Question 1

Which of the following would be considered to be the most liquid?

Accepted Answer

A)  checkable deposits
B)  small time deposits
C)  money market mutual funds
D)  savings depositsE) All of the above
F) B) and C)

Question 2

The Bureau of Consumer Financial Protection was created in 2010 to become part of the

Accepted Answer

A)  U.S.Treasury Department.
B)  Federal Reserve System.
C)  Department of Commerce.
D)  Office of the President.E) B) and C)
F) None of the above

Question 3

To say that coins are "token money" means that

Accepted Answer

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

Question 4

(Last Word)  During the financial crisis of 2007-2008, the Federal Reserve

Accepted Answer

A)  suspended its role as lender of last resort so that the financial market could correct itself.
B)  acquired the assets of a number of bankrupt firms.
C)  served as a lender of last resort to solvent, but not insolvent, firms.
D)  served as a lender of last resort to both solvent and insolvent firms.E) B) and D)
F) None of the above

Question 5

The Financial Crisis of 2007-2008 halted the consolidation in the U.S.financial industry that had caused a declining number but increasing size of firms in the industry prior to the crisis.

Accepted Answer

A) True 
 B)False

Question 6

The amount of money reported as M2

Accepted Answer

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.E) B) and D)
F) None of the above

Question 7

The Federal Open Market Committee (FOMC)  is made up of

Accepted Answer

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 members 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 Bank presidents on a rotating basis.E) A) and B)
F) B) and C)

Question 8

The so-called near monies have the following characteristics, except

Accepted Answer

A)  highly liquid assets.
B)  not a means of payment.
C)  part of money supply M1.
D)  readily converted into cash.E) C) and D)
F) B) and D)

Question 9

Which group aids the Board of Governors of the Federal Reserve System in conducting monetary policy?

Accepted Answer

A)  U.S.Treasury
B)  U.S.Congress
C)  Federal Advisory Council
D)  Federal Open Market CommitteeE) A) and D)
F) B) and D)

Question 10

Currency held within banks is part of

Accepted Answer

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)  neither the M1 nor the M2 definition of the money supply.E) A) and B)
F) B) and C)

Question 11

Checkable deposits are

Accepted Answer

A)  debts of commercial banks and savings institutions.
B)  debts of the Federal government and government agencies.
C)  assets of the Federal government and government agencies.
D)  assets of commercial banks and savings institutions.E) B) and D)
F) None of the above

Question 12

Laws passed in the late 1990s restricted the activities of financial firms to narrowly defined services they could provide, prompting the financial crisis of 2007 and 2008.

Accepted Answer

A) True 
 B)False

Question 13

What function is money serving when you use it when you go shopping?

Accepted Answer

A)  a store of value
B)  a unit of account
C)  a medium of deferred payment
D)  a medium of exchangeE) A) and D)
F) A) and B)

Question 14

The central authority of the U.S.banking system is the

Accepted Answer

A)  Federal Open Market Committee (FOM
C)  .
B)  Board of Governors of the Federal Reserve.
C)  Federal Monetary Authority.
D)  Council of Economic Advisers.E) B) and D)
F) B) and C)

Question 15

The so-called moral-hazard problem in financial management refers to the fact that managers will tend to take on more risk if they know that they are somehow insured against some or all of their losses.

Accepted Answer

A) True 
 B)False

Question 16

Commercial banks and thrift institutions

Accepted Answer

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.E) A) and D)
F) None of the above

Question 17

Coins in people's pockets and purses are

Accepted Answer

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)  excluded from M1 and M2 because people can exchange them for Federal Reserve notes.E) C) and D)
F) A) and C)

Question 18

Securitization, the process of forming new securities by bundling or slicing up groups of securities like mortgages and bonds, is

Accepted Answer

A)  a way of reducing risk through diversification.
B)  well understood by financial analysts and managers who engaged in it.
C)  considered shady by legitimate financial institutions.
D)  still only a minor portion of the modern financial system.E) C) and D)
F) B) and C)

Question 19

The Financial Crisis of 2007-2008 was triggered by problems in the dot-com sector of the economy.

Accepted Answer

A) True 
 B)False

Question 20

Banks lost money during the mortgage default crisis because

Accepted Answer

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.E) A) and C)
F) All of the above

Exam 34: Money, Banking, and Financial Institutions

Banks lost money during the mortgage default crisis because

Correct AnswerverifiedShow Answer

The so-called moral-hazard problem in financial management refers to the fact that managers will tend to take on more risk if they know that they are somehow insured against some or all of their losses.

Correct AnswerverifiedShow Answer

The Bureau of Consumer Financial Protection was created in 2010 to become part of the

Correct AnswerverifiedShow Answer

The Financial Crisis of 2007-2008 was triggered by problems in the dot-com sector of the economy.

Correct AnswerverifiedShow Answer

Currency held within banks is part of

Correct AnswerverifiedShow Answer

Commercial banks and thrift institutions

Correct AnswerverifiedShow Answer

Laws passed in the late 1990s restricted the activities of financial firms to narrowly defined services they could provide, prompting the financial crisis of 2007 and 2008.

Correct AnswerverifiedShow Answer

Checkable deposits are

Correct AnswerverifiedShow Answer

To say that coins are "token money" means that

Correct AnswerverifiedShow Answer

The so-called near monies have the following characteristics, except

Correct AnswerverifiedShow Answer

The Financial Crisis of 2007-2008 halted the consolidation in the U.S.financial industry that had caused a declining number but increasing size of firms in the industry prior to the crisis.

Correct AnswerverifiedShow Answer

Securitization, the process of forming new securities by bundling or slicing up groups of securities like mortgages and bonds, is

Correct AnswerverifiedShow Answer

The amount of money reported as M2

Correct AnswerverifiedShow Answer

Which group aids the Board of Governors of the Federal Reserve System in conducting monetary policy?

Correct AnswerverifiedShow Answer

What function is money serving when you use it when you go shopping?

Correct AnswerverifiedShow Answer

The central authority of the U.S.banking system is the

Correct AnswerverifiedShow Answer

The Federal Open Market Committee (FOMC) is made up of

Correct AnswerverifiedShow Answer

(Last Word) During the financial crisis of 2007-2008, the Federal Reserve

Correct AnswerverifiedShow Answer

Which of the following would be considered to be the most liquid?

Correct AnswerverifiedShow Answer

Coins in people's pockets and purses are

Correct AnswerverifiedShow Answer

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