Question 1

Item  Billions of Dollars  Checkable Deposits $597 Small Time Deposits 818 Currency 639 Money-Market Mutual Funds Held by Businesses 1,045 Savings Deposits, Including Money-Market Deposit Accounts 2,866 Money-Market Mutual Funds Held by Individuals 979\begin{array} { | l | c | } \hline  { 	ext { Item } } & 	ext { Billions of Dollars } \\hline 	ext { Checkable Deposits } & \$ 597 \\hline 	ext { Small Time Deposits } & 818 \\hline 	ext { Currency } & 639 \\hline 	ext { Money-Market Mutual Funds Held by Businesses } & 1,045 \\hline 	ext { Savings Deposits, Including Money-Market Deposit Accounts } & 2,866 \\hline 	ext { Money-Market Mutual Funds Held by Individuals } & 979 \\hline\end{array} Item  Checkable Deposits  Small Time Deposits  Currency  Money-Market Mutual Funds Held by Businesses  Savings Deposits, Including Money-Market Deposit Accounts  Money-Market Mutual Funds Held by Individuals ​ Billions of Dollars $5978186391,0452,866979​​  Refer to the accompanying table. The size of the M1 money supply is

Accepted Answer

A)   $979 billion.
B)   $1,236 billion.
C)   $1,415 billion.
D)   $1,618 billion. E) A) and B)
F) A) and C)

Question 2

Holding the money deposits of businesses and households and making loans to the public are the basic functions of

Accepted Answer

A)   the district banks of the Federal Reserve System.
B)   commercial banks and thrift institutions.
C)   the Federal Open Market Committee and the Board of Governors.
D)   the Federal Deposit Insurance Corporation and the Federal Savings and Loan Insurance Corporation.E) A) and B)
F) A) and C)

Question 3

To say "money is what money does" means that

Accepted Answer

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

Question 4

The Federal Open Market Committee (FOMC) regulates markets and enforces antitrust laws to keep markets open and
competitive.

Accepted Answer

A) True 
 B)False

Question 5

Money in the U.S. is essentially debt of

Accepted Answer

A)   businesses and the banks.
B)   the Federal Reserve System and the banks.
C)   the national and local governments.
D)   businesses and the Federal Reserve System.E) None of the above
F) A) and C)

Question 6

Which of the following ﬁnancial institutions declared bankruptcy as a result of the ﬁnancial crisis of 2007-2008?

Accepted Answer

A)   Merrill Lynch
B)   Lehman Brothers
C)   Goldman Sachs
D)   AIGE) B) and C)
F) All of the above

Question 7

During the Great Recession, the bailout money given to the car companies GM and Chrysler under the TARP program
came from the Fed acting in its role as lender of last resort.

Accepted Answer

A) True 
 B)False

Question 8

Money functions as a store of value if it allows you to

Accepted Answer

A)   measure the value of goods in a reliable way.
B)   make exchanges in a more eﬃcient manner.
C)   delay purchases until you want the goods.
D)   increase your conﬁdence in money.E) A) and B)
F) B) and C) C

Question 9

The most important among the Federal Reserve district banks in conducting monetary policy is the

Accepted Answer

A)   Boston bank.
B)   Chicago bank.
C)   New York bank.
D)   San Francisco bank.E) C) and D)
F) A) and D)

Question 10

Which of the following institutions does not provide checkable-deposit services to the general public?

Accepted Answer

A)   commercial banks
B)   savings and loan associations
C)   U.S. Treasury
D)   credit unionsE) B) and D)
F) A) and B) C

Question 11

To keep high inﬂation from eroding the value of money, monetary authorities in the United States

Accepted Answer

A)   create token money that is less than its intrinsic value.
B)   make paper money legal tender for the payment of debt.
C)   establish insurance on checkable deposit accounts.
D)   control the supply of money in the economy.E) A) and B)
F) All of the above

Question 12

Assuming no other changes, if checkable deposits decrease by $40 billion and balances in money market mutual funds increase by $40 billion, the

Accepted Answer

A)   M1 money supply will decline and the M2 money supply will remain unchanged.
B)   M1 and M2 money supplies will not change.
C)   M1 money supply will increase and the M2 money supply will remain unchanged.
D)   M1 and M2 money supplies will both decline.E) All of the above
F) A) and B)

Question 13

(Last Word)  The Glass-Steagall Act of 1933:

Accepted Answer

A)   encouraged the creation of large, interconnected ﬁnancial services ﬁrms.
B)   was a primary cause of the 2007-2008 ﬁnancial crisis and subsequent recession.
C)   created banks "too big to fail" and "too big to jail."
D)   separated high-risk and low-risk ﬁnancial activities across different ﬁrms.E) A) and C)
F) None of the above D

Question 14

Which of the following is not one of the causes of the skyrocketing mortgage default rates that triggered the ﬁnancial crisis in 2007-2008?

Accepted Answer

A)   Mortgage lending became very lax.
B)   Many people took on mortgages that they were simply incapable of repaying.
C)   Housing prices increased drastically.
D)   Real estate values started declining after having risen for many years.E) A) and B)
F) A) and C)

Question 15

Near monies

Accepted Answer

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 of exchange 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.E) All of the above
F) A) and B)

Question 16

As it relates to Federal Reserve activities, the acronym FOMC describes the

Accepted Answer

A)   Federal Open Market Committee.
B)   Federal Options Market Committee.
C)   Federal Organization for Monetary Control.
D)   Federal Organization for Money Creation.E) B) and C)
F) All of the above

Question 17

If the price index rises from 100 to 130, then the purchasing power of the dollar will fall by about

Accepted Answer

A)   15 percent.
B)   19 percent.
C)   23 percent.
D)   30 percent.E) A) and D)
F) B) and C)

Question 18

Purchasing groceries using a debit card best exempliﬁes money serving as a

Accepted Answer

A)   store of value.
B)   unit of account.
C)   medium of exchange.
D)   index of satisfaction.E) A) and C)
F) All of the above

Question 19

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.

