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.
a. a medium of exchange.
b. a store of value.
c. a unit of account.
d. an economic investment.
c.
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. a medium of exchange.
b. a store of value.
c. a unit of account.
d. an economic investment.
a.
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.
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.
b.
When economists 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.
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.
c.
In the United States, the money supply (M1) includes:
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.
a.
Currency held in the vault of 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.
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.
d.
Currency (paper money plus coins) constitutes about:
a. 24 percent of the U.S. M1 money supply.
b. 45 percent of the U.S. M1 money supply.
c. 51 percent of the U.S. M1 money supply.
d. 55 percent of the U.S. M1 money supply.
a. 24 percent of the U.S. M1 money supply.
b. 45 percent of the U.S. M1 money supply.
c. 51 percent of the U.S. M1 money supply.
d. 55 percent of the U.S. M1 money supply.
b.
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.
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.
b.
In defining 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 deposits and currency.
c. they are not directly or immediately a medium of exchange.
d. they are not recognized by the federal government as legal tender.
a. the intrinsic value of time deposits is nil.
b. the purchasing power of time deposits is much less stable than that of checkable deposits and currency.
c. they are not directly or immediately a medium of exchange.
d. they are not recognized by the federal government as legal tender.
c.
Currency in circulation is part of:
a. M1 only.
b. M2 not including M1.
c. neither M1 nor M2.
d. both M1 and M2.
a. M1 only.
b. M2 not including M1.
c. neither M1 nor M2.
d. both M1 and M2.
d.
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.
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.
b.
Assuming no 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.
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.
b.
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.
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.
a.
Answer the question on the basis of the following list of assets:
1. Large-denominated ($100,000 and over) time deposits
2. Noncheckable 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
Refer to the given list. The M2 definition of money comprises:
a. Items 2, 3, 4, 6, 7, 8, and 10.
b. Items 3, 4, 5, and 6.
c. Items 2, 3, 4, 6, 7, and 8.
d. All of the items listed.
c.
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.
d.
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.
d.
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.
d.
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
a. inversely.
b. directly during recessions but inversely during inflations.
c. directly but not proportionately.
d. directly and proportionately
a.
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.
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.
d.
The central authority of the U.S. banking system is the:
a. Federal Open Market Committee (FOMC).
b. Board of Governors of the Federal Reserve.
c. Federal Monetary Authority.
d. Council of Economic Advisers.
a. Federal Open Market Committee (FOMC).
b. Board of Governors of the Federal Reserve.
c. Federal Monetary Authority.
d. Council of Economic Advisers.
b.
The members 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.
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.
d.
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 12 Federal Reserve Banks.
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 12 Federal Reserve Banks.
a.
Research involving industrially advanced countries suggests that:
a. the more independent the central bank, the lower the average annual growth of real GDP.
b. the more independent the central bank, the higher the average annual growth of real GDP.
c. there is no relationship between the degree of independence of a country’s central bank and the growth rate of its real GDP.
d. the less independent the central bank, the higher the average annual rate of inflation.
a. the more independent the central bank, the lower the average annual growth of real GDP.
b. the more independent the central bank, the higher the average annual growth of real GDP.
c. there is no relationship between the degree of independence of a country’s central bank and the growth rate of its real GDP.
d. the less independent the central bank, the higher the average annual rate of inflation.
d.
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
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
d.
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.
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.
d.
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.
a. moral hazard.
b. adverse selection.
c. a prisoner’s dilemma.
d. shadow banking.
a.
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.
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.
c.
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?
a. Primary Dealer Credit Facility.
b. Commercial Paper Funding Facility.
c. Term Asset-Backed Securities Loan Facility.
d. Term Securities Lending Facility.
a. Primary Dealer Credit Facility.
b. Commercial Paper Funding Facility.
c. Term Asset-Backed Securities Loan Facility.
d. Term Securities Lending Facility.
d.
Charter One, Pentagon Federal Credit Union, and Boeing Employees Credit Union are all primarily:
a. commercial banks.
b. thrifts.
c. insurance companies.
d. pension funds.
a. commercial banks.
b. thrifts.
c. insurance companies.
d. pension funds.
b.
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.
a. Commercial banks and thrifts.
b. Insurance companies and mutual fund companies.
c. Thrifts and securities firms.
d. Pension fund companies and commercial banks.
a.
(Last Word) The Assistant U.S. Attorney General in charge of prosecuting financial crimes did which of the following in response to HSBC bank’s years of money laundering and helping firms and individuals cheat on their taxes?
a. Imposed fines on HSBC and prosecuted key executives so as to diminish moral hazard in the financial services industry.
b. Filed an antitrust lawsuit so as to break up HSBC without disrupting the financial system.
c. Imposed only modest fines on HSBC so as not to destabilize the bank and the financial system.
d. Imposed sanctions based on the provisions of the 2010 Wall Street Reform and Consumer Protection Act.
a. Imposed fines on HSBC and prosecuted key executives so as to diminish moral hazard in the financial services industry.
b. Filed an antitrust lawsuit so as to break up HSBC without disrupting the financial system.
c. Imposed only modest fines on HSBC so as not to destabilize the bank and the financial system.
d. Imposed sanctions based on the provisions of the 2010 Wall Street Reform and Consumer Protection Act.
c.
True or false:
The M2 money supply may be larger or smaller than the M1 money supply depending on the size of small-denominated time deposit balances and money market mutual fund balances held by individuals.
The M2 money supply may be larger or smaller than the M1 money supply depending on the size of small-denominated time deposit balances and money market mutual fund balances held by individuals.
False
True or false:
Currency and coins held by banks are part of the M1 definition of money supply.
Currency and coins held by banks are part of the M1 definition of money supply.
False
True or false:
The 12 Federal Reserve Banks are governmentally owned but privately controlled.
The 12 Federal Reserve Banks are governmentally owned but privately controlled.
False
True or false:
As of March 2009, the federal government and the Federal Reserve had spent $170 billion to keep AIG financially afloat.
As of March 2009, the federal government and the Federal Reserve had spent $170 billion to keep AIG financially afloat.
True
True or False:
The programs enacted to bail out the financial system from crisis in 2007 and 2008 helped alleviate the moral hazard problem in the financial industry.
The programs enacted to bail out the financial system from crisis in 2007 and 2008 helped alleviate the moral hazard problem in the financial industry.
False
True or False:
As part of its response to the financial crisis of 2007 and 2008, Federal Reserve Banks began paying interest on reserve deposits.
As part of its response to the financial crisis of 2007 and 2008, Federal Reserve Banks began paying interest on reserve deposits.
True
