Question 1

In addition to insuring accounts, the FDIC today has the additional power of

Accepted Answer

A)  setting reserve requirements. 
B)  establishing FOMC goals. 
C)  establishing the discount rate. 
D)  establishing higher capital requirements for banks. 
A)  setting reserve requirements. 
B)  establishing FOMC goals. 
C)  establishing the discount rate. 
D)  establishing higher capital requirements for banks.

Question 2

Fractional reserve banking can be thought of as a bank

Accepted Answer

A)  withholding a portion of its total deposits that are not loaned out. 
B)  holding deposits equal to its net worth. 
C)  paying a fraction of its profit to depositors. 
D)  loaning out all of its reserves. 
A)  withholding a portion of its total deposits that are not loaned out. 
B)  holding deposits equal to its net worth. 
C)  paying a fraction of its profit to depositors. 
D)  loaning out all of its reserves.

Question 3

Which of the following is NOT a function of money?

Accepted Answer

A)  medium of exchange 
B)  form of credit 
C)  store of value 
D)  standard of deferred payment 
A)  medium of exchange 
B)  form of credit 
C)  store of value 
D)  standard of deferred payment

Question 4

When the Fed wants to undertake open market operations, it

Accepted Answer

A)  can require all commercial banks to buy from or sell to it. 
B)  can require all member banks to buy from or sell to it. 
C)  buys or sells securities through the trading desk at the New York Federal Reserve Bank. 
D)  buys from or sells to the U.S. Treasury. 
A)  can require all commercial banks to buy from or sell to it. 
B)  can require all member banks to buy from or sell to it. 
C)  buys or sells securities through the trading desk at the New York Federal Reserve Bank. 
D)  buys from or sells to the U.S. Treasury.

Question 5

A system in which depository institutions hold reserves that are less than the amount of total deposits is called

Accepted Answer

A)  fiat money banking. 
B)  fractional reserve banking. 
C)  central banking system. 
D)  required reserve banking. 
A)  fiat money banking. 
B)  fractional reserve banking. 
C)  central banking system. 
D)  required reserve banking.

Question 6

Money serves as a medium of exchange means that

Accepted Answer

A)  it benefits both buyers and sellers. 
B)  it reduces transaction costs. 
C)  it eliminates the need for barter. 
D)  All of the above are correct. 
A)  it benefits both buyers and sellers. 
B)  it reduces transaction costs. 
C)  it eliminates the need for barter. 
D)  All of the above are correct.

Question 7

The money supply that consists of currency, transaction deposits, and traveler's checks is

Accepted Answer

A)  M1. 
B)  M2. 
C)  MZM. 
D)  L, which stands for liquid assets. 
A)  M1. 
B)  M2. 
C)  MZM. 
D)  L, which stands for liquid assets.

Question 8

What characteristic defines something as money?

Accepted Answer

A)  assets declared by the government to be of value 
B)  a medium of exchange widely accepted in an economy 
C)  notes you can deposit in a savings account 
D)  an asset that earns interest 
A)  assets declared by the government to be of value 
B)  a medium of exchange widely accepted in an economy 
C)  notes you can deposit in a savings account 
D)  an asset that earns interest

Question 9

Money market mutual funds are funds pooled by

Accepted Answer

A)  a group of people to buy shares of stocks. 
B)  a group of people to buy stock market funds. 
C)  a group of people to buy short maturity credit instruments. 
D)  a group of people to buy U.S. Treasury bonds. 
A)  a group of people to buy shares of stocks. 
B)  a group of people to buy stock market funds. 
C)  a group of people to buy short maturity credit instruments. 
D)  a group of people to buy U.S. Treasury bonds.

Question 10

The transactions approach to measuring money includes

Accepted Answer

A)  government bonds. 
B)  the value of shares of stock in commercial banks. 
C)  traveler's checks. 
D)  all of these. 
A)  government bonds. 
B)  the value of shares of stock in commercial banks. 
C)  traveler's checks. 
D)  all of these.

