Question 1

The main function of the Federal Reserve System is to

Accepted Answer

A)   serve as the ﬁscal agent for the federal government.
B)   set reserve requirements of banks.
C)   clear checks from member banks.
D)   control the money supply.

Question 2

"Thrifts" refers to the following institutions except

Accepted Answer

A)   commercial banks.
B)   credit unions.
C)   mutual savings banks.
D)   savings and loan associations.

Question 3

Item  Billions of Dollars  Checkable Deposits $597 Small Time Deposits 818 Currency 639 Money-Market Mutual Funds Held by Businesses 1,045 Savings Deposits, Including Money-Market Deposit Accounts 2,866 Money-Market Mutual Funds Held by Individuals 979\begin{array} { | l | c | } \hline { 	ext { Item } } & 	ext { Billions of Dollars } \\hline 	ext { Checkable Deposits } & \$ 597 \\hline 	ext { Small Time Deposits } & 818 \\hline 	ext { Currency } & 639 \\hline 	ext { Money-Market Mutual Funds Held by Businesses } & 1,045 \\hline 	ext { Savings Deposits, Including Money-Market Deposit Accounts } & 2,866 \\hline 	ext { Money-Market Mutual Funds Held by Individuals } & 979 \\hline\end{array} Item  Checkable Deposits  Small Time Deposits  Currency  Money-Market Mutual Funds Held by Businesses  Savings Deposits, Including Money-Market Deposit Accounts  Money-Market Mutual Funds Held by Individuals ​ Billions of Dollars $5978186391,0452,866979​​  Refer to the accompanying table. The value of the money included in M2 but not counted in M1 is

Accepted Answer

A)   $1,457 billion.
B)   $4,442 billion.
C)   $2,886 billion.
D)   $4,663 billion.

Question 4

Small-denominated time deposits, by deﬁnition

Accepted Answer

A)   mature in one month or less.
B)   mature in one year or less.
C)   are less than $100,000.
D)   are held by state and local banks only.

Question 5

During a ﬁnancial crisis, the Fed and other central banks always adopt a strict policy of lending only to ﬁnancial ﬁrms
that are solvent but illiquid.

Accepted Answer

A) True 
 B)False

Question 6

If the price index rises from 100 to 115, then the purchasing power of the dollar will fall by about

Accepted Answer

A)   13 percent.
B)   10 percent.
C)   23 percent.
D)   15 percent.
E)   100 percent.

Question 7

Which group aids the Board of Governors of the Federal Reserve System in conducting monetary policy?

Accepted Answer

A)   U.S. Treasury
B)   U.S. Congress
C)   Federal Advisory Council
D)   Federal Open Market Committee

Question 8

The near-money components of M2 are

Accepted Answer

A)   equally liquid as the M1 components of M2.
B)   more liquid than the M1 components of M2.
C)   less liquid than the M1 components of M2.
D)   highly illiquid.

Question 9

The so-called moral hazard problem refers to one's tendency to

Accepted Answer

A)   buy less of something if one does not have good information about it.
B)   avoid something that is considered risky or hazardous.
C)   get insurance against some possible hazard or danger.
D)   take on greater risk if one is at least partly insured against losses.

Question 10

The Federal Reserve System consists of which of the following?

Accepted Answer

A)   Federal Open Market Committee and Oﬃce of Thrift Supervision
B)   Federal Deposit Insurance Corporation and Controller of the Currency
C)   U.S. Treasury Department and Bureau of Engraving and Printing
D)   Board of Governors and the 12 Federal Reserve Banks

Question 11

The Federal Reserve System performs many functions, but its most important one is

Accepted Answer

A)   issuing currency.
B)   controlling the money supply.
C)   providing for check clearing and collection.
D)   acting as ﬁscal agent for the U.S. government.

Question 12

The Bureau of Consumer Financial Protection was created in 2010 to become part of the

Accepted Answer

A)   U.S. Treasury Department.
B)   Federal Reserve System.
C)   Department of Commerce.
D)   Oﬃce of the President.

Question 13

Refer to the given list of assets. 1. Large-denominated ($100,000 and over)  time deposits
2)  Savings deposits
3)  Currency (coins and paper money)  in circulation
4)  Small-denominated (under $100,000)  time deposits
5)  Stock certiﬁcates
6)  Checkable deposits
7)  Money market deposit accounts
8)  Money market mutual fund balances held by individuals
9)  Money market mutual fund balances held by businesses
10)  Currency held in bank vaults
Which of the following are considered to be near monies?

Accepted Answer

A)   items 2, 5, 8, and 9
B)   all items except for 3
C)   items 2, 4, 7, and 8
D)   items 1, 5, and 10

Question 14

What function is money serving when you deposit money in a savings account?

Accepted Answer

A)   a store of value
B)   a unit of account
C)   a checkable deposit
D)   a medium of exchange

Question 15

Banks lost money during the mortgage default crisis because

Accepted Answer

A)   of defaulted loans to investors in mortgage-backed securities.
B)   they held mortgage-backed securities they had purchased from investment ﬁrms.
C)   homebuyers defaulted on mortgages held by the banks.
D)   of all of these reasons.