Accepted Answer

A) True 
 B)False

Question 20

Item  Billions of Dollars  Checkable Deposits $2,000 Small Time Deposits 350 Currency Held by the Public 80 Savings Deposits, Including Money-Market Deposit Accounts 1,300 Money-Market Mutual Funds Held by Individuals 600 Money-Market Mutual Funds Held by Businesses 700\begin{array} { | l | r | } \hline { 	ext { Item } } & 	ext { Billions of Dollars } \\hline 	ext { Checkable Deposits } & \$ 2,000 \\hline 	ext { Small Time Deposits } & 350 \\hline 	ext { Currency Held by the Public } & 80 \\hline 	ext { Savings Deposits, Including Money-Market Deposit Accounts } & 1,300 \\hline 	ext { Money-Market Mutual Funds Held by Individuals } & 600 \\hline 	ext { Money-Market Mutual Funds Held by Businesses } & 700\\hline\end{array} Item  Checkable Deposits  Small Time Deposits  Currency Held by the Public  Savings Deposits, Including Money-Market Deposit Accounts  Money-Market Mutual Funds Held by Individuals  Money-Market Mutual Funds Held by Businesses ​ Billions of Dollars $2,000350801,300600700​​  The accompanying table contains hypothetical data for an economy. The size of the M2 money supply is

Accepted Answer

A)   $3,730 billion.
B)   $3,980 billion.
C)   $4,330 billion.
D)   $4,470 billion. E) None of the above
F) A) and B)

Exam 14: Money, Banking, and Financial Institutions

Correct Answer
verified

Holding the money deposits of businesses and households and making loans to the public are the basic functions of

Correct Answer
verified

To say "money is what money does" means that

Correct Answer
verified

The Federal Open Market Committee (FOMC) regulates markets and enforces antitrust laws to keep markets open and competitive.

Correct Answer
verified

Money in the U.S. is essentially debt of

Correct Answer
verified

Which of the following ﬁnancial institutions declared bankruptcy as a result of the ﬁnancial crisis of 2007-2008?

Correct Answer
verified

During the Great Recession, the bailout money given to the car companies GM and Chrysler under the TARP program came from the Fed acting in its role as lender of last resort.

Correct Answer
verified

Money functions as a store of value if it allows you to

Correct Answer
verified
C

The most important among the Federal Reserve district banks in conducting monetary policy is the

Correct Answer
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Which of the following institutions does not provide checkable-deposit services to the general public?

Correct Answer
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C

To keep high inﬂation from eroding the value of money, monetary authorities in the United States

Correct Answer
verified

Assuming no other changes, if checkable deposits decrease by $40 billion and balances in money market mutual funds increase by $40 billion, the

Correct Answer
verified

(Last Word) The Glass-Steagall Act of 1933:

Correct Answer
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D

Which of the following is not one of the causes of the skyrocketing mortgage default rates that triggered the ﬁnancial crisis in 2007-2008?

Correct Answer
verified

Near monies

Correct Answer
verified

As it relates to Federal Reserve activities, the acronym FOMC describes the

Correct Answer
verified

If the price index rises from 100 to 130, then the purchasing power of the dollar will fall by about

Correct Answer
verified

Purchasing groceries using a debit card best exempliﬁes money serving as a

Correct Answer
verified

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.

Correct Answer
verified

Correct Answer
verified

Exam 14: Money, Banking, and Financial Institutions

Correct AnswerverifiedShow Answer

Holding the money deposits of businesses and households and making loans to the public are the basic functions of

Correct AnswerverifiedShow Answer

To say "money is what money does" means that

Correct AnswerverifiedShow Answer

The Federal Open Market Committee (FOMC) regulates markets and enforces antitrust laws to keep markets open and competitive.

Correct AnswerverifiedShow Answer

Money in the U.S. is essentially debt of

Correct AnswerverifiedShow Answer

Which of the following ﬁnancial institutions declared bankruptcy as a result of the ﬁnancial crisis of 2007-2008?

Correct AnswerverifiedShow Answer

During the Great Recession, the bailout money given to the car companies GM and Chrysler under the TARP program came from the Fed acting in its role as lender of last resort.

Correct AnswerverifiedShow Answer

Money functions as a store of value if it allows you to

Correct AnswerverifiedC

The most important among the Federal Reserve district banks in conducting monetary policy is the

Correct AnswerverifiedShow Answer

Which of the following institutions does not provide checkable-deposit services to the general public?

Correct AnswerverifiedC

To keep high inﬂation from eroding the value of money, monetary authorities in the United States

Correct AnswerverifiedShow Answer

Assuming no other changes, if checkable deposits decrease by $40 billion and balances in money market mutual funds increase by $40 billion, the

Correct AnswerverifiedShow Answer

(Last Word) The Glass-Steagall Act of 1933:

Correct AnswerverifiedD

Which of the following is not one of the causes of the skyrocketing mortgage default rates that triggered the ﬁnancial crisis in 2007-2008?

Correct AnswerverifiedShow Answer

Near monies

Correct AnswerverifiedShow Answer

As it relates to Federal Reserve activities, the acronym FOMC describes the

Correct AnswerverifiedShow Answer

If the price index rises from 100 to 130, then the purchasing power of the dollar will fall by about

Correct AnswerverifiedShow Answer

Purchasing groceries using a debit card best exempliﬁes money serving as a

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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C

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C

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D

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