. This is an example of

Accepted Answer

A)  direct finance. 
B)  indirect finance. 
C)  credit rationing. 
D)  adverse selection. 
A)  direct finance. 
B)  indirect finance. 
C)  credit rationing. 
D)  adverse selection.

Question 11

In a fiduciary monetary system

Accepted Answer

A)  coins get their value from the precious metals of which they are made. 
B)  money gets its value from the confidence that the public has in its acceptability. 
C)  paper currency does not have value, but balances in checking accounts do. 
D)  checking account balances do not have value, but paper currency does. 
A)  coins get their value from the precious metals of which they are made. 
B)  money gets its value from the confidence that the public has in its acceptability. 
C)  paper currency does not have value, but balances in checking accounts do. 
D)  checking account balances do not have value, but paper currency does.

Question 12

If proceeds from loans are NOT deposited back in the banking system, then

Accepted Answer

A)  the magnitude of the multiplier process is reduced. 
B)  there is no effect on the magnitude of the multiplier process. 
C)  the magnitude of the multiplier process is increased. 
D)  the Fed intervenes by selling more Federal government bonds. 
A)  the magnitude of the multiplier process is reduced. 
B)  there is no effect on the magnitude of the multiplier process. 
C)  the magnitude of the multiplier process is increased. 
D)  the Fed intervenes by selling more Federal government bonds.

Question 13

Which one of the following is included in M2 but NOT in M1?

Accepted Answer

A)  coins and currency 
B)  transaction deposits 
C)  a savings deposit 
D)  large-denomination time deposits 
A)  coins and currency 
B)  transaction deposits 
C)  a savings deposit 
D)  large-denomination time deposits

Question 14

Without an accepted medium of exchange

Accepted Answer

A)  there would be no trade. 
B)  people would have to rely on gold or silver in order to exchange goods and services. 
C)  goods and services would be exchanged by barter. 
D)  prices are very difficult to determine. 
A)  there would be no trade. 
B)  people would have to rely on gold or silver in order to exchange goods and services. 
C)  goods and services would be exchanged by barter. 
D)  prices are very difficult to determine.

Question 15

Fractional reserve banking is a system in which

Accepted Answer

A)  depository institutions pay a fraction of advertised interest rates. 
B)  a fraction of banking services must be provided by depository institutions. 
C)  depository institutions hold a fraction of total deposits in reserve. 
D)  the money supply is a set fraction of the U.S. gold reserves. 
A)  depository institutions pay a fraction of advertised interest rates. 
B)  a fraction of banking services must be provided by depository institutions. 
C)  depository institutions hold a fraction of total deposits in reserve. 
D)  the money supply is a set fraction of the U.S. gold reserves.

Question 16

Which of the following is NOT included in the MZM definition of money?

Accepted Answer

A)  currency. 
B)  money market funds. 
C)  travelers checks. 
D)  small-denomination time deposits. 
A)  currency. 
B)  money market funds. 
C)  travelers checks. 
D)  small-denomination time deposits.

Question 17

Small-denomination certificates of deposits are

Accepted Answer

A)  included in M1 but not M2. 
B)  included in M1 and M2. 
C)  included only in M1. 
D)  included in M2 but not M1. 
A)  included in M1 but not M2. 
B)  included in M1 and M2. 
C)  included only in M1. 
D)  included in M2 but not M1.

Question 18

Which of the following is NOT a financial intermediary?

Accepted Answer

A)  commercial banks 
B)  a savings and loan association 
C)  the Federal Reserve Bank of New York 
D)  the Internal Revenue Service 
A)  commercial banks 
B)  a savings and loan association 
C)  the Federal Reserve Bank of New York 
D)  the Internal Revenue Service

Question 19

What is money?

Accepted Answer

Money is any medium that is un

Question 20

The current chair of the Board of Governors of the Federal Reserve is

Accepted Answer

A)  Alan Greenspan. 
B)  Ben Bernanke. 
C)  Janet Yellen. 
D)  Henry Paulson. 
A)  Alan Greenspan. 
B)  Ben Bernanke. 
C)  Janet Yellen. 
D)  Henry Paulson.

Exam 15: Money, Banking, and Central Banking

A fiduciary monetary system has to have all of the following EXCEPT

Control of the money supply is handled by

You go to work today, but will get your paycheck at the end of the month. This is an example of money serving as a

What are the functions of money?

An item to which a business holds legal claim is called a(n)

Financial intermediaries are important because

The fiscal agent for the U.S. federal government is

If a bank's deposits at the Fed increase by $10 million, then

Suppose you place your savings in a time deposit at the bank, and that bank lends some of those funds to a business that desires a loan. This is an example of

In a fiduciary monetary system

If proceeds from loans are NOT deposited back in the banking system, then

Which one of the following is included in M2 but NOT in M1?

Without an accepted medium of exchange

Fractional reserve banking is a system in which

Which of the following is NOT included in the MZM definition of money?

Small-denomination certificates of deposits are

Which of the following is NOT a financial intermediary?

What is money?

The current chair of the Board of Governors of the Federal Reserve is

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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