Question 1

If a friend of yours keeps cash hidden under the mattress, he is using money as a

Accepted Answer

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

Question 2

The Board of Governors of the Federal Reserve System is

Accepted Answer

A)  elected by the general public. 
B)  composed of seven members who are appointed by the President and approved by the Senate. 
C)  composed of representatives from the country's 12 largest commercial banks. 
D)  composed of 12 members of the Senate and the U.S. House of Representatives. 
A)  elected by the general public. 
B)  composed of seven members who are appointed by the President and approved by the Senate. 
C)  composed of representatives from the country's 12 largest commercial banks. 
D)  composed of 12 members of the Senate and the U.S. House of Representatives.

Question 3

The manner in which FDIC deposit insurance is set up in the United States encourages banks to

Accepted Answer

A)  be too conservative in their lending practices. 
B)  maintain excess reserves that are too great. 
C)  make riskier loans than they otherwise would. 
D)  reject some loans that probably would be profitable. 
A)  be too conservative in their lending practices. 
B)  maintain excess reserves that are too great. 
C)  make riskier loans than they otherwise would. 
D)  reject some loans that probably would be profitable.

Question 4

For barter to occur there has to be

Accepted Answer

A)  a commodity to serve as a medium of exchange. 
B)  a formal market where prices are quoted. 
C)  a double coincidence of wants. 
D)  a single coincidence of wants. 
A)  a commodity to serve as a medium of exchange. 
B)  a formal market where prices are quoted. 
C)  a double coincidence of wants. 
D)  a single coincidence of wants.

Question 5

A statement of assets and liabilities of any business entity is called

Accepted Answer

A)  an income statement. 
B)  a cash flow statement. 
C)  a balance sheet. 
D)  a statement of net worth. 
A)  an income statement. 
B)  a cash flow statement. 
C)  a balance sheet. 
D)  a statement of net worth.

Question 6

Stock market price quotations are an example of money serving as a(n)

Accepted Answer

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

Question 7

The transactions approach to measuring money stresses the role of money 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 8

A purchase of U.S. government securities by the Fed causes

Accepted Answer

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

Question 9

If the FOMC decides to engage in the selling of government bonds, what is the effect on the money supply?

Accepted Answer

A)  a decrease 
B)  an increase 
C)  no change 
D)  an initial increase followed by an additional rise when the bonds mature 
A)  a decrease 
B)  an increase 
C)  no change 
D)  an initial increase followed by an additional rise when the bonds mature

Question 10

To increase the money supply

Accepted Answer

A)  the Federal Reserve should sell government securities. 
B)  the commercial banks should reduce their loans. 
C)  the Federal Reserve should buy government securities. 
D)  the Federal Reserve should reduce its loans to banks. 
A)  the Federal Reserve should sell government securities. 
B)  the commercial banks should reduce their loans. 
C)  the Federal Reserve should buy government securities. 
D)  the Federal Reserve should reduce its loans to banks.

Question 11

A sale of securities by the Fed causes

Accepted Answer

A)  a contraction of the money supply equal to the amount of the securities sold. 
B)  an expansion of the money supply equal to the amount of the securities sold. 
C)  a multiple expansion of the money supply greater than the amount of the securities sold. 
D)  a multiple contraction of the money supply greater than the amount of the securities sold. 
A)  a contraction of the money supply equal to the amount of the securities sold. 
B)  an expansion of the money supply equal to the amount of the securities sold. 
C)  a multiple expansion of the money supply greater than the amount of the securities sold. 
D)  a multiple contraction of the money supply greater than the amount of the securities sold.

Question 12

Asymmetric information before a transaction takes place generates the problem of

Accepted Answer

A)  bank runs. 
B)  irrational behavior. 
C)  moral hazard. 
D)  adverse selection. 
A)  bank runs. 
B)  irrational behavior. 
C)  moral hazard. 
D)  adverse selection.