Question 16

What is the difference between the M1 and M2 deﬁnitions of the money supply?

Accepted Answer

M1 is the most liquid form of money and ...

Question 17

The money supply is backed

Accepted Answer

A)   by the government's ability to control the supply of money and therefore to keep its value relatively stable.
B)   by government bonds.
C)   dollar-for-dollar by gold and silver.
D)   by gold reserves representing a fraction of the total value of dollars in circulation.

Question 18

As of March 2019, more than half of the money supply (M1)  was in the form of

Accepted Answer

A)   currency.
B)   checkable deposits.
C)   gold coins and bars.
D)   savings deposits.

Question 19

Which of the following functions of money enables society to gain the beneﬁts of geographic and labor specialization?

Accepted Answer

A)   unit of account
B)   store of value
C)   medium of exchange
D)   medium of deferred payment

Question 20

A checking account entry is money because it

Accepted Answer

A)   is ensured by the Federal Deposit Insurance Corporation.
B)   has been declared as such by the federal government.
C)   performs the functions of money.
D)   can be sold for currency.

Exam 14: Money, Banking, and Financial Institutions

Correct Answer
verified

During a ﬁnancial crisis, the Fed and other central banks always adopt a strict policy of lending only to ﬁnancial ﬁrms that are solvent but illiquid.

Correct Answer
verified

A checking account entry is money because it

Correct Answer
verified

The Federal Reserve System consists of which of the following?

Correct Answer
verified

If the price index rises from 100 to 115, then the purchasing power of the dollar will fall by about

Correct Answer
verified

Banks lost money during the mortgage default crisis because

Correct Answer
verified

Which group aids the Board of Governors of the Federal Reserve System in conducting monetary policy?

Correct Answer
verified

As of March 2019, more than half of the money supply (M1) was in the form of

Correct Answer
verified

What function is money serving when you deposit money in a savings account?

Correct Answer
verified

"Thrifts" refers to the following institutions except

Correct Answer
verified

The so-called moral hazard problem refers to one's tendency to

Correct Answer
verified

The Federal Reserve System performs many functions, but its most important one is

Correct Answer
verified

What is the difference between the M1 and M2 deﬁnitions of the money supply?

Correct Answer
verified
M1 is the most liquid form of money and ...
View Answer

Which of the following functions of money enables society to gain the beneﬁts of geographic and labor specialization?

Correct Answer
verified

Small-denominated time deposits, by deﬁnition

Correct Answer
verified

The Bureau of Consumer Financial Protection was created in 2010 to become part of the

Correct Answer
verified

The money supply is backed

Correct Answer
verified

Correct Answer
verified

The main function of the Federal Reserve System is to

Correct Answer
verified

The near-money components of M2 are

Correct Answer
verified

Exam 14: Money, Banking, and Financial Institutions

Correct AnswerverifiedShow Answer

During a ﬁnancial crisis, the Fed and other central banks always adopt a strict policy of lending only to ﬁnancial ﬁrms that are solvent but illiquid.

Correct AnswerverifiedShow Answer

A checking account entry is money because it

Correct AnswerverifiedShow Answer

The Federal Reserve System consists of which of the following?

Correct AnswerverifiedShow Answer

If the price index rises from 100 to 115, then the purchasing power of the dollar will fall by about

Correct AnswerverifiedShow Answer

Banks lost money during the mortgage default crisis because

Correct AnswerverifiedShow Answer

Which group aids the Board of Governors of the Federal Reserve System in conducting monetary policy?

Correct AnswerverifiedShow Answer

As of March 2019, more than half of the money supply (M1) was in the form of

Correct AnswerverifiedShow Answer

What function is money serving when you deposit money in a savings account?

Correct AnswerverifiedShow Answer

"Thrifts" refers to the following institutions except

Correct AnswerverifiedShow Answer

The so-called moral hazard problem refers to one's tendency to

Correct AnswerverifiedShow Answer

The Federal Reserve System performs many functions, but its most important one is

Correct AnswerverifiedShow Answer

What is the difference between the M1 and M2 deﬁnitions of the money supply?

Correct AnswerverifiedM1 is the most liquid form of money and ...View AnswerShow Answer

Which of the following functions of money enables society to gain the beneﬁts of geographic and labor specialization?

Correct AnswerverifiedShow Answer

Small-denominated time deposits, by deﬁnition

Correct AnswerverifiedShow Answer

The Bureau of Consumer Financial Protection was created in 2010 to become part of the

Correct AnswerverifiedShow Answer

The money supply is backed

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The main function of the Federal Reserve System is to

Correct AnswerverifiedShow Answer

The near-money components of M2 are

Correct AnswerverifiedShow Answer

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Correct Answer
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verified
M1 is the most liquid form of money and ...
View Answer

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verified

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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