Question 1

Which of the following is NOT a function of money?

Accepted Answer

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

Question 2

Given the list of assets below, which is the most liquid?

Accepted Answer

A)  $500 worth of Google common stock 
B)  $500 worth of General Motors bonds 
C)  A $500 travelers check 
D)  A bitcoin that is accepted by some stores 
A)  $500 worth of Google common stock 
B)  $500 worth of General Motors bonds 
C)  A $500 travelers check 
D)  A bitcoin that is accepted by some stores

Question 3

The purchasing power of money

Accepted Answer

A)  is determined by law. 
B)  varies inversely with the price level. 
C)  depends on the value of gold. 
D)  varies inversely with the interest rate. 
A)  is determined by law. 
B)  varies inversely with the price level. 
C)  depends on the value of gold. 
D)  varies inversely with the interest rate.

Question 4

When a bank buys a bond from the Fed

Accepted Answer

A)  its liabilities decrease. 
B)  its liabilities increase. 
C)  its reserves initially decrease. 
D)  its reserves initially increase. 
A)  its liabilities decrease. 
B)  its liabilities increase. 
C)  its reserves initially decrease. 
D)  its reserves initially increase.

Question 5

-Based on the above table, an open market operation in which the Fed purchased $200,000 of government securities would

Accepted Answer

A)  create a reserve deficiency for the banking system. 
B)  lead to a maximum potential expansion of the money supply of $200,000. 
C)  lead to a maximum potential expansion of the money supply of $2 million. 
D)  cause demand deposits to fall by $200,000. 
A)  create a reserve deficiency for the banking system. 
B)  lead to a maximum potential expansion of the money supply of $200,000. 
C)  lead to a maximum potential expansion of the money supply of $2 million. 
D)  cause demand deposits to fall by $200,000.

Question 6

A bank with $200 million in deposits has $15 million of cash in the bank and $10 million in deposits with the Fed. Its total reserves equal

Accepted Answer

A)  $10 million. 
B)  $15 million. 
C)  $25 million. 
D)  $225 million. 
A)  $10 million. 
B)  $15 million. 
C)  $25 million. 
D)  $225 million.

Question 7

Which of the following institutions has the responsibility for distributing currency and coins to the U.S. banking system?

Accepted Answer

A)  the Office of the Comptroller of the Currency 
B)  the Federal Reserve System 
C)  the U.S. Bureau of Engraving and Printing 
D)  the U.S. Treasury Department 
A)  the Office of the Comptroller of the Currency 
B)  the Federal Reserve System 
C)  the U.S. Bureau of Engraving and Printing 
D)  the U.S. Treasury Department

Question 8

Camels have been used as money. Which function of money would this type of money perform least well?

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 9

The M1 measure of money is suggested by the ________ approach to measuring money.

Accepted Answer

A)  investment 
B)  liquidity 
C)  transactions 
D)  speculative 
A)  investment 
B)  liquidity 
C)  transactions 
D)  speculative

Question 10

If lenders refuse to state the debt in terms of dollars, then dollars are NOT 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 11

As a result of money in an economy

Accepted Answer

A)  people are greedier than in a barter economy. 
B)  people can get rich more quickly with the same amount of goods and services available. 
C)  transaction costs are higher than would be the case in a barter economy. 
D)  real Gross Domestic Product (GDP) and economic growth are greater than they would be in a barter economy. 
A)  people are greedier than in a barter economy. 
B)  people can get rich more quickly with the same amount of goods and services available. 
C)  transaction costs are higher than would be the case in a barter economy. 
D)  real Gross Domestic Product (GDP) and economic growth are greater than they would be in a barter economy.

Question 12

The two basic ways to define money are

Accepted Answer

A)  the transactions approach and the fiduciary approach. 
B)  the M1 approach and the M2 approach. 
C)  the transactions approach and the liquidity approach. 
D)  the liquidity approach and the store of value approach. 
A)  the transactions approach and the fiduciary approach. 
B)  the M1 approach and the M2 approach. 
C)  the transactions approach and the liquidity approach. 
D)  the liquidity approach and the store of value approach.

Question 13

Which of the following is included in M2? I. money market mutual funds
II) small-denomination certificates of deposit

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 14

When an asset is described as being highly liquid, which one of the following characteristics does it possess?

