Question 1

By definition, M1 includes:

Accepted Answer

A) savings accounts. 
B) money market mutual accounts. 
C) small denomination time deposits. 
D) checkable deposits.

Question 2

Which of the following statements is false ?

Accepted Answer

A) Round stones with holes in the center can serve as money. 
B) Money eases the process of exchanging goods and services in a modern economy. 
C) Money serves as a measure of value only when it is backed by gold or silver. 
D) Money is used as a measure of the relative value of goods and services in an economy.

Question 3

Unused lines of credit on credit cards are part of M2.

Accepted Answer

A) True 
 B)False

Question 4

The Federal Reserve System was created by act of Congress in 1931 in an effort to end a wave of bank failures brought on by the Great Depression.

Accepted Answer

A) True 
 B)False

Question 5

Credit cards are money because they serve the three functions of money.

Accepted Answer

A) True 
 B)False

Question 6

In its function of controlling the money supply, the Fed does which one of the following?

Accepted Answer

A) Controls the money supply. 
B) Clears checks. 
C) Regulates banks. 
D) Holds gold belonging to foreign governments. 
E) All of these.

Question 7

Which of the following is in charge of the buying and selling of government securities by the Fed?

Accepted Answer

A) The president. 
B) The Federal Open Market Committee. 
C) The Congress. 
D) None of these.

Question 8

Although the chairman of its Board of Governors is appointed by the Treasury Department, the Fed operates with considerable independence from the executive branch of the government.

Accepted Answer

A) True 
 B)False

Question 9

Members of the Federal Reserve Board of Governors serve one nonrenewable term of:

Accepted Answer

A) 4 years. 
B) 7 years. 
C) 14 years. 
D) life.

Question 10

Which of the following is not a store of value?

Accepted Answer

A) Dollar bills. 
B) Credit card. 
C) Coins. 
D) Gold.

Question 11

Comparing how many dollars it takes you to run your car each year to annual earnings on a job instead of keeping track of costs in terms of gallons of gasoline and quarts of oil represents the use of money as a:

Accepted Answer

A) means of payment. 
B) unit of account. 
C) store of purchasing power. 
D) form of plastic money.

Question 12

Credit cards are:

Accepted Answer

A) M1 money. 
B) M2 money. 
C) near money. 
D) not money.

Question 13

Who runs the Federal Reserve System? Describe the organizational structure of the Fed.

Accepted Answer

The answer of Who runs the Federal Reserve System? Describe...

Question 14

When M1 is expanded to M2, the money supply:

Accepted Answer

A) almost doubles. 
B) more than triples. 
C) goes up tenfold in size. 
D) changes very little. 
E) goes up by 50 percent.

Question 15

With respect to controlling the money supply, the law requires the Fed to take orders from:

Accepted Answer

A) the President. 
B) the Speaker of the House. 
C) the Secretary of the Treasury. 
D) no one ¾ the Fed is an independent agency.

Question 16

Economists who prefer a broader definition of money prefer the:

Accepted Answer

A) M4 measure of the money supply to the M1 measure. 
B) M2 measure of the money supply to the M1 measure. 
C) M3 measure of the money supply to the M2 measure. 
D) prefer the M1 measure of the money supply to the M2 measure.

Question 17

The Federal Reserve System is run by the President of the United States.

Accepted Answer

A) True 
 B)False

Question 18

The Fed's responsibilities include controlling the money supply, clearing checks, and supervising and regulating banks.

Accepted Answer

A) True 
 B)False

Question 19

The central bank of the United States is the:

Accepted Answer

A) Federal Reserve Banking System. 
B) First National Bank. 
C) Comptroller's Bank. 
D) United States National Bank. 
E) U.S. Treasury Bank.

Question 20

Most commercial banks belong to the Federal Reserve System.

Accepted Answer

A) True 
 B)False

Exam 14: Money and the Federal Reserve System

By definition, M1 includes:

Which of the following statements is false ?

Unused lines of credit on credit cards are part of M2.

The Federal Reserve System was created by act of Congress in 1931 in an effort to end a wave of bank failures brought on by the Great Depression.

Credit cards are money because they serve the three functions of money.

In its function of controlling the money supply, the Fed does which one of the following?

Which of the following is in charge of the buying and selling of government securities by the Fed?

Although the chairman of its Board of Governors is appointed by the Treasury Department, the Fed operates with considerable independence from the executive branch of the government.

Members of the Federal Reserve Board of Governors serve one nonrenewable term of:

Which of the following is not a store of value?

Comparing how many dollars it takes you to run your car each year to annual earnings on a job instead of keeping track of costs in terms of gallons of gasoline and quarts of oil represents the use of money as a:

Credit cards are:

Who runs the Federal Reserve System? Describe the organizational structure of the Fed.

When M1 is expanded to M2, the money supply:

With respect to controlling the money supply, the law requires the Fed to take orders from:

Economists who prefer a broader definition of money prefer the:

The Federal Reserve System is run by the President of the United States.

The Fed's responsibilities include controlling the money supply, clearing checks, and supervising and regulating banks.

The central bank of the United States is the:

Most commercial banks belong to the Federal Reserve System.