Unit of account flash card

To say money is socially defined means that:
A. money has been defined in a Constitutional amendment.B. whatever performs the functions of money extremely well is considered to be money.C. the money supply includes all public and private securities purchased by society.D. society, acting through Congress, specifies what shall be included in the money supply.

Money functions as:
A. a store of value.B. a unit of account.C. a medium of exchange.D. all of these.

If you are estimating your total expenses for school next semester, you are using money primarily as:
A. a medium of exchange.B. a store of value.C. a unit of account.D. an economic investment.

If you place a part of your summer earning in a savings account, you are using money primarily as a:
A. medium of exchange.B. store of value.C. unit of account.D. standard of value.

If you write a check on a bank to purchase a used Honda Civic, you are using money primarily as:
A. a medium of exchange.B. a store of value.C. a unit of account.D. an economic investment.

A $70 price tag on a sweater in a department store window is an example of money functioning as a:
A. unit of account.B. standard of deferred payments.C. store of value.D. medium of exchange.

Stock market price quotations best exemplify money serving as a(n):
A. store of value.B. unit of account.C. medium of exchange.D. index of satisfaction.

Purchasing common stock by writing a check best exemplifies money serving as a(n):
A. store of value.B. unit of account.C. medium of exchange.D. index of satisfaction.

When economists say that money serves as a medium of exchange, they mean that it is:
A. a way to keep wealth in a readily spendable form for future use.B. a means of payment.C. a monetary unit for measuring and comparing the relative values of goods.D. declared as legal tender by the government.

When economist say that money serves as a unit of account, they mean that it is:
A. a way to keep wealth in a readily spendable form for future use.B. a means of payment.C. a monetary unit for measuring and comparing the relative values of goods.D. declared as legal tender by the government.

When economists say that money serves as a store of value, they mean that it is:
A. a way to keep wealth in a readily spendable form for future use.B. a means of payment.C. a monetary unit for measuring and comparing the relative values of goods.D. declared as legal tender by the government.

The paper money used in the United States is:
A. National Bank Notes.B. Treasury Notes.C. United States Notes.D. Federal Reserve Notes.

In the United States, the money supply (M1) is compromised of:
A. coins, paper currency, and checkable deposits.B. currency, checkable deposits, and Series E bonds.C. coins, paper currency, checkable deposits, and credit balances with brokers.D. paper currency, coins, gold certificates, and time deposits.

Currency held in the vault of the First National Bank is:
A. counted as part of M1.B. counted as part of M2, but not M1.C. only counted as part of M1 if it was deposited into a checking account.D. not counted as part of the money supply.

Checkable deposits are classified as money because:
A. they can be readily used in purchasing goods and paying debts.B. banks hold currency equal to the value of their checkable deposits.C. they are ultimately the obligations of the Treasury.D. they earn interest income for the depositor.

Currency (paper money plus coins) constitutes about:
A. 67 percent of the U.S. M1 money supply.B. 51 percent of the U.S. M1 money supply.C. 49 percent of the U.S. M1 money supply.D. 33 percent of the U.S. M1 money supply.

In January 2010, the supply of money (M1) in the United States was about:
A. $847 billion.B. $1,676 billion.C. $1,365 billion.D. $8,463 billion.

To say that coins are “token money” means that:
A. their face value is less than their intrinsic value.B. their face value is greater than their intrinsic value.C. their face value is equal to their intrinsic value.D. they are not legal tender.

In define money as M1, economists exclude time deposits because:
A. the intrinsic value of time deposits is nil.B. the purchasing power of time deposits is much less stable than that of checkable depositsand currency.C. they are not directly or immediately a medium of exchange.D. they are not recognized by the Federal government as legal tender.

Which of the following is not part of the M2 money supply?
A. money market mutual fund balancesB. money market deposit accountsC. currencyD. large-denominated time deposits

The M2 money supply includes:
A. stock certificates.B. currency in bank vaults.C. the cash value of life insurance policies.D. individual shares in money market mutual funds.

