Question 1

Bank runs are a possibility because

Accepted Answer

A)   the FDIC is inefficient.
B)   bankers are often poor businesspeople.
C)   in difficult times people want currency instead of demand deposits.
D)   banks do not keep enough reserves to cover all their depository liabilities.E) None of the above
F) A) and B)

Question 2

Which of the following is true of the Federal Reserve System? I. It was established in the early 1980s.
II)  It serves as the central bank of the United States.

Accepted Answer

A)   I only
B)   II only
C)   Both I and II
D)   Neither I nor IIE) A) and C)
F) None of the above

Question 3

Which of the following is NOT a correct statement about the Federal Reserve banks?

Accepted Answer

A)   They supervise member banks within the Federal Reserve System.
B)   They provide a system of check collection and clearing.
C)   They provide the economy with gold backed currency.
D)   They act as banker and fiscal agent for the U.S. government.E) A) and D)
F) A) and C)

Question 4

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.E) A) and D)
F) A) and C)

Question 5

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

Accepted Answer

A)   medium of exchange.
B)   unit of accounting.
C)   temporary store of value.
D)   standard of deferred payment.E) All of the above
F) B) and C)

Question 6

Which of the following is a financial intermediary?

Accepted Answer

A)   the Red Cross
B)   the Internal Revenue Service
C)   a share of corporate stock
D)   an insurance companyE) A) and B)
F) A) and C)

Question 7

To be accepted as money, an item must perform all of the following functions EXCEPT

Accepted Answer

A)   serve as a store of value.
B)   be easily reproduced.
C)   be a medium of exchange.
D)   serve as a standard of deferred payment.E) B) and C)
F) C) and D)

Question 8

A major function of the Federal Reserve System is

Accepted Answer

A)   the implementation of fiscal policy for the federal government.
B)   the control of the money supply.
C)   the control of government spending.
D)   the control of taxing policy.E) A) and B)
F) None of the above

Question 9

Which of the following is NOT part of M1?

Accepted Answer

A)   Credit cards
B)   Checking accounts
C)   Currency
D)   Traveler's checksE) All of the above
F) A) and C)

Question 10

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.E) C) and D)
F) B) and C)

Question 11

Why is money as a medium of exchange important in an economy?

Accepted Answer

Money permits more specialization and re...

Question 12

The FDIC was created because

Accepted Answer

A)   banks failed to create money the way the Fed wanted them to.
B)   people worried about bank failures after World War I, even though very few banks actually failed.
C)   there were so many bank failures in the 1930s.
D)   the Fed kept the required reserve ratio too low.E) A) and B)
F) None of the above

Question 13

An asset is liquid if

Accepted Answer

A)   it earns interest.
B)   it is backed by a government guarantee.
C)   it can be exchanged for other items of value without high transaction costs.
D)   All of the above are correct.E) A) and D)
F) All of the above

Question 14

Small-denomination time deposits are less than

Accepted Answer

A)   $1 million.
B)   $100,000.
C)   $10,000.
D)   $1,000.E) A) and B)
F) B) and C)

Question 15

The key official definition of the money supply is

Accepted Answer

A)   only coins and paper currency in circulation.
B)   only transactions deposits at banks.
C)   MZM.
D)   M2.E) A) and B)
F) C) and D)

Question 16

The designate M1 measure of money consists of

Accepted Answer

A)   the most liquid types of money in the U.S. system.
B)   small time deposits only.
C)   credit cards and ATM cards.
D)   gold and gold coins.E) A) and C)
F) B) and C)

Question 17

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.E) A) and C)
F) A) and B)

Question 18

The government agency that insures deposits held in banks in the United States is

Accepted Answer

A)   the Federal Reserve System.
B)   the Federal Bank Insurance Corporation.
C)   the Federal Asset Insurance Corporation.
D)   the Federal Deposit Insurance Corporation.E) A) and C)
F) All of the above

Question 19

When the Fed buys government securities,

Accepted Answer

A)   reserves increase, leading to a decrease in the money supply by an amount more than the purchase of the government securities.
B)   reserves decrease, leading to a increase in the money supply by an amount more than the purchase of the government securities.
C)   reserves increase, leading to a increase in the money supply by an amount more than the purchase of the government securities.
D)   reserves decrease, leading to a decrease in the money supply by an amount more than the purchase of the government securities.E) None of the above
F) B) and C)

Question 20

What type of intrinsic value or backing does U.S. currency have today?

Accepted Answer

A)   gold
B)   government bonds
C)   none
D)   silverE) B) and C)
F) All of the above

Exam 15: Money, Banking, and Central Banking

What type of intrinsic value or backing does U.S. currency have today?

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Total reserves are

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Which of the following is true of the Federal Reserve System? I. It was established in the early 1980s. II) It serves as the central bank of the United States.

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The key official definition of the money supply is

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To be accepted as money, an item must perform all of the following functions EXCEPT

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Why is money as a medium of exchange important in an economy?

Correct AnswerverifiedMoney permits more specialization and re...View AnswerShow Answer

The government agency that insures deposits held in banks in the United States is

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When the Fed buys government securities,

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The transactions approach to measuring money includes

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Which of the following is a financial intermediary?

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Small-denomination time deposits are less than

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The FDIC was created because

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Bank runs are a possibility because

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A major function of the Federal Reserve System is

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An asset is liquid if

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

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Which of the following is NOT part of M1?

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Which of the following is NOT a correct statement about the Federal Reserve banks?

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

Correct AnswerverifiedShow Answer

The designate M1 measure of money consists of

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Money permits more specialization and re...
View Answer

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