Question 1

Even when a particular monetary asset is NOT performing one of the functions of money well, people still use the asset because

Accepted Answer

A)  it is still easier than relying on barter. 
B)  they can always earn interest from holding money. 
C)  once an asset is defined as money it is always money. 
D)  people expect money will come back at a later date. 
A)  it is still easier than relying on barter. 
B)  they can always earn interest from holding money. 
C)  once an asset is defined as money it is always money. 
D)  people expect money will come back at a later date.

Question 2

Perishable goods such as tomatoes and eggs are never used as money, because they cannot function 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 3

The Federal Reserve Bank was first established in the U.S. by an Act of Congress passed in

Accepted Answer

A)  1776. 
B)  1938. 
C)  1913. 
D)  1947. 
A)  1776. 
B)  1938. 
C)  1913. 
D)  1947.

Question 4

Which of the following is the most liquid asset?

Accepted Answer

A)  small denomination time deposits 
B)  currency 
C)  short-term treasury bonds 
D)  shares of stock 
A)  small denomination time deposits 
B)  currency 
C)  short-term treasury bonds 
D)  shares of stock

Question 5

A fiduciary monetary system is dependent on

Accepted Answer

A)  acceptability and predictability of value. 
B)  precious metals backing fiat money. 
C)  Congressional monetary support. 
D)  a negative inflation rate. 
A)  acceptability and predictability of value. 
B)  precious metals backing fiat money. 
C)  Congressional monetary support. 
D)  a negative inflation rate.

Question 6

Which of the following is NOT a description of indirect finance?

Accepted Answer

A)  You take out a student loan from your bank. 
B)  An insurance company lends funds to Tesla. 
C)  You borrow $500 from your parents. 
D)  You buy shares in a mutual fund. 
A)  You take out a student loan from your bank. 
B)  An insurance company lends funds to Tesla. 
C)  You borrow $500 from your parents. 
D)  You buy shares in a mutual fund.

Question 7

Checking account deposits are included in

Accepted Answer

A)  money market account. 
B)  currency. 
C)  lines of credit. 
D)  M1. 
A)  money market account. 
B)  currency. 
C)  lines of credit. 
D)  M1.

Question 8

The opportunity cost of holding money is measured by

Accepted Answer

A)  the return from company stock shares that the money can buy. 
B)  the price of government bonds. 
C)  the interest yield that could have been earned by holding some other asset. 
D)  the liquidity of interest-bearing assets. 
A)  the return from company stock shares that the money can buy. 
B)  the price of government bonds. 
C)  the interest yield that could have been earned by holding some other asset. 
D)  the liquidity of interest-bearing assets.

Question 9

The Federal Reserve System was established in which year?

Accepted Answer

A)  1865 
B)  1913 
C)  1929 
D)  1941 
A)  1865 
B)  1913 
C)  1929 
D)  1941

Question 10

What is a fiduciary monetary system?

Accepted Answer

A fiduciary monetary system is a system

Question 11

Transactions deposits include

Accepted Answer

A)  credit cards. 
B)  certificates of deposit. 
C)  lines of credit. 
D)  checkable and debitable accounts. 
A)  credit cards. 
B)  certificates of deposit. 
C)  lines of credit. 
D)  checkable and debitable accounts.

Question 12

Liquidity refers to

Accepted Answer

A)  the ease with which an asset can be acquired or disposed of without incurring high transaction costs. 
B)  the expected return from an asset. 
C)  the amount of indebtedness held against an asset. 
D)  the net worth of the individual in question. 
A)  the ease with which an asset can be acquired or disposed of without incurring high transaction costs. 
B)  the expected return from an asset. 
C)  the amount of indebtedness held against an asset. 
D)  the net worth of the individual in question.

Question 13

The liquidity approach to measuring money stresses the role of money as a

Accepted Answer

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

Question 14

What effect has the presence of federal deposit insurance had on the banking industry?

Accepted Answer

A)  Banks now hold more excess reserves. 
B)  Banks have made it more difficult for customers to qualify for loans. 
C)  Banks have made riskier loans. 
D)  Depositors have become more vigilant in monitoring the decisions made by managers of their banks. 
A)  Banks now hold more excess reserves. 
B)  Banks have made it more difficult for customers to qualify for loans. 
C)  Banks have made riskier loans. 
D)  Depositors have become more vigilant in monitoring the decisions made by managers of their banks.

Question 15

When the price level goes up, the purchasing power of the dollar

Accepted Answer

A)  also increases. 
B)  falls. 
C)  remains constant. 
D)  varies directly with the interest rate. 
A)  also increases. 
B)  falls. 
C)  remains constant. 
D)  varies directly with the interest rate.

Question 16

For something to serve as money, it must be

Accepted Answer

A)  backed by the authority of the government. 
B)  generally accepted by buyers and sellers. 
C)  light, durable, and common. 
D)  convertible to gold. 
A)  backed by the authority of the government. 
B)  generally accepted by buyers and sellers. 
C)  light, durable, and common. 
D)  convertible to gold.

Question 17

The potential for a financial breakdown at large institutions to spread throughout the financial system is called

Accepted Answer

A)  a systemic risk. 
B)  a too-large-to-fail problem. 
C)  an averse selection problem. 
D)  a moral hazard. 
A)  a systemic risk. 
B)  a too-large-to-fail problem. 
C)  an averse selection problem. 
D)  a moral hazard.

Question 18

A fractional reserve banking system is a system whereby

Accepted Answer

A)  banks keep at least 100 percent of their deposits on hand as reserves. 
B)  banks keep only a fraction of their deposits on hand as reserves. 
C)  a central bank tells all banks what fraction of the population they can serve. 
D)  banks specialize so that one type of bank handles one kind of deposit and another type of bank handles another type of deposit. 
A)  banks keep at least 100 percent of their deposits on hand as reserves. 
B)  banks keep only a fraction of their deposits on hand as reserves. 
C)  a central bank tells all banks what fraction of the population they can serve. 
D)  banks specialize so that one type of bank handles one kind of deposit and another type of bank handles another type of deposit.

Question 19

Among the liabilities of a bank are its

Accepted Answer

A)  transaction deposits. 
B)  total reserves. 
C)  excess reserves. 
D)  loans. 
A)  transaction deposits. 
B)  total reserves. 
C)  excess reserves. 
D)  loans.

Question 20

By serving as the lender of last resort,

Accepted Answer

A)  the Fed provides check clearing services. 
B)  the Fed supervises depository institutions. 
C)  the Fed can prevent bank failures. 
D)  the Fed aids in the sale of government securities. 
A)  the Fed provides check clearing services. 
B)  the Fed supervises depository institutions. 
C)  the Fed can prevent bank failures. 
D)  the Fed aids in the sale of government securities.

Exam 15: Money, Banking, and Central Banking

Even when a particular monetary asset is NOT performing one of the functions of money well, people still use the asset because

Perishable goods such as tomatoes and eggs are never used as money, because they cannot function as a

The Federal Reserve Bank was first established in the U.S. by an Act of Congress passed in

Which of the following is the most liquid asset?

A fiduciary monetary system is dependent on

Which of the following is NOT a description of indirect finance?

Checking account deposits are included in

The opportunity cost of holding money is measured by

The Federal Reserve System was established in which year?

What is a fiduciary monetary system?

Transactions deposits include

Liquidity refers to

The liquidity approach to measuring money stresses the role of money as a

What effect has the presence of federal deposit insurance had on the banking industry?

When the price level goes up, the purchasing power of the dollar

For something to serve as money, it must be

The potential for a financial breakdown at large institutions to spread throughout the financial system is called

A fractional reserve banking system is a system whereby

Among the liabilities of a bank are its

By serving as the lender of last resort,

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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