A checking account entry is money because it:
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.

Currency in circulation is part of:
A. M1 only.B. M2 not including M1.C. neither M1 nor M2.D. both M1 and M2.

Money market deposits accounts are included in:
A. M1 only.B. M2 only.C. neither M1 nor M2.D. both M1 and M2.

Checkable deposits are:
A. included in M1.B. not included in either MlC. considered to be a near money.D. also called time deposits.

The amount of money reported as M2:
A. is smaller than the amount reported as M1.B. is larger than the amount reported as M1.C. excludes coins and currency.D. includes large ($100,000 or more) certificates of deposit.

The largest component of the money supply (M1) is:
A. currency in bank vaults.B. currency in circulation.C. checkable deposits.D. stock certificates.

Paper money (currency) in the United States is issued by the:
A. United States Mint.B. Federal Reserve Banks.C. United States Treasury.D. national banks.

A $20 bill is a:
A. gold certificate.B. Treasury note.C. Treasury bill.D. Federal Reserve Note.

Coins in people’s pockets and purses are:
A. included in M1, but not in M2.B. included in both M1 and in M2.C. included in M2, but not in M1.D. excluded from M1 and M2 because people can exchange them for Federal Reserve notes.

Coins held in commercial banks are:
A. included in M1, but not in M2.B. included both in M1 and in M2.C. included in M2, but not in M1.D. not part of the nation’s money supply.

Checkable deposits include:
A. both large and small-denominated time deposits.B. the deposits of banks and thrifts on which checks can be written.C. only the checkable deposits of commercial banks.D. only the checkable deposits of thrift institutions.

The difference between M1 and M2 is that:
A. the former includes time deposits.B. the latter includes small-denominated time deposits, non-checkable savings accounts,money market deposit accounts, and money market mutual fund balances.C. the latter includes negotiable government bonds.D. the latter includes cash held by commercial banks and the U.S. Treasury.

Assuming o other changes, if checkable deposits increase by $40 billion and currency in circulation decreases by $40 billion, the:
A. M1 money supply will decline.B. M1 money supply will not change.C. M2 money supply will decline.D. M2 money supply will increase.

Assuming no other changes, if checkable deposits decrease by $40 billion and balances in money market mutual funds increase by $40 billion, the:
A. M1 money supply will decline and M2 money supply will remain unchanged.B. M1 and M2 money supplies will not change.C. M1 money supply will increase and M2 money supply will remain unchanged.D. M1 and M2 money supplies will both decline.

“Near-monies” are included in:
A. both M1 and M2.B. M2 only.C. M1 only.D. neither M1 nor M2.

Assuming no other changes, if balances in money market deposit accounts increase by $50 billion and small-denominated time deposits decrease by $50 billion, the:
A. M1 and M2 money supplies will not change.B. M2 money supply will increase.C. M1 money supply will decline.D. M2 money supply will increase and the M1 money supply will decrease.

Small-denominated time deposits, by definition:
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.

The near-money components of M2 are:
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.

The M2 money supply is about _______ times larger than the M1 money supply.
A. 1.5B. 5C. 10D. 20

Near-monies:
A. include all financial and real assets that can be easily converted into currency.B. are certain highly liquid financial assets that do not function directly as a medium ofexchange but can be readily converted into M1.C. are excluded from M2 because they are highly liquid.D. are defined as monetary balances that are immediately available, at zero cost, for

household and business transactions.

Time deposits of $100,000 or more are:
A. a component of M1.B. a component of M2 but not of M1.C. a component of M1 but not of M2.D. not a component of M1 or M2.

Currency held within banks is part of:
A. both the M1 and M2 definitions of the money supply.B. the M2 definition of the money supply only.C. the M1 definition of the money supply only.D. none of these definitions of the money supply.

The money supply is backed:
A. by the government’s ability to control the supply of money and therefore to keep its valuerelatively 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.

