Question 1

An asset's liquidity refers to its ability to be

Accepted Answer

A)  bought and stored.
B)  increasing in value over time.
C)  used and enjoyed.
D)  a means of payment.E) None of the above
F) B) and C)

Question 2

The paper money, or currency, in the United States essentially represents

Accepted Answer

A)  a debt of commercial banks and savings institutions.
B)  a debt of the U.S.Treasury.
C)  an asset of the Federal government.
D)  a debt of the Federal Reserve System.E) A) and B)
F) A) and C)

Question 3

Which of the following trends had been happening in the banking industry even before the Financial Crisis of 2007-2008?

Accepted Answer

A)  an expansion in the number of banks and thrifts
B)  a consolidation of services offered by financial institutions
C)  a decrease in the integration of global financial markets
D)  an increase in the amount of savings held by banks relative to other financial institutionsE) C) and D)
F) A) and D)

Question 4

Unlike banks, thrifts are not subject to monetary control by the Fed, and thus they (thrifts) do not have to hold reserves against their checkable deposits.

Accepted Answer

A) True 
 B)False

Question 5

The Federal Reserve System

Accepted Answer

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.E) A) and B)
F) A) and C)

Question 6

(Last Word)  The Federal Reserve policy of "extend and pretend"

Accepted Answer

A)  meant that the Fed did not distinguish in its lender of last resort function between solvent and insolvent firms.
B)  was praised for preventing a financial meltdown in which many solvent and insolvent firms would have failed.
C)  is accurately described by all of the other answers.
D)  was criticized for increasing moral hazard in the financial system.E) All of the above
F) C) and D)

Question 7

Members of the Federal Reserve Board of Governors are

Accepted Answer

A)  appointed by Congress to staggered 14-year terms.
B)  selected by the Federal Open Market Committee for 4-year terms.
C)  appointed by the president to staggered 14-year terms.
D)  selected by each of the Federal Reserve banks for 4-year terms.E) B) and D)
F) A) and D)

Question 8

Which of the following items are included in money supply M2 but not M1?

Accepted Answer

A)  Federal Reserve notes
B)  coins
C)  savings deposits
D)  checkable depositsE) B) and D)
F) B) and C)

Question 9

A $20 bill is a

Accepted Answer

A)  gold certificate.
B)  Treasury note.
C)  Treasury bill.
D)  Federal Reserve note.E) None of the above
F) A) and D)

Question 10

The Federal Reserve System is an

Accepted Answer

A)  agency that is controlled by Congress.
B)  agency that is under the direction of the president.
C)  independent agency of government.
D)  agency run by popularly elected officials.E) A) and D)
F) A) and C)

Question 11

As of February 2016, the supply of money (M1)  in the United States was about

Accepted Answer

A)  $2,472 billion.
B)  $3,105 billion.
C)  $1,359 billion.
D)  $12,479 billion.E) A) and B)
F) A) and C)

Question 12

Which of the following is not true about the Federal Reserve Banks?

Accepted Answer

A)  They serve as bankers' banks.
B)  They are privately owned but government controlled.
C)  Unlike other banks, they are not motivated by profits.
D)  They compete with commercial banks in their basic functions.E) B) and C)
F) A) and D)

Question 13

Checkable deposits are included in

Accepted Answer

A)  M1 but not in M2.
B)  M2 but not in M1.
C)  both M1 and M2.
D)  neither M1 nor M2.E) All of the above
F) None of the above

Question 14

Which of the following is not true about the use of a credit card?

Accepted Answer

A)  It is a means of deferring payment for a short period of time.
B)  It allows people to "economize" on the use of money.
C)  Credit card balances are part of M2 but not part of M1.
D)  A credit card transaction is not the same as a debit card transaction.E) A) and B)
F) B) and C)

Question 15

Which group is responsible for the policy decision of changing the money supply?

Accepted Answer

A)  Federal Open Market Committee
B)  Office of Management and Budget
C)  Thrift Advisory Council
D)  Federal Advisory CouncilE) C) and D)
F) None of the above

Question 16

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 10E) A) and B)
F) C) and D)

Question 17

If the purchasing power of the dollar is falling, then it follows that

Accepted Answer

A)  the price index is falling.
B)  the price index is rising.
C)  nominal incomes are falling.
D)  interest rates are rising.E) A) and B)
F) B) and C)

Question 18

How much did the U.S.Congress allocate to the Troubled Asset Relief Program in 2008?

Accepted Answer

A)  $170 billion
B)  $700 billion
C)  $787 billion
D)  $885 billionE) B) and D)
F) None of the above

Question 19

Traditionally, the Federal Reserve can give emergency loans only to

Accepted Answer

A)  securities firms.
B)  commercial banks.
C)  investment banks.
D)  manufacturing firms.E) A) and D)
F) A) and B)

Question 20

In the U.S.economy, the money supply is controlled by the

Accepted Answer

A)  U.S.Treasury.
B)  Federal Reserve System.
C)  Senate Committee on Banking and Finance.
D)  Congress.E) A) and D)
F) B) and D)

Exam 34: Money, Banking, and Financial Institutions

Traditionally, the Federal Reserve can give emergency loans only to

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As of February 2016, the supply of money (M1) in the United States was about

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The paper money, or currency, in the United States essentially represents

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Which group is responsible for the policy decision of changing the money supply?

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Which of the following is not true about the use of a credit card?

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A $20 bill is a

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In the U.S.economy, the money supply is controlled by the

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(Last Word) The Federal Reserve policy of "extend and pretend"

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Which of the following items are included in money supply M2 but not M1?

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The Federal Reserve System

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Which of the following trends had been happening in the banking industry even before the Financial Crisis of 2007-2008?

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If the purchasing power of the dollar is falling, then it follows that

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Currency held in bank vaults Which of the following are considered to be near monies?

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Checkable deposits are included in

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Members of the Federal Reserve Board of Governors are

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How much did the U.S.Congress allocate to the Troubled Asset Relief Program in 2008?

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Which of the following is not true about the Federal Reserve Banks?

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The Federal Reserve System is an

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Unlike banks, thrifts are not subject to monetary control by the Fed, and thus they (thrifts) do not have to hold reserves against their checkable deposits.

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An asset's liquidity refers to its ability to be

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