Question 1

The reserve ratio equals 20 percent.The Fed buys $1 million in U.S.government securities.The most the money supply can increase is

Accepted Answer

A) $1 million. 
B) $4 million. 
C) $5 million. 
D) $10 million. 
A) $1 million. 
B) $4 million. 
C) $5 million. 
D) $10 million. C

Question 2

The initial impact of the Fed's open market sale of government securities by the Federal Reserve is

Accepted Answer

A) an increase in the money supply by some multiple of the dollar volume of the sale. 
B) an increase in commercial bank deposits at the Fed. 
C) a fall in the money supply by some multiple of the dollar volume of the sale. 
D) a reduction of the commercial banking system's reserve deposits at the Fed. 
A) an increase in the money supply by some multiple of the dollar volume of the sale. 
B) an increase in commercial bank deposits at the Fed. 
C) a fall in the money supply by some multiple of the dollar volume of the sale. 
D) a reduction of the commercial banking system's reserve deposits at the Fed. D

Question 3

When Kate and Sam use dollars to compare the market values of their automobiles,money is acting as a

Accepted Answer

A) unit of accounting. 
B) standard of deferred payment. 
C) store of value. 
D) medium of exchange. 
A) unit of accounting. 
B) standard of deferred payment. 
C) store of value. 
D) medium of exchange. A

Question 4

All of the following are included in M1 EXCEPT

Accepted Answer

A) coin and currency. 
B) money market mutual fund shares. 
C) traveler's checks. 
D) checking account balances. 
A) coin and currency. 
B) money market mutual fund shares. 
C) traveler's checks. 
D) checking account balances.

Question 5

The Federal Deposit Insurance Corporation

Accepted Answer

A) increases the stability of the banking system by reducing the likelihood of bank runs. 
B) discourages banks from engaging in excessive risk taking. 
C) only insures deposits in money-center banks. 
D) was established after the Panic of 1907. 
A) increases the stability of the banking system by reducing the likelihood of bank runs. 
B) discourages banks from engaging in excessive risk taking. 
C) only insures deposits in money-center banks. 
D) was established after the Panic of 1907.

Question 6

Deposit insurance shields depositors from the adverse effects of risky decisions and thereby

Accepted Answer

A) encourages riskier behavior on the part of managers of depository institutions. 
B) encourages depositors to monitor the managers of depository institutions more closely. 
C) encourages moral hazard on the part of depositors. 
D) generates a more efficient banking system. 
A) encourages riskier behavior on the part of managers of depository institutions. 
B) encourages depositors to monitor the managers of depository institutions more closely. 
C) encourages moral hazard on the part of depositors. 
D) generates a more efficient banking system.

Question 7

Russia borrowed funds from the International Monetary Fund in 1989 in exchange for agreeing to undertake certain changes.However,after receiving the funds,Russia spent the funds on other things,making the loan repayment more unlikely to occur.This situation is referred to as

Accepted Answer

A) adverse selection. 
B) moral hazard. 
C) asymmetric information. 
D) deceptive knowledge. 
A) adverse selection. 
B) moral hazard. 
C) asymmetric information. 
D) deceptive knowledge.

Question 8

The two basic ways to define money are

Accepted Answer

A) the transactions approach and the fiduciary approach. 
B) the transactions approach and the M1 approach. 
C) the transactions approach and the liquidity approach. 
D) the liquidity approach and the store of value approach. 
A) the transactions approach and the fiduciary approach. 
B) the transactions approach and the M1 approach. 
C) the transactions approach and the liquidity approach. 
D) the liquidity approach and the store of value approach.

Question 9

The purchasing power of the dollar

Accepted Answer

A) varies directly with the price of gold. 
B) varies directly with the purchasing power of other major currencies such as the euro and the Japanese yen. 
C) varies directly with the price level. 
D) varies inversely with the price level. 
A) varies directly with the price of gold. 
B) varies directly with the purchasing power of other major currencies such as the euro and the Japanese yen. 
C) varies directly with the price level. 
D) varies inversely with the price level.

Question 10

Lenders generally want borrowers to agree to invest prudently,yet once a loan is made borrowers may use the funds in a highly risky fashion.This leads to the problem of

Accepted Answer

A) critical mass. 
B) deposit insurance. 
C) investor selection. 
D) moral hazard. 
A) critical mass. 
B) deposit insurance. 
C) investor selection. 
D) moral hazard.

Question 11

If the Fed purchases $100,000 in government bonds from a bank,then the

Accepted Answer

A) liabilities of the bank rise by $100,000. 
B) reserves of the bank fall by $100,000. 
C) assets of the bank rise by $100,000. 
D) reserves of the bank rise by $100,000. 
A) liabilities of the bank rise by $100,000. 
B) reserves of the bank fall by $100,000. 
C) assets of the bank rise by $100,000. 
D) reserves of the bank rise by $100,000.

Question 12

Small-denomination time deposits are less than

Accepted Answer

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

Question 13

If the FOMC decides to engage in the selling of government bonds,what is the effect on the money supply?

Accepted Answer

A) a decrease 
B) an increase 
C) no change 
D) an initial increase followed by an additional rise when the bonds mature 
A) a decrease 
B) an increase 
C) no change 
D) an initial increase followed by an additional rise when the bonds mature

Question 14

Which of the following is responsible for the distribution of paper currency in the United States?