Accepted Answer

A)  It earns a high rate of interest, so its purchasing power is maintained when prices rise. 
B)  It is easily and readily converted into money without any loss in purchasing power. 
C)  The face value of the asset is somewhat less than its value when converted into currency. 
D)  The asset holds its value over time. 
A)  It earns a high rate of interest, so its purchasing power is maintained when prices rise. 
B)  It is easily and readily converted into money without any loss in purchasing power. 
C)  The face value of the asset is somewhat less than its value when converted into currency. 
D)  The asset holds its value over time.

Question 15

The members of the Federal Open Market Committee are

Accepted Answer

A)  the Treasury secretary, the head of the Federal Deposit Insurance Corporation, and the Comptroller of the Currency. 
B)  the seven members of the Fed's Board of Governors and five of the Federal Reserve bank presidents. 
C)  the President, the Speaker of the House of Representatives, and the Senate Majority Leader. 
D)  the five top officials at the Federal Reserve Bank of New York's Trading Desk. 
A)  the Treasury secretary, the head of the Federal Deposit Insurance Corporation, and the Comptroller of the Currency. 
B)  the seven members of the Fed's Board of Governors and five of the Federal Reserve bank presidents. 
C)  the President, the Speaker of the House of Representatives, and the Senate Majority Leader. 
D)  the five top officials at the Federal Reserve Bank of New York's Trading Desk.

Question 16

Which function of money does the liquidity approach to measuring money stresses?

Accepted Answer

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

Question 17

Savings accounts, certificates of deposit, and bonds pay interest and stocks pay dividends. Why does anyone hold on to currency or other forms of money and lose this extra income?

Accepted Answer

Money is more liquid than these other as

Question 18

The part of the Federal Reserve System (the Fed) that supervises and regulates member banks is

Accepted Answer

A)  the Federal Open Market Committee. 
B)  the Federal Advisory Committee. 
C)  the Federal Reserve district banks. 
D)  the Board of Governors. 
A)  the Federal Open Market Committee. 
B)  the Federal Advisory Committee. 
C)  the Federal Reserve district banks. 
D)  the Board of Governors.

Question 19

-The potential money multiplier for the banking system in the above table is

Accepted Answer

A)  5. 
B)  9. 
C)  1. 
D)  10. 
A)  5. 
B)  9. 
C)  1. 
D)  10.

Question 20

Other things being equal, if the reserve ratio is raised from 10 percent to 25 percent

Accepted Answer

A)  minimum potential value of the money multiplier rises from 0.10 to 0.25. 
B)  minimum potential value of the money multiplier falls from 10 to 5. 
C)  maximum potential value of the money multiplier rises from 10 to 25. 
D)  maximum potential value of the money multiplier falls from 10 to 4. 
A)  minimum potential value of the money multiplier rises from 0.10 to 0.25. 
B)  minimum potential value of the money multiplier falls from 10 to 5. 
C)  maximum potential value of the money multiplier rises from 10 to 25. 
D)  maximum potential value of the money multiplier falls from 10 to 4.

Exam 15: Money, Banking, and Central Banking

Which of the following is NOT a function of money?

Given the list of assets below, which is the most liquid?

The purchasing power of money

When a bank buys a bond from the Fed

-Based on the above table, an open market operation in which the Fed purchased $200,000 of government securities would

A bank with $200 million in deposits has $15 million of cash in the bank and $10 million in deposits with the Fed. Its total reserves equal

Which of the following institutions has the responsibility for distributing currency and coins to the U.S. banking system?

Camels have been used as money. Which function of money would this type of money perform least well?

The M1 measure of money is suggested by the ________ approach to measuring money.

If lenders refuse to state the debt in terms of dollars, then dollars are NOT a

As a result of money in an economy

The two basic ways to define money are

Which of the following is included in M2? I. money market mutual funds II) small-denomination certificates of deposit

When an asset is described as being highly liquid, which one of the following characteristics does it possess?

The members of the Federal Open Market Committee are

Which function of money does the liquidity approach to measuring money stresses?

Savings accounts, certificates of deposit, and bonds pay interest and stocks pay dividends. Why does anyone hold on to currency or other forms of money and lose this extra income?

The part of the Federal Reserve System (the Fed) that supervises and regulates member banks is

-The potential money multiplier for the banking system in the above table is

Other things being equal, if the reserve ratio is raised from 10 percent to 25 percent

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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