Question 1

How does money function as a unit of account?

Accepted Answer

A)  Money has intrinsic worth as a commodity. 
B)  Money is convertible into commodities that have intrinsic worth. 
C)  The prices of all goods and services are measured in terms of money. 
D)  Things that function as money can do so because people know there is a standard of value that ultimately backs the money even if it is only faith. 
E)  Bank accounts make it easy for people to store their wealth. 
A)  Money has intrinsic worth as a commodity. 
B)  Money is convertible into commodities that have intrinsic worth. 
C)  The prices of all goods and services are measured in terms of money. 
D)  Things that function as money can do so because people know there is a standard of value that ultimately backs the money even if it is only faith. 
E)  Bank accounts make it easy for people to store their wealth. C

Question 2

Whatever serves as a medium of exchange is _____

Accepted Answer

A)  generally accepted in return for goods and services. 
B)  money as long as it is also the best such medium of exchange available. 
C)  money as long as it is the most widely used currency. 
D)  money as long as it is not also legal tender. 
E)  not money unless it continues to be backed by its issuing institution. 
A)  generally accepted in return for goods and services. 
B)  money as long as it is also the best such medium of exchange available. 
C)  money as long as it is the most widely used currency. 
D)  money as long as it is not also legal tender. 
E)  not money unless it continues to be backed by its issuing institution. A

Question 3

The twelve district banks of the Federal Reserve System were created to decentralize power and to respond to the public's fears of the monopoly power of a single central bank such as the Bank of England or the Bank of Japan.

Accepted Answer

A) True 
 B)False  True

Question 4

If the price index in 2015 was 238, the purchasing power of a dollar measured in terms of the base year was _____

Accepted Answer

A)  $2.38. 
B)  $0.24. 
C)  $0.42. 
D)  $4.20. 
E)  $1.00. 
A)  $2.38. 
B)  $0.24. 
C)  $0.42. 
D)  $4.20. 
E)  $1.00.

Question 5

The Federal Reserve banks could probably have prevented many of the bank failures in the early 1930s by _____

Accepted Answer

A)  raising the reserve requirement of commercial banks. 
B)  lending money to the commercial banks. 
C)  improving the system whereby checks are cleared. 
D)  helping to create a commission of experts to engage in a prolonged study of the problem. 
E)  selling large amounts of government bonds. 
A)  raising the reserve requirement of commercial banks. 
B)  lending money to the commercial banks. 
C)  improving the system whereby checks are cleared. 
D)  helping to create a commission of experts to engage in a prolonged study of the problem. 
E)  selling large amounts of government bonds.

Question 6

A government program that invested in financial institutions and automakers to help stabilize markets during the great recession of 2008 was the _____

Accepted Answer

A)  Troubled Asset Relief Program. 
B)  Social Security System. 
C)  Supplemental Security Income Program. 
D)  Public Housing Assistance Program. 
E)  Deposit Insurance Program. 
A)  Troubled Asset Relief Program. 
B)  Social Security System. 
C)  Supplemental Security Income Program. 
D)  Public Housing Assistance Program. 
E)  Deposit Insurance Program.

Question 7

One advantage of a money market mutual fund account is that _____

Accepted Answer

A)  it is guaranteed for a larger amount than are FDIC-insured deposits. 
B)  it is a riskless asset. 
C)  its holders typically earn more interest than they can with a regular bank account. 
D)  it earns high interest and is liquid. 
E)  it is completely liquid and riskless. 
A)  it is guaranteed for a larger amount than are FDIC-insured deposits. 
B)  it is a riskless asset. 
C)  its holders typically earn more interest than they can with a regular bank account. 
D)  it earns high interest and is liquid. 
E)  it is completely liquid and riskless.

Question 8

Exchange is necessary in an economy if _____

Accepted Answer

A)  output is to be produced. 
B)  output is to be consumed. 
C)  individuals are self-sufficient. 
D)  families are self-sufficient. 
E)  labor is specialized. 
A)  output is to be produced. 
B)  output is to be consumed. 
C)  individuals are self-sufficient. 
D)  families are self-sufficient. 
E)  labor is specialized.

Question 9

U.S. banks have grown primarily through _____

Accepted Answer

A)  The United States' long-standing preference for big banks. 
B)  surviving banks buying up bankrupt banks. 
C)  excellent customer service. 
D)  mergers and acquisitions. 
E)  deposit insurance policy. 
A)  The United States' long-standing preference for big banks. 
B)  surviving banks buying up bankrupt banks. 
C)  excellent customer service. 
D)  mergers and acquisitions. 
E)  deposit insurance policy.

