Question 1

As of 2017, the FDIC insured deposit accounts up to which of the following amounts?

Accepted Answer

A)  $10,000. 
B)  $25,000. 
C)  $100,000. 
D)  $250,000. 
A)  $10,000. 
B)  $25,000. 
C)  $100,000. 
D)  $250,000.

Question 2

The maximum potential money multiplier is equal to

Accepted Answer

A)  the reserve ratio. 
B)  the inverse of the required reserve ratio. 
C)  one minus the reserve ratio 
D)  the number of dollars on reserve. 
A)  the reserve ratio. 
B)  the inverse of the required reserve ratio. 
C)  one minus the reserve ratio 
D)  the number of dollars on reserve.

Question 3

If you save $20,000 for a down payment on a house, you are using money as

Accepted Answer

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

Question 4

-According to the above table, the value of M1 is

Accepted Answer

A)  $1,888 billion. 
B)  $1,629 billion. 
C)  $1,313 billion. 
D)  $1,205 billion. 
A)  $1,888 billion. 
B)  $1,629 billion. 
C)  $1,313 billion. 
D)  $1,205 billion.

Question 5

Which of the following is NOT part of M1?

Accepted Answer

A)  money market deposit accounts 
B)  coin and currency 
C)  checking deposits 
D)  traveler's checks 
A)  money market deposit accounts 
B)  coin and currency 
C)  checking deposits 
D)  traveler's checks

Question 6

Suppose your $1,000 certificate of deposit matures and you transfer the funds to your checking account. This causes

Accepted Answer

A)  M1 to decrease by $1,000 and M2 to increase by $1,000. 
B)  M1 to increase by $1,000 and M2 to remain the same. 
C)  both M1 and M2 to increase by $1,000. 
D)  no change to either M1 or M2. 
A)  M1 to decrease by $1,000 and M2 to increase by $1,000. 
B)  M1 to increase by $1,000 and M2 to remain the same. 
C)  both M1 and M2 to increase by $1,000. 
D)  no change to either M1 or M2.

Question 7

Bank examinations by the FDIC help reduce the ________ problem, by preventing bank managers from allocating funds already obtained from depositors to non-creditworthy loans.

Accepted Answer

A)  moral hazard 
B)  principled hazard 
C)  adverse selection 
D)  contrary selection 
A)  moral hazard 
B)  principled hazard 
C)  adverse selection 
D)  contrary selection

Question 8

Fractional reserve banking refers to a banking system in which

Accepted Answer

A)  bank deposits are less than bank reserves. 
B)  bank reserves are only a fraction of total deposits. 
C)  bank reserves are only a fraction of required reserves. 
D)  bank loans are less than bank reserves. 
A)  bank deposits are less than bank reserves. 
B)  bank reserves are only a fraction of total deposits. 
C)  bank reserves are only a fraction of required reserves. 
D)  bank loans are less than bank reserves.

Question 9

A major function of the Federal Reserve System is

Accepted Answer

A)  the implementation of fiscal policy for the federal government. 
B)  the control of the money supply. 
C)  the control of government spending. 
D)  the control of taxing policy. 
A)  the implementation of fiscal policy for the federal government. 
B)  the control of the money supply. 
C)  the control of government spending. 
D)  the control of taxing policy.

Question 10

The Federal Open Market Committee has responsibility for

Accepted Answer

A)  appointing members to the Board of Governors of the Federal Reserve system. 
B)  printing money. 
C)  issuing orders to buy or sell government securities for the Fed. 
D)  advising the Treasury Department on monetary policy. 
A)  appointing members to the Board of Governors of the Federal Reserve system. 
B)  printing money. 
C)  issuing orders to buy or sell government securities for the Fed. 
D)  advising the Treasury Department on monetary policy.

Question 11

The Board of Governors of the Federal Reserve System is

Accepted Answer

A)  appointed by the Congress. 
B)  elected by the public. 
C)  appointed by the President with approval of the U.S. Senate. 
D)  elected by members of the American Banking Association. 
A)  appointed by the Congress. 
B)  elected by the public. 
C)  appointed by the President with approval of the U.S. Senate. 
D)  elected by members of the American Banking Association.