Question 11

Open market operations are

Accepted Answer

A)  the buying of existing corporate securities in secondary markets by private citizens, banks and the Fed. 
B)  the buying and selling of existing U.S. government securities in open private markets by the Fed. 
C)  the actions of the Fed that are used to finance deficit financing by the government. 
D)  the selling of new government securities in order to increase the money supply. 
A)  the buying of existing corporate securities in secondary markets by private citizens, banks and the Fed. 
B)  the buying and selling of existing U.S. government securities in open private markets by the Fed. 
C)  the actions of the Fed that are used to finance deficit financing by the government. 
D)  the selling of new government securities in order to increase the money supply.

Question 12

Which of the following is responsible for the distribution of paper currency in the United States?

Accepted Answer

A)  the U.S. Treasury 
B)  the Office of the Comptroller of the currency 
C)  the Federal Reserve 
D)  all of the above 
A)  the U.S. Treasury 
B)  the Office of the Comptroller of the currency 
C)  the Federal Reserve 
D)  all of the above

Question 13

Financial intermediation is best defined as the process by which

Accepted Answer

A)  inflation is controlled. 
B)  corporations issue new stock. 
C)  liabilities are liquidated. 
D)  financial institutions accept savings from savers and make loans to investors. 
A)  inflation is controlled. 
B)  corporations issue new stock. 
C)  liabilities are liquidated. 
D)  financial institutions accept savings from savers and make loans to investors.

Question 14

The function of money that provides for a commonly recognized measure of value for the price system is a(n)

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 15

The M1 definition of the money supply includes all of the following EXCEPT

Accepted Answer

A)  currency. 
B)  transaction deposits. 
C)  savings accounts. 
D)  travelers checks. 
A)  currency. 
B)  transaction deposits. 
C)  savings accounts. 
D)  travelers checks.

Question 16

The U.S. fiduciary monetary system

Accepted Answer

A)  is the one agency responsible for providing coins and paper currency. 
B)  is one where money is not convertible to a valuable commodity such as gold. 
C)  puts capital controls in place. 
D)  controls the private banking system. 
A)  is the one agency responsible for providing coins and paper currency. 
B)  is one where money is not convertible to a valuable commodity such as gold. 
C)  puts capital controls in place. 
D)  controls the private banking system.

Question 17

An asset is liquid if it

Accepted Answer

A)  is of intrinsic value. 
B)  can be exchanged for other goods and services. 
C)  is a store of value. 
D)  can be obtained or disposed of without losing much of its nominal value. 
A)  is of intrinsic value. 
B)  can be exchanged for other goods and services. 
C)  is a store of value. 
D)  can be obtained or disposed of without losing much of its nominal value.

Question 18

-Using the information in the above table, the value of M2 is

Accepted Answer

A)  $3,600. 
B)  $3,800. 
C)  $4,600. 
D)  $5,500. 
A)  $3,600. 
B)  $3,800. 
C)  $4,600. 
D)  $5,500.

Question 19

Explain how the Fed increases the money supply when it buys bonds in the open market.

Accepted Answer

The Fed buys bonds in the open market an

Question 20

In defining money according to the transactions approach, you would want to include

Accepted Answer

A)  those assets that are used as a store of value. 
B)  those assets that are used as a medium of exchange. 
C)  those assets that are used as a unit of account. 
D)  those assets that are used as a standard of deferred payment. 
A)  those assets that are used as a store of value. 
B)  those assets that are used as a medium of exchange. 
C)  those assets that are used as a unit of account. 
D)  those assets that are used as a standard of deferred payment.

Exam 15: Money, Banking, and Central Banking

In addition to insuring accounts, the FDIC today has the additional power of

Fractional reserve banking can be thought of as a bank

Which of the following is NOT a function of money?

When the Fed wants to undertake open market operations, it

A system in which depository institutions hold reserves that are less than the amount of total deposits is called

Money serves as a medium of exchange means that

The money supply that consists of currency, transaction deposits, and traveler's checks is

What characteristic defines something as money?

Money market mutual funds are funds pooled by

The transactions approach to measuring money includes

Open market operations are

Which of the following is responsible for the distribution of paper currency in the United States?

Financial intermediation is best defined as the process by which

The function of money that provides for a commonly recognized measure of value for the price system is a(n)

The M1 definition of the money supply includes all of the following EXCEPT

The U.S. fiduciary monetary system

An asset is liquid if it

-Using the information in the above table, the value of M2 is

Explain how the Fed increases the money supply when it buys bonds in the open market.

In defining money according to the transactions approach, you would want to include

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

Filters