Question 13

When the Fed buys a $20,000 bond from a bond dealer

Accepted Answer

A)  reserves of the banking system increase by $20,000, but the money supply will only be able to increase by something less than this amount. 
B)  reserves of the banking system increase by $20,000, but the money supply can increase by more than $20,000. 
C)  reserves of the banking system remain unchanged, but the money supply increases by $20,000. 
D)  reserves of the banking system remain unchanged, but the money supply decreases by $20,000. 
A)  reserves of the banking system increase by $20,000, but the money supply will only be able to increase by something less than this amount. 
B)  reserves of the banking system increase by $20,000, but the money supply can increase by more than $20,000. 
C)  reserves of the banking system remain unchanged, but the money supply increases by $20,000. 
D)  reserves of the banking system remain unchanged, but the money supply decreases by $20,000.

Question 14

When you deposit funds in a bank and then the bank lends these funds to a borrower, the bank is engaged in

Accepted Answer

A)  fiduciary investment. 
B)  fraudulent behavior. 
C)  universal banking. 
D)  financial intermediation. 
A)  fiduciary investment. 
B)  fraudulent behavior. 
C)  universal banking. 
D)  financial intermediation.

Question 15

A fiduciary monetary system is

Accepted Answer

A)  fully backed by gold. 
B)  dependent on barter for exchanges of goods and services. 
C)  one which cannot have any inflation. 
D)  dependent on the public's faith to accept the currency. 
A)  fully backed by gold. 
B)  dependent on barter for exchanges of goods and services. 
C)  one which cannot have any inflation. 
D)  dependent on the public's faith to accept the currency.

Question 16

The reserve ratio is 10 percent. Depositors regularly keep 10 percent of their deposits as cash. If the Fed buys $1 million of U.S. government securities, excess reserves

Accepted Answer

A)  increase by $800,000. 
B)  increase by $810,000. 
C)  increase by $900,000. 
D)  increase by $1 million. 
A)  increase by $800,000. 
B)  increase by $810,000. 
C)  increase by $900,000. 
D)  increase by $1 million.

Question 17

Which of the following is a financial intermediary?

Accepted Answer

A)  the U.S. Department of the Treasury 
B)  the Internal Revenue Service 
C)  a share of corporate stock 
D)  an insurance company 
A)  the U.S. Department of the Treasury 
B)  the Internal Revenue Service 
C)  a share of corporate stock 
D)  an insurance company

Question 18

The liquidity of money refers to

Accepted Answer

A)  the amount of gold it is backed by. 
B)  the standard of deferred payments and how quickly those payments can be made. 
C)  how quickly it can be disposed of without high transaction costs. 
D)  asymmetric information. 
A)  the amount of gold it is backed by. 
B)  the standard of deferred payments and how quickly those payments can be made. 
C)  how quickly it can be disposed of without high transaction costs. 
D)  asymmetric information.

Question 19

From an accounting point of view, a checking account should be considered part of a bank's

Accepted Answer

A)  assets. 
B)  liabilities. 
C)  profits. 
D)  reserves. 
A)  assets. 
B)  liabilities. 
C)  profits. 
D)  reserves.

Question 20

A price tag of $4 for a portable power bank is an example of money as

Accepted Answer

A)  a medium of exchange. 
B)  a unit of accounting. 
C)  a store of value. 
D)  a time deposit. 
A)  a medium of exchange. 
B)  a unit of accounting. 
C)  a store of value. 
D)  a time deposit.

Exam 15: Money, Banking, and Central Banking

If a friend of yours keeps cash hidden under the mattress, he is using money as a

The Board of Governors of the Federal Reserve System is

The manner in which FDIC deposit insurance is set up in the United States encourages banks to

For barter to occur there has to be

A statement of assets and liabilities of any business entity is called

Stock market price quotations are an example of money serving as a(n)

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

A purchase of U.S. government securities by the Fed causes

If the FOMC decides to engage in the selling of government bonds, what is the effect on the money supply?

To increase the money supply

A sale of securities by the Fed causes

Asymmetric information before a transaction takes place generates the problem of

When the Fed buys a $20,000 bond from a bond dealer

When you deposit funds in a bank and then the bank lends these funds to a borrower, the bank is engaged in

A fiduciary monetary system is

The reserve ratio is 10 percent. Depositors regularly keep 10 percent of their deposits as cash. If the Fed buys $1 million of U.S. government securities, excess reserves

Which of the following is a financial intermediary?

The liquidity of money refers to

From an accounting point of view, a checking account should be considered part of a bank's

A price tag of $4 for a portable power bank is an example of money as

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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