Which of the following does not explain what back the money supply in the United States?
A. It is back by gold.B. It is widely accepted in transactions.C. It is designated “legal tender” by the Federal government.D. It is relatively scarce.

Suppose that the Federal government suddenly declared that wheat was to be used as money. What is a possible outcome of that decision?
A. The value of the “wheat dollar” would be unstable depending on crop yields from year to year.B. Farmers would replace corn and soy crops with wheat.C. Wheat would function as money so long as people accept it in exchange for goods and services.D. All of these are possible outcomes.

The purchasing power of money and the price level vary:
A. inversely.B. directly during recessions, but inversely during inflations.C. directly, but not proportionately.D. directly and proportionately.

The value if money varies:
A. inversely with the price level.B. directly with the volume of employment.C. directly with the price level.D. directly with the interest rate.

If the price index rises from 100 to 120, the purchasing power values of the dollar:
A. may either rise or fall.B. will rise by one-sixth.C. will fall by one-sixth.D. will rise by 20 percent.

If the price index rises from 200 to 250, the purchasing power values of the dollar:
A. may either rise or fall.B. will rise by 25 percent.C. will fall by 25 percent.D. will fall by 20 percent.

The purchasing power of the dollar:
A. has been increasing in recent years because of economic growth.B. varies directly with the cost-of-living index.C. is inversely related to the level of aggregate demand.D. is the reciprocal of the price level.

During period of rapid inflation, money may cease t work as a medium of exchange:
A. unless it has been designated legal tender.B. unless it is backed by gold.C. because it is too scarce for everyone to have enough for transactions.D. because people and businesses will not want to accept it in transactions.

Stabilizing a nation’s price level and the purchasing power of its money can be achieved:
A. only with fiscal policy.B. only with monetary policy.C. with both fiscal and monetary policy.D. with neither fiscal nor monetary policy.

Other things equal, an excessive increase in the money supply will:
A. increase the purchasing power of each dollar.B. decrease the purchasing power of each dollar.C. have no impact on the purchasing power of the dollar.D. reduce the price level.

If P equals the price level expressed as an index number and SV equals the value of the dollar then:
A. P = $V – 1.B. $V = 1/P.C. 1 = $V/P.D. $V = P – 1.

The basic policy-making body in the U.S. banking system us the:
A. Federal Open Market Committee (FOMC).B. Board of Governors of the Federal Reserve.C. Federal Monetary Authority.D. Council of Economic Advisers.

The Federal Reserve System was created in:
A. 1926.B. 1946.C. 1895.D. 1913.

In the U.S. economy the money supply is controlled by the:
A. U.S. Treasury.B. Federal Reserve System.C. Senate Committee on Banking and Finance.D. Congress.

As it relates to the Federal Reserve activities, the acronym FOMC describes the:
A. Federal Open Market Committee.B. Federal Options Market Committee.C. Federal Organization for Monetary Control.D. Federal Organization for Money Creation.

The Federal Open Market Committee (FOMC) is made up of:
A. the chair of the Board of Governors along with the 12 presidents of the Federal Reserve Banks.B. the seven members of the Board of Governors along with the president of the New York Federal Reserve Bank.C. the seven members of the Board of Governors of the Federal Reserve System along with the three members of the Council of Economic Advisers.D. the seven member of the Board of Governors of the Federal Reserve System along with the president of the New York Federal Reserve Bank and four other Federal Reserve Banks presidents on a rotating basis.

The group that sets the Federal Reserve System policy on buying and selling government securities (bill, notes, and bonds) is the:
A. Federal Deposit Insurance Corporation (FDIC).B. Federal Bond Sale Authority.C. Council of Economic Advisers.D. Federal Open Market Committee (FOMC).

Approximately how many commercial banks are now operating in the United States?
A. about 7,300B. about 6,800C. about 8,700D. about 6,300

Which of the following is true about the U.S. Federal Reserve System?
A. There are 12 regional Federal Reserve Banks.B. The head of the U.S. Treasury also chairs the Federal Reserve Board.C. There are 14 members of the Federal Reserve Board.D. The Open Market Committee is smaller in size than the Federal Reserve Board.