Accepted Answer

A) the U.S.Treasury 
B) the Office of the Comptroller of the currency 
C) the Federal Reserve 
D) all of the above 
A) the U.S.Treasury 
B) the Office of the Comptroller of the currency 
C) the Federal Reserve 
D) all of the above

Question 15

Open market operations are

Accepted Answer

A) the buying of existing corporate securities in secondary markets by private citizens,banks and the Fed. 
B) the buying and selling of existing U.S.government securities in open private markets by the Fed. 
C) the actions of the Fed that are used to finance deficit financing by the government. 
D) the selling of new government securities in order to increase the money supply. 
A) the buying of existing corporate securities in secondary markets by private citizens,banks and the Fed. 
B) the buying and selling of existing U.S.government securities in open private markets by the Fed. 
C) the actions of the Fed that are used to finance deficit financing by the government. 
D) the selling of new government securities in order to increase the money supply.

Question 16

Fractional reserve banking is a system in which

Accepted Answer

A) depository institutions pay a fraction of advertised interest rates. 
B) a fraction of banking services must be provided by depository institutions. 
C) depository institutions hold a fraction of total deposits in reserve. 
D) the money supply is a set fraction of the U.S.gold reserves. 
A) depository institutions pay a fraction of advertised interest rates. 
B) a fraction of banking services must be provided by depository institutions. 
C) depository institutions hold a fraction of total deposits in reserve. 
D) the money supply is a set fraction of the U.S.gold reserves.

Question 17

Which of the following is NOT true about the duties the Fed performs for the federal government?

Accepted Answer

A) The Federal Reserve is the banker and fiscal agent of the federal government. 
B) The U.S.Treasury controls the Fed. 
C) The Federal Reserve aids in the purchase and sale of certain government securities. 
D) The U.S.Treasury has a checking account at the Fed. 
A) The Federal Reserve is the banker and fiscal agent of the federal government. 
B) The U.S.Treasury controls the Fed. 
C) The Federal Reserve aids in the purchase and sale of certain government securities. 
D) The U.S.Treasury has a checking account at the Fed.

Question 18

To the extent that the value of money is less predictable,it becomes

Accepted Answer

A) more acceptable as a standard of deferred payment. 
B) more acceptable as a unit of account. 
C) more acceptable as a store of value. 
D) less acceptable as a medium of exchange. 
A) more acceptable as a standard of deferred payment. 
B) more acceptable as a unit of account. 
C) more acceptable as a store of value. 
D) less acceptable as a medium of exchange.

Question 19

The U.S.central bank performs all the following roles for the nation EXCEPT

Accepted Answer

A) performing banking functions for their nations' governments. 
B) lending funds directly to the public. 
C) providing financial services for private banks. 
D) conducting their nations' monetary policies. 
A) performing banking functions for their nations' governments. 
B) lending funds directly to the public. 
C) providing financial services for private banks. 
D) conducting their nations' monetary policies.

Question 20

In a fiduciary monetary system,money is backed by

Accepted Answer

A) the public's confidence that the assets will continue to be accepted as money. 
B) the intrinsic value of the materials used to make the assets. 
C) the assets of the institutions that issue the various assets used as money. 
D) gold. 
A) the public's confidence that the assets will continue to be accepted as money. 
B) the intrinsic value of the materials used to make the assets. 
C) the assets of the institutions that issue the various assets used as money. 
D) gold.

The reserve ratio equals 20 percent.The Fed buys $1 million in U.S.government securities.The most the money supply can increase is

The initial impact of the Fed's open market sale of government securities by the Federal Reserve is

When Kate and Sam use dollars to compare the market values of their automobiles,money is acting as a

All of the following are included in M1 EXCEPT

The Federal Deposit Insurance Corporation

Deposit insurance shields depositors from the adverse effects of risky decisions and thereby

Russia borrowed funds from the International Monetary Fund in 1989 in exchange for agreeing to undertake certain changes.However,after receiving the funds,Russia spent the funds on other things,making the loan repayment more unlikely to occur.This situation is referred to as

The two basic ways to define money are

The purchasing power of the dollar

Lenders generally want borrowers to agree to invest prudently,yet once a loan is made borrowers may use the funds in a highly risky fashion.This leads to the problem of

If the Fed purchases $100,000 in government bonds from a bank,then the

Small-denomination time deposits are less than

If the FOMC decides to engage in the selling of government bonds,what is the effect on the money supply?

Which of the following is responsible for the distribution of paper currency in the United States?

Open market operations are

Fractional reserve banking is a system in which

Which of the following is NOT true about the duties the Fed performs for the federal government?

To the extent that the value of money is less predictable,it becomes

The U.S.central bank performs all the following roles for the nation EXCEPT

In a fiduciary monetary system,money is backed by

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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Exam 15: Money, banking, and Central Banking

The reserve ratio equals 20 percent.The Fed buys $1 million in U.S.government securities.The most the money supply can increase is

The initial impact of the Fed's open market sale of government securities by the Federal Reserve is

When Kate and Sam use dollars to compare the market values of their automobiles,money is acting as a

All of the following are included in M1 EXCEPT

The Federal Deposit Insurance Corporation

Deposit insurance shields depositors from the adverse effects of risky decisions and thereby

Russia borrowed funds from the International Monetary Fund in 1989 in exchange for agreeing to undertake certain changes.However,after receiving the funds,Russia spent the funds on other things,making the loan repayment more unlikely to occur.This situation is referred to as

The two basic ways to define money are

The purchasing power of the dollar

Lenders generally want borrowers to agree to invest prudently,yet once a loan is made borrowers may use the funds in a highly risky fashion.This leads to the problem of

If the Fed purchases $100,000 in government bonds from a bank,then the

Small-denomination time deposits are less than

If the FOMC decides to engage in the selling of government bonds,what is the effect on the money supply?

Which of the following is responsible for the distribution of paper currency in the United States?

Open market operations are

Fractional reserve banking is a system in which

Which of the following is NOT true about the duties the Fed performs for the federal government?

To the extent that the value of money is less predictable,it becomes

The U.S.central bank performs all the following roles for the nation EXCEPT

In a fiduciary monetary system,money is backed by

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters