Question 1

When the Fed buys a U.S. bond in the open market

Accepted Answer

A)  total reserves will increase. 
B)  total reserves will decrease. 
C)  total reserves do not change but the money supply increases. 
D)  total reserves do not change but the money supply decreases. 
A)  total reserves will increase. 
B)  total reserves will decrease. 
C)  total reserves do not change but the money supply increases. 
D)  total reserves do not change but the money supply decreases.

Question 2

The direct exchange of goods and services for other goods and services is known as

Accepted Answer

A)  primitive trade. 
B)  nonmarket trade. 
C)  barter. 
D)  purchasing power parity. 
A)  primitive trade. 
B)  nonmarket trade. 
C)  barter. 
D)  purchasing power parity.

Question 3

Which of the following would be considered a transaction deposit?

Accepted Answer

A)  mutual funds account 
B)  checking account 
C)  credit card account 
D)  401(k) retirement account 
A)  mutual funds account 
B)  checking account 
C)  credit card account 
D)  401(k) retirement account

Question 4

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

Accepted Answer

A)  providing for check collection and clearing 
B)  holding deposits of member banks 
C)  supervising member banks 
D)  making loans to private firms 
A)  providing for check collection and clearing 
B)  holding deposits of member banks 
C)  supervising member banks 
D)  making loans to private firms

Question 5

One of the benefits of money as a medium of exchange is that

Accepted Answer

A)  it allows for private transactions such as trading vegetables for medical services. 
B)  it allows individuals to compare the relative value of goods. 
C)  over time it will become more valuable so that individuals can purchase more goods and services. 
D)  it allows for specialization that leads to economic efficiencies. 
A)  it allows for private transactions such as trading vegetables for medical services. 
B)  it allows individuals to compare the relative value of goods. 
C)  over time it will become more valuable so that individuals can purchase more goods and services. 
D)  it allows for specialization that leads to economic efficiencies.

Question 6

Which of the following is NOT a part of the Federal Reserve System?

Accepted Answer

A)  the Twelve District Federal Reserve banks 
B)  the Federal Open Market Committee 
C)  the Federal Deposit Insurance Corporation 
D)  the Board of Governors 
A)  the Twelve District Federal Reserve banks 
B)  the Federal Open Market Committee 
C)  the Federal Deposit Insurance Corporation 
D)  the Board of Governors

Question 7

Other things being equal, when the Fed buys U.S. government securities

Accepted Answer

A)  the U.S. Treasury must immediately issue new securities to replace the securities that the Fed has removed from the market. 
B)  the Fed's total assets and total liabilities immediately expand by exactly the amount of the Fed's purchase. 
C)  the quantity of deposits in the U.S. banking system expands by less than the amount of the Fed's purchase. 
D)  the quantity of paper currency and coins in circulation expands by more than the amount of the Fed's purchase. 
A)  the U.S. Treasury must immediately issue new securities to replace the securities that the Fed has removed from the market. 
B)  the Fed's total assets and total liabilities immediately expand by exactly the amount of the Fed's purchase. 
C)  the quantity of deposits in the U.S. banking system expands by less than the amount of the Fed's purchase. 
D)  the quantity of paper currency and coins in circulation expands by more than the amount of the Fed's purchase.

Question 8

Who appoints the Federal Reserve System's Board of Governors?

Accepted Answer

A)  the Secretary of the Treasury 
B)  the President of the United States 
C)  the Speaker of the House of Representatives 
D)  the American Banking Association 
A)  the Secretary of the Treasury 
B)  the President of the United States 
C)  the Speaker of the House of Representatives 
D)  the American Banking Association

Question 9

A government bond is NOT as liquid as cash because the bond

Accepted Answer

A)  cannot be converted to spendable dollars either until it matures or is sold to another investor. 
B)  can be exchanged only for the goods or services produced by the company that issued the bond. 
C)  must be exchanged for a stock certificate before it can be converted to spendable funds. 
D)  always has a face value less than its actual value. 
A)  cannot be converted to spendable dollars either until it matures or is sold to another investor. 
B)  can be exchanged only for the goods or services produced by the company that issued the bond. 
C)  must be exchanged for a stock certificate before it can be converted to spendable funds. 
D)  always has a face value less than its actual value.

Question 10

Which of the following is a time deposit with a fixed maturity date offered by banks and other financial institutions?