The Board of Governors of the Federal Reserve has ___ members.
A. 5B. 7C. 9D. 14

The member of the Federal Reserve Board:
A. serve seven-year terms.B. are appointed by the American Economic Association.C. are elected by votes of the 12 presidents of the Federal Reserve Banks.D. are appointed for 14-year terms.

An important function of the Federal Reserve Bank is to:
A. supervise the liquidation of the assets of bankrupt state banks.B. help large commercial banks develop correspondent relationships with smaller commercial banks.C. advise commercial banks as to the most profitable ways of reinvesting profits.D. provide facilities by which commercial banks and thrift institutions may collect checks.

Which of the following statements best describe the twelve Federal Reserve Banks?
A. They are privately owned and privately controlled central banks whose basic goal is to provide an ample and orderly market for U.S. Treasury securities.B. They are privately owned and publicly controlled central banks whose basic function is to minimize the risks in commercial banking in order to make it a reasonably profitable industry.C. They are privately owned and publicly controlled central banks whose basic goal is to control the money supply and interest rates in promoting the general economic welfare.D. They are privately owned and publicly controlled central banks whose basic goal is to earn profits for their owners.

The seven members of the Board of Governors of the Federal Reserve System are:
A. appointed by the President with the confirmation of the Senate.B. elected by Congress from a slate of nominees provided by the President.C. appointed by the Senate Finance Committee.D. appointed by the presidents of the twelve Federal Reserve Banks.

To say that the Federal Reserve Banks are quasi-public banks means that:
A. they are privately owned, but managed in the public interest.B. they deal only with banks of foreign nations and do not have direct business contact with U.S. banks.C. they deal only with commercial banks, and not the public.D. they are publicly owned, but privately managed.

Which of the following is the basic economic policy function of the Federal Reserve Banks?
A. holding the deposits or reserves of commercial banksB. acting as fiscal agents for the Federal governmentC. controlling the supply of moneyD. the collection or clearing of checks among commercial banks

The Federal Reserve System:
A. has the same status as the Supreme Court.B. is basically an independent agency.C. has the status of a Congressional committee.D. is an agency of the executive branch of the Federal government.

Research for industrially advanced countries indicates that:
A. the more independent the central bank, the lower the average annual rate of inflation.B. the more independent the central bank, the higher the average annual rate of inflation.C. there is no relationship between the degree of independence of a country’s central bank and its inflation rate.D. the more independent the central bank, the higher the average annual rate of unemployment.

Commercial banks and thrift institutions:
A. differ because thrifts cannot make loans.B. differ because thrifts cannot offer checkable deposits.C. have become less similar in recent years.D. have become increasingly similar in recent years.

“Subprime” mortgage loans refer to:
A. high-interest rate loans to home buyers with above average credit risk.B. home-buying loans that charge interest rates below the prime interest rate.C. loans to buyers of homes that are in need of substantial repair.D. loans from the Federal Reserve to home mortgage lenders to support a greater volume ofhome-buying loans at affordable interest rates.

What are “mortgage-backed securities?”
A. Company stock shares for financial institutions that lend to home buyers.B. Bonds backed by mortgage payments.C. Treasury bills and savings bonds that banks sold to maintain liquidity during the mortgagedefault crisis.D. Insurance against mortgage loan defaults.

When banks bundled mortgage loans and sold the resulting mortgage-backed securities:
A. they insulated the banking system from any risk associated with mortgage defaults.B. they greatly reduced the overall risk of mortgage defaults.C. buyers of these securities assumed all of the risk of mortgage defaults.D. they reduced their direct exposure to mortgage default risk, but were still exposed through loans to investors in mortgage-backed securities.

Banks lost money during the mortgage default crisis because:
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.

In the financial industry,”securitization” refers to:
A. increasing insurance protection on bank deposits.B. requiring greater down payments on home purchases to reduce mortgage default risk.C. bundling groups of loans, bonds, mortgages, and other financial debts into new securities.D. increasing collateral requirements on loans.

Collateralized default swaps:
A. helped reduce the losses from the mortgage default crisis.B. involve exchanging high-risk mortgages for low-risk mortgage-backed securities.C. are loans to investors in mortgage-backed securities.D. insured holders of loan-backed securities in case they underlying loans were not repaid.

What does it mean when economists say that home buyers are “underwater” on their mortgages?
A. Buyers owe more on their mortgage than the properties are worth.B. Buyers are financially incapable of repaying their mortgages and bankruptcy is inevitable.C. Buyers are purchasing homes on flood plains and are highly susceptible to financial losses.D. Buyers are paying interest rates substantially higher than current market interest rates,creating interest payments that create financial hardship.

The “shadow banking system” refers to:
A. the provision of credit through the underground economy when the financial crisis of 2007 and 2008 occurred.B. the process by which securities exchanges provide credit for personal and business needs apart from traditional bank lending.C. the series of illegal financial transactions that precipitated the financial crisis of 2007 and 2008.D. mortgage loans made to homebuyers who are poor credit risks.

Which of the following statements is true about the high rate of mortgage defaults that contributed to the financial crisis of 2007 and 2008?

A. High interest rates on mortgage loans were the primary cause of defaults.

B. The high rate of defaults occurred despite the efforts of government to discourage new home ownership and slow the growth of the housing bubble.

C. Prior to the rise in defaults banks had become lax in their lending practices, resulting in a number of bad loans.

D. The high rate of defaults resulted primarily from the two years of recession preceding the mortgage default crisis.

Which of the following financial institutions declared bankruptcy as a result of the financial crisis of 2007 and 2008?
A. Merrill LynchB. Lehman BrothersC. Goldman SachsD. AIG

Which of the following financial institutions was acquired by Bank of America as a result of the financial crisis of 2007 and 2008?
A. Merrill LynchB. Lehman BrothersC. Goldman SachsD. AIG

TARP, created in 2008, stands for:
A. Toxic Asset Relief ProgramB. Troubled Asset Recovery PlanC. Toxic Asset Reinvestment PolicyD. Troubled Asset Relief Program

How much did the U.S. Congress allocate to the Troubled Asset Relief Program in 2008?
A. $170 billionB. $700 billionC. $787 billionD. $885 billion

Some economists are concerned that the financial rescue provided by the TARP will encourage financial investors and firms to take on greater risks in the future. This is an example of:
A. moral hazard.B. adverse selection.C. a prisoner’s dilemma.D. shadow banking.

Which of the following programs was not designed and implemented by the Federal Reserve?
A. Troubled Asset Relief ProgramB. Term Securities Lending FacilityC. Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity FacilityD. Primary Dealer Credit Facility

Which of the following statements is true as a result of Federal Reserve efforts to rescue the financial industry from the financial crisis of 2007 and 2008?
A. From February 2008, to May 2009, the Fed oversaw the consolidation of 20 major financial institutions into fewer than a dozen.B. From March 2008, to February 2009, the Fed experienced a 50 percent decline in the value of assets held.C. From February 2008, to March 2009, Fed assets more than doubled to nearly $2 trillion.D. From February 2008, to March 2009, Fed lending caused the U.S. public debt to rise by over $1 trillion.

Which of the following programs provides loans of U.S. securities to primary dealers for one-month terms, in an effort to enhance liquidity in U.S. securities markets?
one-month terms, in an effort to enhance liquidity in U.S. securities markets?
A. Primary Dealer Credit FacilityB. Commercial Paper Funding FacilityC. Term Asset-Backed Securities Loan FacilityD. Term Securities Lending Facility

Which role of the Federal Reserve was expanded directly as a result of the PDCF and TSLF?
A. Supervising banksB. Lender of last resortC. Fiscal agent for the Federal governmentD. Issuing currency

Which of the following programs involves the Federal Reserve directly purchases short-term lending instruments from corporation?
A. Term Asset-Backed Securities Loan FacilityB. Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity FacilityC. Commercial Paper Funding FacilityD. Term Securities Lending Facility

What is the primary function of the Term Assets Backed Securities Loan Facility?
A. Provide funding support for collateralized securities such as student, auto, and credit card loans.B. Provide securities loans to primary dealers for one-month terms.C. Provide overnight loans to primary dealers willing to post loan-backed securities as collateral.D. Provide loans to U.S. financial institutions to purchase commercial paper.

