Question 1

Money is:

Accepted Answer

A)  the set of all assets that are regularly used to directly purchase goods and services.
B)  represented by the amount of dollars and coins in our economy.
C)  controlled by the supply and demand of goods and services on which our money is spent.
D)  All of these are true.E) None of the above
F) A) and C)

Question 2

Your savings account balance would be counted in which measure of money?

Accepted Answer

A)  M1
B)  M2
C)  Hard money
D)  It would be counted in both M1 and M2E) A) and C)
F) None of the above

Question 3

If the money multiplier is approximated to be 4,then the reserve ratio must be:

Accepted Answer

A)  25 percent.
B)  2.5 percent.
C)  5 percent.
D)  4 percent.E) All of the above
F) A) and B)

Question 4

The Federal Reserve:

Accepted Answer

A)  is the central bank of the United States.
B)  sets the budget for the U.S.government.
C)  is appointed by the president of the United States.
D)  All of these are true.E) C) and D)
F) None of the above

Question 5

The Fed changes the reserve requirement sparingly because:

Accepted Answer

A)  very small changes cause very large overall changes to money supply due to the money multiplier.
B)  it would cause uncertainty for banks and slow their rate of lending.
C)  sudden changes of such a huge magnitude would have far-reaching,and sometimes undesirable,effects.
D)  All of these are true.E) A) and B)
F) C) and D)

Question 6

If people decide to hold some of their cash and not deposit it,then:

Accepted Answer

A)  the money multiplier overestimates how much money will be created in the economy.
B)  the money multiplier underestimates how much money will be created in the economy.
C)  the reserve ratio is not fully functioning,and should be raised.
D)  the reserve ratio is not fully functioning,and should be lowered.E) A) and B)
F) C) and D)

Question 7

In the United States,the central bank is the:

Accepted Answer

A)  Federal Reserve.
B)  Congressional Budgeting Office.
C)  Treasury.
D)  National Bank of the United States.E) A) and D)
F) A) and C)

Question 8

We say that money is a medium of exchange because it represents:

Accepted Answer

A)  a certain amount of purchasing power held over time.
B)  something you can use to purchase goods and services.
C)  something you can directly offer,like any good or service,in exchange for some good or service you want.
D)  a standard unit of comparison.E) A) and C)
F) B) and C)

Question 9

An example of a good that can be used for money that has intrinsic value is:

Accepted Answer

A)  cigarettes.
B)  fish.
C)  gold.
D)  All of these have intrinsic value.E) A) and B)
F) A) and C)

Question 10

The chairman of the Federal Reserve System:

Accepted Answer

A)  is approved by the House of Representatives and the Senate.
B)  serves a four-year term.
C)  is independent of the Board of Governors,to maintain objectivity.
D)  All of these are true.E) A) and D)
F) C) and D)

Question 11

When goods that have intrinsic value are used as money,if their value as money falls,the good:

Accepted Answer

A)  is still useful to people for other reasons.
B)  loses its intrinsic value.
C)  is no longer useful to people for other reasons.
D)  tends to gain in intrinsic value.E) B) and C)
F) A) and C)

Question 12

Central banks:

Accepted Answer

A)  exist in almost every major nation.
B)  are common only to industrialized nations.
C)  in the United States oversee the U.S.economy,as well as some developing nations who do not have a central bank.
D)  stopped being used after events like the Great Depression proved them useless.E) None of the above
F) A) and C)

Question 13

If the economy is in a recession,the Fed is likely to:

Accepted Answer

A)  buy bonds through open market operations.
B)  increase the discount rate.
C)  increase the reserve requirement.
D)  The Fed is likely to do any of these during a recession.E) B) and C)
F) C) and D)

Question 14

A bank run is:

Accepted Answer

A)  the situation that arises from fear that the bank is in danger of running out of money.
B)  when all depositors from a single bank demand to withdraw all deposits at once.
C)  when a bank's reserves are not enough to satisfy all withdrawal demands.
D)  All of these are true.E) A) and B)
F) A) and C)

Question 15

The Federal Reserve System consists of 12 ___________ and 7 ______________.

Accepted Answer

A)  regional banks;Board of Governor's members
B)  Board of Governor's members;regional banks
C)  regional banks;member banks
D)  member banks;regional banksE) A) and B)
F) None of the above

Question 16

The essential functions of any central bank are:

Accepted Answer

A)  managing the money supply,and acting as a lender of last resort.
B)  overseeing major business transactions,and managing the money supply.
C)  preventing the formulation of monopolies or other market failure,and acting as a lender of last resort.
D)  collecting taxes,and managing the supply of money.E) All of the above
F) None of the above

Question 17

Hard money:

Accepted Answer

A)  is the least narrow definition of money.
B)  includes cash.
C)  cannot always be used in transactions immediately,but is accessible.
D)  All of these are true.E) A) and B)
F) A) and C)

Question 18

Banks have historically used the discount window:

Accepted Answer

A)  sparingly,until the financial crisis of 2008.
B)  often,until the financial crisis of 2008.
C)  sparingly during recessions,and often during booms.
D)  often during recessions,and sparingly during booms.E) A) and C)
F) A) and B)

Question 19

Monetary policy primarily influences the economy through changes in:

Accepted Answer

A)  the interest rate.
B)  spending by government.
C)  spending by the Fed.
D)  the discount rate.E) None of the above
F) B) and C)

Question 20

The ratio of the total amount of demand deposits at a bank to the amount kept as cash reserves is known as:

Accepted Answer

A)  the reserve ratio.
B)  the demand deposit ratio.
C)  the demand-reserve ratio.
D)  the federal funds rate.E) A) and B)
F) A) and C)

Exam 31: Money and the Monetary System

If people decide to hold some of their cash and not deposit it,then:

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Central banks:

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Your savings account balance would be counted in which measure of money?

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The ratio of the total amount of demand deposits at a bank to the amount kept as cash reserves is known as:

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When goods that have intrinsic value are used as money,if their value as money falls,the good:

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The Fed changes the reserve requirement sparingly because:

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We say that money is a medium of exchange because it represents:

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The essential functions of any central bank are:

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If the economy is in a recession,the Fed is likely to:

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The chairman of the Federal Reserve System:

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If the money multiplier is approximated to be 4,then the reserve ratio must be:

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The Federal Reserve System consists of 12 ___________ and 7 ______________.

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Hard money:

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Banks have historically used the discount window:

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Monetary policy primarily influences the economy through changes in:

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An example of a good that can be used for money that has intrinsic value is:

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The Federal Reserve:

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In the United States,the central bank is the:

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Money is:

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A bank run is:

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The Federal Reserve System consists of 12 _ and 7 ____.

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