Question 1

The M2 money supply is equal to the M1 money supply plus

Accepted Answer

A)  small time deposits, savings deposits, and retail money market mutual fund shares. 
B)  all credit card balances and retail money market mutual fund shares. 
C)  large time deposits and retail money market mutual fund shares. 
D)  every account held by commercial banks. 
A)  small time deposits, savings deposits, and retail money market mutual fund shares. 
B)  all credit card balances and retail money market mutual fund shares. 
C)  large time deposits and retail money market mutual fund shares. 
D)  every account held by commercial banks.

Question 2

The Federal Reserve System has

Accepted Answer

A)  7 district banks. 
B)  12 district banks. 
C)  24 district banks. 
D)  50 district banks. 
A)  7 district banks. 
B)  12 district banks. 
C)  24 district banks. 
D)  50 district banks.

Question 3

When you set aside the money you have today in order to purchase goods and services later on, you are using money as a

Accepted Answer

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

Question 4

A sale of U.S. government securities by the Fed causes a(n)

Accepted Answer

A)  expansion of the money supply equal to the amount of the securities sold. 
B)  contraction of the money supply equal to the amount of the securities sold. 
C)  expansion of the money supply of more than the amount of the securities sold. 
D)  contraction of the money supply of more than the amount of the securities sold. 
A)  expansion of the money supply equal to the amount of the securities sold. 
B)  contraction of the money supply equal to the amount of the securities sold. 
C)  expansion of the money supply of more than the amount of the securities sold. 
D)  contraction of the money supply of more than the amount of the securities sold.

Question 5

Which of the following is NOT included using the transactions approach to measuring the money supply (M1)?

Accepted Answer

A)  currency 
B)  certificates of deposit 
C)  transaction deposits 
D)  traveler's checks 
A)  currency 
B)  certificates of deposit 
C)  transaction deposits 
D)  traveler's checks

Question 6

If the actual money multiplier equals the potential money multiplier, and if the Fed wishes to reduce the money supply by $1 million when the reserve ratio is 10 percent, then the Fed should

Accepted Answer

A)  sell $100,000 of government securities. 
B)  buy $100,000 of government securities. 
C)  sell $10,000 of government securities. 
D)  buy $10,000 of government securities. 
A)  sell $100,000 of government securities. 
B)  buy $100,000 of government securities. 
C)  sell $10,000 of government securities. 
D)  buy $10,000 of government securities.

Question 7

In a fiduciary monetary system, money is backed by

Accepted Answer

A)  the public's confidence about the general acceptability of the money. 
B)  the intrinsic value of the materials used to make the assets. 
C)  the assets of the institutions that issue the various assets used as money. 
D)  gold. 
A)  the public's confidence about the general acceptability of the money. 
B)  the intrinsic value of the materials used to make the assets. 
C)  the assets of the institutions that issue the various assets used as money. 
D)  gold.

Question 8

As a "lender of last resort," the Fed

Accepted Answer

A)  is obligated to bail out any depository institution in the country that is in financial difficulty. 
B)  protects the deposits of $100,000 or less in all commercial banks in the country. 
C)  provides loans to banks experiencing temporary liquidity problems. 
D)  bails out any corporation the government has decided should not fail. 
A)  is obligated to bail out any depository institution in the country that is in financial difficulty. 
B)  protects the deposits of $100,000 or less in all commercial banks in the country. 
C)  provides loans to banks experiencing temporary liquidity problems. 
D)  bails out any corporation the government has decided should not fail.

Question 9

Monetary policy actions are determined by the

Accepted Answer

A)  Federal Open Market Committee. 
B)  New York Federal Reserve Bank. 
C)  President of the United States. 
D)  all of the above 
A)  Federal Open Market Committee. 
B)  New York Federal Reserve Bank. 
C)  President of the United States. 
D)  all of the above

Question 10

The existence of money in an economy promotes efficiency by

Accepted Answer

A)  creating an equal distribution of income. 
B)  creating incentives to be self-sufficient. 
C)  facilitating trade, thereby allowing for greater specialization. 
D)  allowing for the formation of corporations as legal entities. 
A)  creating an equal distribution of income. 
B)  creating incentives to be self-sufficient. 
C)  facilitating trade, thereby allowing for greater specialization. 
D)  allowing for the formation of corporations as legal entities.

Question 11

Open market operations are

Accepted Answer

A)  the procedures for approving loans at commercial banks. 
B)  the procedures of applying for loans at commercial banks. 
C)  the Federal Reserve's purchase and sale of existing U.S. government securities. 
D)  steps a bank must complete before it can invest in stocks on the open market. 
A)  the procedures for approving loans at commercial banks. 
B)  the procedures of applying for loans at commercial banks. 
C)  the Federal Reserve's purchase and sale of existing U.S. government securities. 
D)  steps a bank must complete before it can invest in stocks on the open market.

Question 12

The Federal Reserve System is divided into how many districts?

Accepted Answer

A)  1 
B)  5 
C)  7 
D)  12 
A)  1 
B)  5 
C)  7 
D)  12

Question 13

Which of the following is NOT a benefit of money when used as a medium of exchange?

Accepted Answer

A)  allowing individuals to specialize 
B)  allowing individuals to pay off debts 
C)  allowing for some economic efficiencies 
D)  providing economic growth 
A)  allowing individuals to specialize 
B)  allowing individuals to pay off debts 
C)  allowing for some economic efficiencies 
D)  providing economic growth

Question 14

Which of the following is NOT included in M1?

Accepted Answer

A)  currency 
B)  transaction deposits 
C)  saving deposits 
D)  traveler's checks 
A)  currency 
B)  transaction deposits 
C)  saving deposits 
D)  traveler's checks

Question 15

A checking account balance in a commercial bank is

Accepted Answer

A)  part of the currency supply. 
B)  a time deposit. 
C)  not liquid enough to be considered money. 
D)  an asset readily usable for most transactions. 
A)  part of the currency supply. 
B)  a time deposit. 
C)  not liquid enough to be considered money. 
D)  an asset readily usable for most transactions.

Question 16

Total reserves are

Accepted Answer

A)  deposits held by Federal Reserve district banks for depository institutions, plus depository institutions' vault cash. 
B)  reserves that a depository institution must hold in the form of vault cash. 
C)  reserves that depository institutions are allowed to claim as reserves. 
D)  any item that legally functions as money. 
A)  deposits held by Federal Reserve district banks for depository institutions, plus depository institutions' vault cash. 
B)  reserves that a depository institution must hold in the form of vault cash. 
C)  reserves that depository institutions are allowed to claim as reserves. 
D)  any item that legally functions as money.

Exam 15: Money, Banking, and Central Banking

The M2 money supply is equal to the M1 money supply plus

The Federal Reserve System has

When you set aside the money you have today in order to purchase goods and services later on, you are using money as a

A sale of U.S. government securities by the Fed causes a(n)

Which of the following is NOT included using the transactions approach to measuring the money supply (M1)?

If the actual money multiplier equals the potential money multiplier, and if the Fed wishes to reduce the money supply by $1 million when the reserve ratio is 10 percent, then the Fed should

In a fiduciary monetary system, money is backed by

As a "lender of last resort," the Fed

Monetary policy actions are determined by the

The existence of money in an economy promotes efficiency by

Open market operations are

The Federal Reserve System is divided into how many districts?

Which of the following is NOT a benefit of money when used as a medium of exchange?

Which of the following is NOT included in M1?

A checking account balance in a commercial bank is

Total reserves are

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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