The various lender-of-last-resort programs implemented by the Fed in response to the financial crisis of 2007 and 2008:
A. severely depleted the assets of the Federal Reserve.B. have been little used, and therefore ineffective.C. increased by moral hazard problem by limiting losses from bad financial decisions.D. were designed to offset the moral hazard created by the TARP and other bailout programs.

Between September 2007, and September 2009:
A. the Fed oversaw the conversion of all thrifts into commercial banks.B. the FDIC closed more than 200 U.S. banks and shifted their deposits to other banks.C. the Fed increased capital requirements for larger financial institutions in an effort to reduce moral hazard.D. the FDIC paid out more than $500 billion to depositors who held money in failed banks.

New York Life, Prudential, and Hartford, are all primarily:
A. commercial banks.B. mutual fund companies.C. insurance companies.D. securities firms.

Chapter One, Pentagon Federal Credit Union, and Boeing Employee Credit Union, are all primarily:
A. commercial banks.B. thrifts.C. insurance companies.D. pension funds.

TIAA-CREF, Teamster’ Union and CalPERS, are all primarily:
A. commercial banks.B. thrifts.C. insurance companies.D. pension funds.

Smith Barney, Charles Schwab, and Merrill Lynch, are all primarily:
A. investment banks.B. mutual fund companies.C. insurance companies.D. securities firms.

In 2009, approximately how much if the money on the deposit was held by the three largest U.S. banks?
A. 30 percent.B. 50 percent.C. 70 percent.D. 90 percent.

Firms whose central business is to offer security advice and buy and sell individual stocks and bonds for clients are known as:
A. thrifts.B. pension fund companies.C. securities firms.D. insurance companies.

Firms whose central business is providing individual account shares of collections of stocks, bonds, or both are known as:
A. insurance companies.B. thrifts.C. commercial banks.D. mutual funds companies.

Which of these pairs of financial institutions are most alike in terms of their main lines of business?
A. Commercial banks and thrifts.B. Insurance companies and mutual fund companies.C. Thrifts and securities firms.D. Pension fund companies and commercial banks.

The Federal Deposit Insurance Corporation (FDIC) insures deposits up to $250,000 in:
A. mutual fund companies and pension fund companies.B. thrifts and insurance companies.C. commercial banks and thrifts.D. securities firms and insurance companies.

(Consider This) Credit cards are:
A. the fastest growing component of the M1 money supply.B. near-monies that are part of the M2 money supply but not the M1 money supply.C. not money, officially defined.D. also known as time deposits.

(Consider This) Which of the following is not part of the M2 money supply?
A. Currency in circulation.B. Credit card balances.C. Small-denominated time deposits of less than $100,000.D. Checkable deposits.

(Consider This) Credit card balances are:
A. a component of M1.B. a component of M2 but not of M1.C. a component of M1 but not of M2.D. not a component of M1 or M2.

(Last Word) Electronic money is:
A. closely associated with smart cards.B. issued in real terms so that it is immune from the effects of inflation.C. the money dispensed by automatic teller machines (ATMs).D. also called share-draft money.

(Last Word) Plastic cards that contain computer chips that store balances are known as:
A. credit cards.B. smart cards.C. debit cards.D. E-cards.

(Last Word) Smart cards sold by retailers, such as single-store gift cards and prepaid phone cards are known as:
A. credit cards.B. debit cards.C. stored-value cards.D. E-cards.