Question 10

Before the 1970s, bankers were happy with interest-rate ceilings because those ceilings _____

Accepted Answer

A)  reduced interest-rate competition for deposits among banks. 
B)  guaranteed them high profits. 
C)  guaranteed them a minimum profit. 
D)  enabled them to expand into other lines of commerce. 
E)  allowed them to hold corporate stock. 
A)  reduced interest-rate competition for deposits among banks. 
B)  guaranteed them high profits. 
C)  guaranteed them a minimum profit. 
D)  enabled them to expand into other lines of commerce. 
E)  allowed them to hold corporate stock.

Question 11

As a result of the financial crises in 2008, which bank was seized by the FDIC after a 10-day bank run during which depositors withdrew $16 billion, or about 10 percent of all deposits?

Accepted Answer

A)  JPMorgan Chase 
B)  Wells Fargo 
C)  Bank of America 
D)  Washington Mutual 
E)  Wachovia 
A)  JPMorgan Chase 
B)  Wells Fargo 
C)  Bank of America 
D)  Washington Mutual 
E)  Wachovia

Question 12

What activity does the Fed undertake when it carries out open-market operations?

Accepted Answer

A)  It buys and sells the bonds, but not the notes, of leading U.S. corporations. 
B)  It changes the legal reserve requirements for member banks. 
C)  It changes the discount rate, which generally increases the amount of available credit. 
D)  It provides funds so that healthy depository institutions can purchase weaker ones on the open market. 
E)  It deals in the purchase and sale of U.S. government securities. 
A)  It buys and sells the bonds, but not the notes, of leading U.S. corporations. 
B)  It changes the legal reserve requirements for member banks. 
C)  It changes the discount rate, which generally increases the amount of available credit. 
D)  It provides funds so that healthy depository institutions can purchase weaker ones on the open market. 
E)  It deals in the purchase and sale of U.S. government securities.

Question 13

During the Great Depression, the Federal Reserve Board _____

Accepted Answer

A)  prevented many bank failures. 
B)  failed to act as a lender of last resort. 
C)  failed to clear checks adequately. 
D)  began operating as the government's bank. 
E)  issued too many bank notes. 
A)  prevented many bank failures. 
B)  failed to act as a lender of last resort. 
C)  failed to clear checks adequately. 
D)  began operating as the government's bank. 
E)  issued too many bank notes.

Question 14

Which of the following is true of a price level increase in an economy?

Accepted Answer

A)  When the price level increases, the purchasing power of money increases. 
B)  When the price level increases, the purchasing power of money decreases. 
C)  When the price level increases, the purchasing power of money remains unchanged. 
D)  When the price level increases, the purchasing power of money either increases or decreases, depending upon the size of the national debt. 
E)  When the price level increases, the purchasing power of money either increases or decreases, depending upon the level of government expenditures. 
A)  When the price level increases, the purchasing power of money increases. 
B)  When the price level increases, the purchasing power of money decreases. 
C)  When the price level increases, the purchasing power of money remains unchanged. 
D)  When the price level increases, the purchasing power of money either increases or decreases, depending upon the size of the national debt. 
E)  When the price level increases, the purchasing power of money either increases or decreases, depending upon the level of government expenditures.

Question 15

Borrowers more likely to default would _____ to compensate the lender for their higher risk.

Accepted Answer

A)  get an interest rate below the prime rate 
B)  pay an adjustable interest rate 
C)  pay a higher interest rate 
D)  pay a prime rate 
E)  be placed in foreclosure 
A)  get an interest rate below the prime rate 
B)  pay an adjustable interest rate 
C)  pay a higher interest rate 
D)  pay a prime rate 
E)  be placed in foreclosure

Question 16

The primary purpose of the Federal Open Market Committee (FOMC) is to _____

Accepted Answer

A)  set reserve requirements. 
B)  extend loans to member banks of the Fed. 
C)  buy and sell government securities. 
D)  distribute Federal Reserve notes. 
E)  enforce bank regulations. 
A)  set reserve requirements. 
B)  extend loans to member banks of the Fed. 
C)  buy and sell government securities. 
D)  distribute Federal Reserve notes. 
E)  enforce bank regulations.

Question 17

Commitments to make or receive payments in the future are made easier by money's function as a _____

Accepted Answer

A)  unit of account. 
B)  store of value. 
C)  medium of exchange. 
D)  form of barter. 
E)  commodity. 
A)  unit of account. 
B)  store of value. 
C)  medium of exchange. 
D)  form of barter. 
E)  commodity.

Question 18

Which of the following is true of depository institutions?

Accepted Answer

A)  Depository institutions seek to maximize profits. 
B)  Depository institutions do not seek to maximize profits. 
C)  Depository institutions do not make loans. 
D)  Depository institutions make loans. 
E)  Depository institutions receive funds primarily through customer deposits. 
A)  Depository institutions seek to maximize profits. 
B)  Depository institutions do not seek to maximize profits. 
C)  Depository institutions do not make loans. 
D)  Depository institutions make loans. 
E)  Depository institutions receive funds primarily through customer deposits.

Question 19

In the 1970s, _____

Accepted Answer

A)  the market interest rate increased above the rate that banks could offer. 
B)  banks and thrifts were able to borrow at low interest rates to support outstanding loans. 
C)  the market interest rate decreased below the rate that banks could offer. 
D)  banks and thrifts were forced to call in outstanding loans. 
E)  banks and thrifts were bailed out by the FDIC. 
A)  the market interest rate increased above the rate that banks could offer. 
B)  banks and thrifts were able to borrow at low interest rates to support outstanding loans. 
C)  the market interest rate decreased below the rate that banks could offer. 
D)  banks and thrifts were forced to call in outstanding loans. 
E)  banks and thrifts were bailed out by the FDIC.

Question 20

In general, the more money in existence, the better it functions as a store of value.

Accepted Answer

A) True 
 B)False

How does money function as a unit of account?

Whatever serves as a medium of exchange is _____

The twelve district banks of the Federal Reserve System were created to decentralize power and to respond to the public's fears of the monopoly power of a single central bank such as the Bank of England or the Bank of Japan.

If the price index in 2015 was 238, the purchasing power of a dollar measured in terms of the base year was _____

The Federal Reserve banks could probably have prevented many of the bank failures in the early 1930s by _____

A government program that invested in financial institutions and automakers to help stabilize markets during the great recession of 2008 was the _____

One advantage of a money market mutual fund account is that _____

Exchange is necessary in an economy if _____

U.S. banks have grown primarily through _____

Before the 1970s, bankers were happy with interest-rate ceilings because those ceilings _____

As a result of the financial crises in 2008, which bank was seized by the FDIC after a 10-day bank run during which depositors withdrew $16 billion, or about 10 percent of all deposits?

What activity does the Fed undertake when it carries out open-market operations?

During the Great Depression, the Federal Reserve Board _____

Which of the following is true of a price level increase in an economy?

Borrowers more likely to default would _____ to compensate the lender for their higher risk.

The primary purpose of the Federal Open Market Committee (FOMC) is to _____

Commitments to make or receive payments in the future are made easier by money's function as a _____

Which of the following is true of depository institutions?

In the 1970s, _____

In general, the more money in existence, the better it functions as a store of value.

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Fiscal Policy.

Federal Budgets and Public Policy.

Banking and the Money Supply.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters

Exam 13: Money and the Financial System.

How does money function as a unit of account?

Whatever serves as a medium of exchange is _____

The twelve district banks of the Federal Reserve System were created to decentralize power and to respond to the public's fears of the monopoly power of a single central bank such as the Bank of England or the Bank of Japan.

If the price index in 2015 was 238, the purchasing power of a dollar measured in terms of the base year was _____

The Federal Reserve banks could probably have prevented many of the bank failures in the early 1930s by _____

A government program that invested in financial institutions and automakers to help stabilize markets during the great recession of 2008 was the _____

One advantage of a money market mutual fund account is that _____

Exchange is necessary in an economy if _____

U.S. banks have grown primarily through _____

Before the 1970s, bankers were happy with interest-rate ceilings because those ceilings _____

As a result of the financial crises in 2008, which bank was seized by the FDIC after a 10-day bank run during which depositors withdrew $16 billion, or about 10 percent of all deposits?

What activity does the Fed undertake when it carries out open-market operations?

During the Great Depression, the Federal Reserve Board _____

Which of the following is true of a price level increase in an economy?

Borrowers more likely to default would _____ to compensate the lender for their higher risk.

The primary purpose of the Federal Open Market Committee (FOMC) is to _____

Commitments to make or receive payments in the future are made easier by money's function as a _____

Which of the following is true of depository institutions?

In the 1970s, _____

In general, the more money in existence, the better it functions as a store of value.

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Fiscal Policy.

Federal Budgets and Public Policy.

Banking and the Money Supply.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters