Question 1

The M1 definition of the U.S. money supply views money primarily as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 2

During periods of disintermediation the total flow of credit through the financial system is reduced.

Accepted Answer

A) True 
 B)False

Question 3

Secondary securities issued by financial intermediaries are characterized by:

Accepted Answer

A)  Low risk of default 
B)  Small denominations 
C)  Liquidity 
D)  All of the above 
E)  None of the above

Question 4

Fiat money consists of gold and silver coins whose precious metal content has been reduced, depreciating the value of the coin, by government order.

Accepted Answer

A) True 
 B)False

Question 5

The smallest measure of the U.S. money supply that includes small savings and time deposits (under $100,000 each in amount) is known as:

Accepted Answer

A)  M1 
B)  M2 
C)  MZ2 
D)  L 
E)  None of the above

Question 6

Insurance companies and pension funds must adhere to the prudent man rule when making stock selections.

Accepted Answer

A) True 
 B)False

Question 7

Brokers take a position in the securities they trade while dealers do not.

Accepted Answer

A) True 
 B)False

Question 8

Due to recent deregulation, service innovations and lower average interest rates today's financial intermediaries face less uncertainty today than in the past regarding their funds sources and funds costs.

Accepted Answer

A) True 
 B)False

Question 9

Swaps, futures and options all represent a class of financial assets called derivatives.

Accepted Answer

A) True 
 B)False

Question 10

According to the text, pension funds are classified as:

Accepted Answer

A)  Depository institutions 
B)  Contractual institutions 
C)  Investment institutions 
D)  Investment mutuals 
E)  None of the above

Question 11

It is not possible for an economic unit to be a lender and a borrower simultaneously.

Accepted Answer

A) True 
 B)False

Question 12

The fact that money is an asset which virtually every business, household, unit of government will accept in payment for goods and services describes money's role as a:

Accepted Answer

A)  Perfectly liquid asset 
B)  Standard of value 
C)  Store of value 
D)  Medium of exchange 
E)  None of the above

Question 13

Money serves as a "store of value" which is a reserve for future purchasing power.

Accepted Answer

A) True 
 B)False

Question 14

For a closed financial system, the sum total of financial assets equals:

Accepted Answer

A)  Total financial liabilities 
B)  Total real assets 
C)  Total assets 
D)  Net worth plus liabilities 
E)  Total net worth

Question 15

By definition financial assets provide a continuing stream of services to their owner.

Accepted Answer

A) True 
 B)False

Question 16

The household sector in the economy usually is a:

Accepted Answer

A)  Balanced-budget sector 
B)  Surplus-budget sector 
C)  Deficit-budget sector 
D)  Financially neutral sector 
E)  None of the above

Question 17

The monetary unit, which is used for the in country currency, in China is the yuan.

Accepted Answer

A) True 
 B)False

Question 18

The importance of financial intermediaries as well as their growth has been reduced in recent years by

Accepted Answer

A)  FDIC 
B)  The Federal Reserve 
C)  Foreign banks 
D)  New forms of disintermediation 
E)  C and D

Question 19

Compared to other nations and regions of the world the United States is considered a relatively safe haven for money.

Accepted Answer

A) True 
 B)False

Question 20

Savings banks are classified as one of the following types of financial institutions. Which one?

Accepted Answer

A)  Commercial banking firms 
B)  Credit Unions 
C)  Contractual institutions 
D)  Investment institutions 
E)  None of the above

Exam 2: Financial Systems, Monetary Units, and the Role of Money in the Economy

The M1 definition of the U.S. money supply views money primarily as a medium of exchange.

During periods of disintermediation the total flow of credit through the financial system is reduced.

Secondary securities issued by financial intermediaries are characterized by:

Fiat money consists of gold and silver coins whose precious metal content has been reduced, depreciating the value of the coin, by government order.

The smallest measure of the U.S. money supply that includes small savings and time deposits (under $100,000 each in amount) is known as:

Insurance companies and pension funds must adhere to the prudent man rule when making stock selections.

Brokers take a position in the securities they trade while dealers do not.

Due to recent deregulation, service innovations and lower average interest rates today's financial intermediaries face less uncertainty today than in the past regarding their funds sources and funds costs.

Swaps, futures and options all represent a class of financial assets called derivatives.

According to the text, pension funds are classified as:

It is not possible for an economic unit to be a lender and a borrower simultaneously.

The fact that money is an asset which virtually every business, household, unit of government will accept in payment for goods and services describes money's role as a:

Money serves as a "store of value" which is a reserve for future purchasing power.

For a closed financial system, the sum total of financial assets equals:

By definition financial assets provide a continuing stream of services to their owner.

The household sector in the economy usually is a:

The monetary unit, which is used for the in country currency, in China is the yuan.

The importance of financial intermediaries as well as their growth has been reduced in recent years by

Compared to other nations and regions of the world the United States is considered a relatively safe haven for money.

Savings banks are classified as one of the following types of financial institutions. Which one?