Question 1

If people use quartz as a medium of exchange, then they

Accepted Answer

A) have a barter economy 
B) are using commodity money 
C) are using token money 
D) are using legal tender 
E) are using fiat money 
A) have a barter economy 
B) are using commodity money 
C) are using token money 
D) are using legal tender 
E) are using fiat money B

Question 2

The more specialized labor is,

Accepted Answer

A) the less likely it is that a double coincidence of wants will exist, and the less likely it is that monetary exchange will develop 
B) the less likely it is that a double coincidence of wants will exist, and the more likely it is that monetary exchange will develop 
C) the more likely it is that a double coincidence of wants will exist, and the less likely it is that monetary exchange will develop 
D) the more likely it is that a double coincidence of wants will exist, and the more likely it is that monetary exchange will develop 
E) the more likely it is that individuals are producing only what they want to consume 
A) the less likely it is that a double coincidence of wants will exist, and the less likely it is that monetary exchange will develop 
B) the less likely it is that a double coincidence of wants will exist, and the more likely it is that monetary exchange will develop 
C) the more likely it is that a double coincidence of wants will exist, and the less likely it is that monetary exchange will develop 
D) the more likely it is that a double coincidence of wants will exist, and the more likely it is that monetary exchange will develop 
E) the more likely it is that individuals are producing only what they want to consume B

Question 3

The original bankers were

Accepted Answer

A) seigniors 
B) governments 
C) savings and loan institutions 
D) farmers 
E) goldsmiths 
A) seigniors 
B) governments 
C) savings and loan institutions 
D) farmers 
E) goldsmiths E

Question 4

Gresham's Law states that people

Accepted Answer

A) sell goods for money but prefer to buy goods with other goods 
B) buy and sell goods with money 
C) spend some money and hoard some money 
D) spend lower-quality money and hoard higher-quality money 
E) spend higher-quality money and hoard lower-quality money 
A) sell goods for money but prefer to buy goods with other goods 
B) buy and sell goods with money 
C) spend some money and hoard some money 
D) spend lower-quality money and hoard higher-quality money 
E) spend higher-quality money and hoard lower-quality money

Question 5

Bank notes created by a goldsmith in a fractional reserve system were

Accepted Answer

A) not backed by anything of value 
B) commodity money, since they were backed by gold 
C) not commodity money fully, since not all the gold was there 
D) representative of commodity money 
E) fiat money 
A) not backed by anything of value 
B) commodity money, since they were backed by gold 
C) not commodity money fully, since not all the gold was there 
D) representative of commodity money 
E) fiat money

Question 6

Which of the following is not a power of the Federal Reserve System?

Accepted Answer

A) setting the prime interest rate 
B) issuing Federal Reserve notes 
C) buying and selling U.S. government securities 
D) extending loans to member banks 
E) clearing checks 
A) setting the prime interest rate 
B) issuing Federal Reserve notes 
C) buying and selling U.S. government securities 
D) extending loans to member banks 
E) clearing checks

Question 7

Which of the following have, at one time or another, been part of the U.S. money supply?

Accepted Answer

A) seashells 
B) platinum coins 
C) token money 
D) legal tender 
E) private bank notes 
A) seashells 
B) platinum coins 
C) token money 
D) legal tender 
E) private bank notes

Question 8

Which of the following is true of the discount rate?

Accepted Answer

A) It is the interest rate commercial banks charge their most creditworthy customers. 
B) It is the interest rate that thrift institutions charge for home mortgages. 
C) It is the interest rate at which depository institutions can borrow from the Federal Reserve. 
D) It is the interest rate set in the market for U.S. Treasury Bills. 
E) It is the prime interest rate. 
A) It is the interest rate commercial banks charge their most creditworthy customers. 
B) It is the interest rate that thrift institutions charge for home mortgages. 
C) It is the interest rate at which depository institutions can borrow from the Federal Reserve. 
D) It is the interest rate set in the market for U.S. Treasury Bills. 
E) It is the prime interest rate.

Question 9

The U.S. dollar is a good example of fiat money.

Accepted Answer

A) True 
 B)False

Question 10

In the United States, only Federal Reserve Banks can issue paper currency but their power to do so is virtually unlimited.

Accepted Answer

A) True 
 B)False

Question 11

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 12

In the world of banking, checks are

Accepted Answer

A) written instructions from a depositor to the bank 
B) written instructions from one depositor to another depositor 
C) a form of commodity money 
D) token money 
E) fiat money 
A) written instructions from a depositor to the bank 
B) written instructions from one depositor to another depositor 
C) a form of commodity money 
D) token money 
E) fiat money

Question 13

When silver and gold were used as money, both their quantity and quality were open to question. The solution was

Accepted Answer

A) seashells 
B) seigniorage 
C) token money 
D) coinage 
E) fiat money 
A) seashells 
B) seigniorage 
C) token money 
D) coinage 
E) fiat money

Question 14

Which of the following countries has the most number of banks among the top 25 based on worldwide assets?

Accepted Answer

A) France 
B) Japan 
C) United Kingdom 
D) Netherlands 
E) United States 
A) France 
B) Japan 
C) United Kingdom 
D) Netherlands 
E) United States

Question 15

Specialization of labor means that

Accepted Answer

A) production requires a special kind of labor 
B) the overall skill level of labor is increasing 
C) individuals produce goods that they are relatively good at producing and trade for those that they do not produce 
D) individuals achieve self-sufficiency in production 
E) exchange within the economy consists of trading in services 
A) production requires a special kind of labor 
B) the overall skill level of labor is increasing 
C) individuals produce goods that they are relatively good at producing and trade for those that they do not produce 
D) individuals achieve self-sufficiency in production 
E) exchange within the economy consists of trading in services

Question 16

The Federal Reserve System was established

Accepted Answer

A) by the U.S. Constitution 
B) immediately after the Civil War 
C) in 1914 
D) during the Great Depression 
E) immediately following World War II 
A) by the U.S. Constitution 
B) immediately after the Civil War 
C) in 1914 
D) during the Great Depression 
E) immediately following World War II

Question 17

When many depository institutions--especially thrifts--failed in the 1970s and 1980s,

Accepted Answer

A) most depositors got their money back 
B) most depositors lost everything 
C) most of the losses to depositors were paid out of the pockets of the owners of these institutions 
D) the U.S. taxpayer, fortunately, avoided bearing any of the financial burden of the losses 
E) the entire economy collapsed and the country was plunged into a severe depression 
A) most depositors got their money back 
B) most depositors lost everything 
C) most of the losses to depositors were paid out of the pockets of the owners of these institutions 
D) the U.S. taxpayer, fortunately, avoided bearing any of the financial burden of the losses 
E) the entire economy collapsed and the country was plunged into a severe depression

Question 18

As the number of goods and services increases, barter becomes

Accepted Answer

A) easier because the chance of there being a double coincidence of wants increases 
B) harder because the chance of there being a double coincidence of wants increases 
C) easier because the chance of there being a double coincidence of wants decreases 
D) harder because the chance of there being a double coincidence of wants decreases 
E) easier because people have more choice 
A) easier because the chance of there being a double coincidence of wants increases 
B) harder because the chance of there being a double coincidence of wants increases 
C) easier because the chance of there being a double coincidence of wants decreases 
D) harder because the chance of there being a double coincidence of wants decreases 
E) easier because people have more choice

Question 19

Which of the following is not a possibility for the future of pennies?

Accepted Answer

A) Mint them from a lower cost alloy 
B) Abolish them 
C) Decree that they are worth five cents and withdraw nickels from circulation 
D) Reintroduce the half-cent coin 
E) None of the answers is correct 
A) Mint them from a lower cost alloy 
B) Abolish them 
C) Decree that they are worth five cents and withdraw nickels from circulation 
D) Reintroduce the half-cent coin 
E) None of the answers is correct

Question 20

Bank holding companies

Accepted Answer

A) b, c, and d are correct 
B) can often engage in interstate banking 
C) can provide financial advisory services 
D) have access to more sources of funds than individual commercial banks 
E) are subject to the same regulations as commercial banks 
A) b, c, and d are correct 
B) can often engage in interstate banking 
C) can provide financial advisory services 
D) have access to more sources of funds than individual commercial banks 
E) are subject to the same regulations as commercial banks

Exam 14: Money and the Financial System

If people use quartz as a medium of exchange, then they

The more specialized labor is,

The original bankers were

Gresham's Law states that people

Bank notes created by a goldsmith in a fractional reserve system were

Which of the following is not a power of the Federal Reserve System?

Which of the following have, at one time or another, been part of the U.S. money supply?

Which of the following is true of the discount rate?

The U.S. dollar is a good example of fiat money.

In the United States, only Federal Reserve Banks can issue paper currency but their power to do so is virtually unlimited.

During the Great Depression, the Federal Reserve Board

In the world of banking, checks are

When silver and gold were used as money, both their quantity and quality were open to question. The solution was

Which of the following countries has the most number of banks among the top 25 based on worldwide assets?

Specialization of labor means that

The Federal Reserve System was established

When many depository institutions--especially thrifts--failed in the 1970s and 1980s,

As the number of goods and services increases, barter becomes

Which of the following is not a possibility for the future of pennies?

Bank holding companies

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand Supply and Markets

Introduction to Macroeconomics

Tracking the Us Economy

Unemployment and Inflation

Productivity and Growth

Aggregate Expenditure

Aggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Banking and the Money Supply

The Algebra of Income and Expenditure

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

The Algebra of Demand-Side Equilibrium

International Trade

International Finance

Economic Development

National Income Accounts

Understanding Graphs

Variable Net Exports

Variable Net Exports Revisited

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