Question 1

The three important functions of money are _____.

Accepted Answer

A)  medium of exchange,facilitation of trade,and unit of account
B)  unit of account,facilitation of trade,and store of value
C)  store of value,facilitation of trade,and double coincidence of wants
D)  facilitation of trade,medium of exchange,and unit of account
E)  medium of exchange,unit of account,and store of value

Question 2

The reserve requirement refers to:

Accepted Answer

A)  the fraction of deposits that banks are required by the Fed to hold as reserves.
B)  the amount of gold required to back up all Federal Reserve notes.
C)  the requirement that banks reserve part of their lending capacity for small businesses.
D)  the requirement that Reserve bank presidents be part of the FOMC.
E)  the Treasury deposits held by the Fed.

Question 3

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.

Question 4

The emergence of the subprime mortgage market following the recession of 2001 made it increasingly difficult for low-income individuals to obtain a mortgage.

Accepted Answer

A) True 
 B)False

Question 5

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

Question 6

In order for something to be used as money,it must be _____.

Accepted Answer

A)  issued by the government
B)  issued by banks
C)  declared to be money
D)  generally acceptable
E)  made of something valuable

Question 7

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.

Question 8

Which of the following serves as money in many federal prisons in the United States these days?

Accepted Answer

A)  Postage stamps
B)  Energy bars
C)  Plastic-and-foil pouches of mackerel
D)  Cans of tuna
E)  Cigarettes C

Question 9

Money is legal tender if:

Accepted Answer

A)  people willingly accept it in payment of debts.
B)  it is backed by gold or silver.
C)  it is commodity money.
D)  the government says it is.
E)  it is in a bank account.

Question 10

The Federal Reserve System has the power to:

Accepted Answer

A)  raise or lower federal income tax rates.
B)  balance the federal government budget.
C)  increase or decrease federal government spending.
D)  compete with commercial banks in making loans to business firms.
E)  buy and sell federal government securities.

Question 11

Which of the following is correct regarding the discount rate?

Accepted Answer

A)  It is the interest rate that 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. C

Question 12

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

Question 13

Barter was more feasible in primitive societies than in modern societies because:

Accepted Answer

A)  there was no inflation in primitive societies.
B)  there were many goods available for trade in primitive societies,so people could always find the goods that they wanted.
C)  specialization was limited and thus there were few goods available for trade in primitive societies.
D)  specialization was limited and thus there were many goods available for trade in primitive societies.
E)  people in primitive societies had limited wants.

Question 14

A major reason for the development of money market mutual funds in the 1970s was that:

Accepted Answer

A)  open-market operations were suspended.
B)  bank deposit rates were capped at levels below market interest rates.
C)  money market funds offered more flexible checking privileges than banks.
D)  they were considered to be safer than banks.
E)  money markets did not exist until 1970.

Question 15

Which of the following is not a goal of the Fed?

Accepted Answer

A)  Maintaining a high level of employment
B)  Maintaining stability in interest rates
C)  Maintaining high prices to encourage production
D)  Maintaining stability in financial markets
E)  Maintaining stability in foreign exchange markets

Question 16

The value of fiat money is fundamentally determined by the:

Accepted Answer

A)  reputation of the bank that holds it.
B)  reputation of the person who holds it.
C)  value of the gold or silver for which it can be redeemed.
D)  value of the commodities for which it can be traded.
E)  value of comparable stocks and bonds. D

Question 17

A lender of last resort is a financial institution that is willing and able to lend to:

Accepted Answer

A)  individuals who have other debts outstanding.
B)  individuals who do not have a positive net worth.
C)  banks that are not members of the Federal Reserve System.
D)  fractional reserve system banks experiencing runs on their deposits.
E)  Federal Reserve System member banks experiencing runs on their deposits.

Question 18

Only Federal Reserve banks can issue paper currency in the United States,and their power to do so is virtually unlimited.

Accepted Answer

A) True 
 B)False

Question 19

Money market mutual funds:

Accepted Answer

A)  offer higher rates of interest than bank checking accounts,but lack check-writing privileges.
B)  offer higher rates of interest than bank checking accounts and also offer limited check-writing privileges.
C)  usually pay lower rates of interest than bank checking accounts.
D)  were originally developed and offered by banks to their customers.
E)  usually do not offer any check-writing privileges.

Question 20

The Fed can make loans to the general public at the discount rate.

Accepted Answer

A) True 
 B)False

Exam 13: Money and the Financial System

The three important functions of money are _____.

Correct AnswerverifiedShow Answer

The reserve requirement refers to:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The emergence of the subprime mortgage market following the recession of 2001 made it increasingly difficult for low-income individuals to obtain a mortgage.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In order for something to be used as money,it must be _____.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following serves as money in many federal prisons in the United States these days?

Correct AnswerverifiedC

Money is legal tender if:

Correct AnswerverifiedShow Answer

The Federal Reserve System has the power to:

Correct AnswerverifiedShow Answer

Which of the following is correct regarding the discount rate?

Correct AnswerverifiedC

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

Correct AnswerverifiedShow Answer

Barter was more feasible in primitive societies than in modern societies because:

Correct AnswerverifiedShow Answer

A major reason for the development of money market mutual funds in the 1970s was that:

Correct AnswerverifiedShow Answer

Which of the following is not a goal of the Fed?

Correct AnswerverifiedShow Answer

The value of fiat money is fundamentally determined by the:

Correct AnswerverifiedD

A lender of last resort is a financial institution that is willing and able to lend to:

Correct AnswerverifiedShow Answer

Only Federal Reserve banks can issue paper currency in the United States,and their power to do so is virtually unlimited.

Correct AnswerverifiedShow Answer

Money market mutual funds:

Correct AnswerverifiedShow Answer

The Fed can make loans to the general public at the discount rate.

Correct AnswerverifiedShow Answer

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C

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C

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D

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