Question 12

If the transactions approach to measuring money is used, then the money supply consists of

Accepted Answer

A)  currency only. 
B)  transaction deposits only. 
C)  currency and transaction deposits only. 
D)  currency, checkable and debitable deposits, and traveler's checks. 
A)  currency only. 
B)  transaction deposits only. 
C)  currency and transaction deposits only. 
D)  currency, checkable and debitable deposits, and traveler's checks.

Question 13

Why is money as a medium of exchange important in an economy?

Accepted Answer

Money permits more specialization and re

Question 14

For a small-denomination certificate of deposit to be included in M2 it must be a denomination of less than

Accepted Answer

A)  $2,500,000. 
B)  $100,000. 
C)  $1 trillion 
D)  $1,000. 
A)  $2,500,000. 
B)  $100,000. 
C)  $1 trillion 
D)  $1,000.

Question 15

Explain the forces that caused the savings and loan debacle in the latter half of the 1980s.

Accepted Answer

Deposit insurance created a moral hazard

Question 16

Checkable deposit account balances are

Accepted Answer

A)  counted in the calculation of the money supply. 
B)  part of M2 but not part of M1. 
C)  considered credit, but not money. 
D)  only a small component of the money supply. 
A)  counted in the calculation of the money supply. 
B)  part of M2 but not part of M1. 
C)  considered credit, but not money. 
D)  only a small component of the money supply.

Question 17

A monetary system is preferable over the barter system because it

Accepted Answer

A)  reduces transaction costs. 
B)  is easier to track by the government. 
C)  limits cash leakages. 
D)  is determined by the Congress. 
A)  reduces transaction costs. 
B)  is easier to track by the government. 
C)  limits cash leakages. 
D)  is determined by the Congress.

Question 18

The liquidity approach to measuring the money supply uses

Accepted Answer

A)  M1 only. 
B)  near moneys only. 
C)  M1 plus some highly liquid assets. 
D)  M2 plus some highly liquid assets. 
A)  M1 only. 
B)  near moneys only. 
C)  M1 plus some highly liquid assets. 
D)  M2 plus some highly liquid assets.

Question 19

The function of money that allows individuals a method to compare the relative value of goods and services is

Accepted Answer

A)  medium of exchange. 
B)  unit of accounting. 
C)  store of value. 
D)  liquidity. 
A)  medium of exchange. 
B)  unit of accounting. 
C)  store of value. 
D)  liquidity.

Question 20

Which one of the following would increase reserves for the banking system?

Accepted Answer

A)  The Fed sells government securities on the open market. 
B)  The Fed buys government securities on the open market. 
C)  You take $100 out of a checking account and then deposit the same amount in a savings account. 
D)  You purchase a U.S. Treasury bond from a bond dealer. 
A)  The Fed sells government securities on the open market. 
B)  The Fed buys government securities on the open market. 
C)  You take $100 out of a checking account and then deposit the same amount in a savings account. 
D)  You purchase a U.S. Treasury bond from a bond dealer.

Exam 15: Money, Banking, and Central Banking

As of 2017, the FDIC insured deposit accounts up to which of the following amounts?

The maximum potential money multiplier is equal to

If you save $20,000 for a down payment on a house, you are using money as

-According to the above table, the value of M1 is

Which of the following is NOT part of M1?

Suppose your $1,000 certificate of deposit matures and you transfer the funds to your checking account. This causes

Bank examinations by the FDIC help reduce the ________ problem, by preventing bank managers from allocating funds already obtained from depositors to non-creditworthy loans.

Fractional reserve banking refers to a banking system in which

A major function of the Federal Reserve System is

The Federal Open Market Committee has responsibility for

The Board of Governors of the Federal Reserve System is

If the transactions approach to measuring money is used, then the money supply consists of

Why is money as a medium of exchange important in an economy?

For a small-denomination certificate of deposit to be included in M2 it must be a denomination of less than

Explain the forces that caused the savings and loan debacle in the latter half of the 1980s.

Checkable deposit account balances are

A monetary system is preferable over the barter system because it

The liquidity approach to measuring the money supply uses

The function of money that allows individuals a method to compare the relative value of goods and services is

Which one of the following would increase reserves for the banking system?

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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