Accepted Answer

A)  savings deposit 
B)  money market deposit account 
C)  time deposit 
D)  small-denomination certificate of deposit 
A)  savings deposit 
B)  money market deposit account 
C)  time deposit 
D)  small-denomination certificate of deposit

Question 11

Suppose a person deposits a paycheck in a bank. The transaction deposits are money, so has the money supply increased? Explain.

Accepted Answer

No. The check was drawn on the

Question 12

Total reserves are

Accepted Answer

A)  required reserves plus vault cash. 
B)  required reserves plus excess reserves. 
C)  required reserves. 
D)  excess reserves. 
A)  required reserves plus vault cash. 
B)  required reserves plus excess reserves. 
C)  required reserves. 
D)  excess reserves.

Question 13

For the United States, what is money based on the transactions approach to measuring money?

Accepted Answer

The transactions approach look

Question 14

When Howie puts money under his mattress for purchases later on, money is acting as a

Accepted Answer

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

Question 15

The transactions approach to measuring money relies on the role of money primarily as a

Accepted Answer

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

Question 16

According to the text, the actual M1 multiplier in the U.S. today is

Accepted Answer

A)  between 0 and 1. 
B)  between 1.5 and 2.0. 
C)  negative. 
D)  over 10. 
A)  between 0 and 1. 
B)  between 1.5 and 2.0. 
C)  negative. 
D)  over 10.

Question 17

If the reserve ratio is raised, the money multiplier

Accepted Answer

A)  is lowered. 
B)  is increased. 
C)  stays the same. 
D)  is doubled. 
A)  is lowered. 
B)  is increased. 
C)  stays the same. 
D)  is doubled.

Question 18

According to the text, the actual M2 multiplier in the United States today is

Accepted Answer

A)  about 5. 
B)  between 1.0 and 2.0. 
C)  negative. 
D)  over 10. 
A)  about 5. 
B)  between 1.0 and 2.0. 
C)  negative. 
D)  over 10.

Question 19

Financial intermediaries are institutions that

Accepted Answer

A)  produce money for the federal government. 
B)  regulate the activities of stock and bond markets. 
C)  act as middlemen in the process of directing funds from savers to investors. 
D)  oversee the activities of government institutions such as the Federal Reserve. 
A)  produce money for the federal government. 
B)  regulate the activities of stock and bond markets. 
C)  act as middlemen in the process of directing funds from savers to investors. 
D)  oversee the activities of government institutions such as the Federal Reserve.

Question 20

The part of the Federal Reserve System that determines monetary policy actions is the

Accepted Answer

A)  District Bank Board. 
B)  Federal Deposit Insurance Corporation (FDI
C) . 
C)  Federal Open Market Committee. 
D)  Comptroller's Office. 
A)  District Bank Board. 
B)  Federal Deposit Insurance Corporation (FDI
C) . 
C)  Federal Open Market Committee. 
D)  Comptroller's Office.

Exam 15: Money, Banking, and Central Banking

When the Fed buys a U.S. bond in the open market

The direct exchange of goods and services for other goods and services is known as

Which of the following would be considered a transaction deposit?

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

One of the benefits of money as a medium of exchange is that

Which of the following is NOT a part of the Federal Reserve System?

Other things being equal, when the Fed buys U.S. government securities

Who appoints the Federal Reserve System's Board of Governors?

A government bond is NOT as liquid as cash because the bond

Which of the following is a time deposit with a fixed maturity date offered by banks and other financial institutions?

Suppose a person deposits a paycheck in a bank. The transaction deposits are money, so has the money supply increased? Explain.

Total reserves are

For the United States, what is money based on the transactions approach to measuring money?

When Howie puts money under his mattress for purchases later on, money is acting as a

The transactions approach to measuring money relies on the role of money primarily as a

According to the text, the actual M1 multiplier in the U.S. today is

If the reserve ratio is raised, the money multiplier

According to the text, the actual M2 multiplier in the United States today is

Financial intermediaries are institutions that

The part of the Federal Reserve System that determines monetary policy actions is the

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

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The Macroeconomy: Unemployment, Inflation, and Deflation

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Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

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Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

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Consumer Choice

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The Firm: Cost and Output Determination

Perfect Competition

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Regulation and Antitrust Policy in a Globalized Economy

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Unions and Labor Market Monopoly Power

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Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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