Question 1

Though many assets can be used as a store of value, money is a particularly attractive method to store value because:

Accepted Answer

A)   it increases in value as prices rise.
B)   its purchasing power does not decline when prices rise.
C)   it is the most liquid of all assets.
D)   it is backed by gold.E) A) and B)
F) A) and C)

Question 2

The M1 definition of the money supply includes:

Accepted Answer

A)   coins and currency in circulation.
B)   coins and currency in circulation and checkable deposits.
C)   Federal Reserve notes, gold certificates, and checkable deposits.
D)   Federal Reserve notes and bank loans.E) B) and D)
F) C) and D)

Question 3

In the United States, the money supply (M1)  consists of:

Accepted Answer

A)   paper currency and coins.
B)   coins, paper currency and checkable deposits.
C)   paper currency, coins, checkable deposits, and savings deposits.
D)   government bonds, currency, and checkable deposits.E) A) and D)
F) None of the above

Question 4

Although it has considerable political independence, the Fed is legally a branch of the U.S. Treasury Department.

Accepted Answer

A) True 
 B)False

Question 5

Suppose you transfer $1,000 from your checking account to your savings account. How does this action affect the M1 and M2 money supplies?

Accepted Answer

A)   M1 and M2 are both unchanged.
B)   M1 falls by $1,000, and M2 rises by $1,000.
C)   M1 is unchanged, and M2 rises by $1,000.
D)   M1 falls by $1,000, and M2 is unchanged.E) A) and B)
F) A) and C)

Question 6

Which of the following is not a component of the M1 money supply?

Accepted Answer

A)   Checkable deposits.
B)   Large-denomination (more than $100)  bills.
C)   Interest-earning checking deposits.
D)   Outstanding balances on credit cards.E) All of the above
F) A) and D)

Question 7

The Federal Reserve System is owned by:

Accepted Answer

A)   federal government agencies such as the Treasury.
B)   the Congress of the United States.
C)   the banks that are members of the Federal Reserve System.
D)   anyone who buys stock over the counter.
E)   people who have deposits in member banks.F) A) and D)
G) C) and E)

Question 8

The Federal Reserve System is divided into:

Accepted Answer

A)   2 districts.
B)   12 districts.
C)   26 districts.
D)   50 districts.
E)   1 district.F) B) and D)
G) B) and C)

Question 9

The Federal Reserve System:

Accepted Answer

A)   was created by and is owned by the government.
B)   pursues independent fiscal policy at the behest of Congress.
C)   never acts to control inflation.
D)   pursues an independent monetary policy which can conflict with the government's economic policy.
E)   only acts to lower taxes and increase spending when there are recessionary tendencies in the economy.F) B) and D)
G) A) and E)

Question 10

Which of the following is considered part of M2?

Accepted Answer

A)   Savings deposits.
B)   Money market mutual fund shares.
C)   Small time deposits of less than $100,000.
D)   All of the above.E) None of the above
F) B) and C)

Question 11

Which of the following defines the "medium of exchange" function of money?

Accepted Answer

A)   To provide a common measurement of the relative value of different goods and services.
B)   The ability of money to hold value over time.
C)   The materials used manufacture money are of medium grade so that people will not hoard money for its commodity value.
D)   Money that is widely accepted in exchange for goods and services.E) C) and D)
F) All of the above

Question 12

Coins and dollar bills are money in the form of:

Accepted Answer

A)   barter.
B)   currency.
C)   capital stock.
D)   investment.E) A) and B)
F) C) and D)

Question 13

If every person is willing to accept money in payment, rather than goods and services, money serves as a:

Accepted Answer

A)   medium of exchange.
B)   unit of account.
C)   store of value.
D)   coincident exchange.E) A) and D)
F) None of the above

Question 14

M2 money includes all but which one of the following?

Accepted Answer

A)   Checkable deposits.
B)   Savings accounts.
C)   Large denomination time deposits.
D)   Money market deposit accounts.
E)   Money market mutual accounts.F) D) and E)
G) B) and C)

Question 15

What is the "medium of exchange" function of money? ​

Accepted Answer

A)   ​A common measurement of the relative value of different goods and services.
B)   ​The ability of money to hold value over time.
C)   ​The quality of money not to be hoarded because of its commodity value.
D)   ​The function of money to be widely accepted in exchange for goods and services.E) None of the above
F) B) and D)

Question 16

Currency consists of:

Accepted Answer

A)   coins and Eurodollars.
B)   paper money and checks.
C)   coins and paper money.
D)   paper money and Eurodollars.
E)   coins and checks.F) A) and E)
G) B) and D)

Question 17

Which of the following is not one of the functions of the Federal Reserve?

Accepted Answer

A)   Clearing checks.
B)   Printing currency.
C)   Supervising and regulating banks.
D)   Controlling the money supply.E) All of the above
F) B) and D)

Question 18

Barter is a system of exchange that does not depend on a coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 19

For barter exchange to take place,

Accepted Answer

A)   there has to be a coincidence of wants.
B)   the products in question have to be divisible.
C)   money has to be used to put a value on the transaction.
D)   there has to be a single coincidence of wants.
E)   gold has to be one of the goods traded.F) D) and E)
G) C) and E)

Question 20

M1 money includes all but which one of the following?

Accepted Answer

A)   Checkable deposits.
B)   Savings accounts.
C)   Paper money.
D)   Coins.E) C) and D)
F) All of the above

Exam 18: Money and the Federal Reserve System

What is the "medium of exchange" function of money? ​

Correct AnswerverifiedShow Answer

The Federal Reserve System:

Correct AnswerverifiedShow Answer

Currency consists of:

Correct AnswerverifiedShow Answer

Which of the following is not a component of the M1 money supply?

Correct AnswerverifiedShow Answer

Which of the following is not one of the functions of the Federal Reserve?

Correct AnswerverifiedShow Answer

Although it has considerable political independence, the Fed is legally a branch of the U.S. Treasury Department.

Correct AnswerverifiedShow Answer

The Federal Reserve System is owned by:

Correct AnswerverifiedShow Answer

In the United States, the money supply (M1) consists of:

Correct AnswerverifiedShow Answer

Coins and dollar bills are money in the form of:

Correct AnswerverifiedShow Answer

Suppose you transfer $1,000 from your checking account to your savings account. How does this action affect the M1 and M2 money supplies?

Correct AnswerverifiedShow Answer

For barter exchange to take place,

Correct AnswerverifiedShow Answer

Barter is a system of exchange that does not depend on a coincidence of wants.

Correct AnswerverifiedShow Answer

The M1 definition of the money supply includes:

Correct AnswerverifiedShow Answer

If every person is willing to accept money in payment, rather than goods and services, money serves as a:

Correct AnswerverifiedShow Answer

Though many assets can be used as a store of value, money is a particularly attractive method to store value because:

Correct AnswerverifiedShow Answer

M1 money includes all but which one of the following?

Correct AnswerverifiedShow Answer

M2 money includes all but which one of the following?

Correct AnswerverifiedShow Answer

Which of the following defines the "medium of exchange" function of money?

Correct AnswerverifiedShow Answer

The Federal Reserve System is divided into:

Correct AnswerverifiedShow Answer

Which of the following is considered part of M2?

Correct AnswerverifiedShow Answer

What is the "medium of exchange" function of money?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified