Question 1

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) A) and B)
F) A) and D)

Question 2

When paper money is designated as legal tender, it means that

Accepted Answer

A)   it is printed by the government.
B)   its supply is controlled by the government.
C)   it is a means of payment by law.
D)   it will be accepted by the government.E) A) and B)
F) A) and C)

Question 3

An inﬂation rate of 8 percent would erode the purchasing power of the dollar by

Accepted Answer

A)   8.0 percent.
B)   7.4 percent.
C)   4.4 percent.
D)   12.5 percent.E) B) and D)
F) None of the above

Question 4

Checkable deposits include

Accepted Answer

A)   both large- and small-denominated time deposits.
B)   the deposits held by banks and thrifts on which checks can be written.
C)   only the checkable deposits of commercial banks.
D)   only the checkable deposits of thrift institutions.E) B) and C)
F) B) and D)

Question 5

Items 1. Money market mutual funds held by individuals
2)  Savings deposits, including money market deposit accounts
3)  Money market mutual funds held by businesses
4)  Currency held by the public
5)  Small time deposits
6)  Checkable deposits
Refer to the accompanying list. Which items are included in the M2 money supply but not the M1 money supply?

Accepted Answer

A)   1 and 7
B)   3 and 5
C)   1 and 2
D)   1, 2, and 5E) A) and C)
F) None of the above

Question 6

To say that the Federal Reserve Banks are quasi-public banks means that

Accepted Answer

A)   they are privately owned but managed in the public interest.
B)   they deal only with banks of foreign nations and do not have direct business contact with U.S. banks.
C)   they deal only with commercial banks, and not the public.
D)   they are publicly owned but privately managed.E) A) and C)
F) A) and B)

Question 7

Which of the following statements is true about the high rate of mortgage defaults that contributed to the ﬁnancial crisis of 2007-2008?

Accepted Answer

A)   High interest rates on mortgage loans were the primary cause of defaults.
B)   The high rate of defaults occurred despite the efforts of government to discourage new home ownership and slow the growth of the housing bubble.
C)   Prior to the rise in defaults, banks had become lax in their lending practices, resulting in a large number of bad loans.
D)   The high rate of defaults resulted primarily from the two years of recession preceding the mortgage default crisis.E) A) and D)
F) A) and C)

Question 8

The difference between M1 and M2 is that

Accepted Answer

A)   the former includes time deposits.
B)   the latter includes small-denominated time deposits, savings accounts, money market deposit accounts, and money market mutual fund balances.
C)   the latter includes negotiable government bonds.
D)   the latter includes cash held by commercial banks and the U.S. Treasury.E) C) and D)
F) All of the above

Question 9

Item  Billions of Dollars  Checkable Deposits $2,180 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 } & \$ 2,180 \\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 $2,180350801,300600700​​  The accompanying table contains hypothetical data for an economy. The size of the M1 money supply is

Accepted Answer

A)   $2,260 billion.
B)   $2,180 billion.
C)   $80 billion.
D)   $2,860 billion.
E)   $2,610 billion. F) D) and E)
G) B) and E)

Question 10

Money market deposit accounts are included in

Accepted Answer

A)   M1 only.
B)   M2 only.
C)   neither M1 nor M2.
D)   both M1 and M2.E) A) and D)
F) A) and C)

Question 11

In the ﬁnancial industry, "securitization" refers to

Accepted Answer

A)   increasing insurance protection on bank deposits.
B)   requiring greater down payments on home purchases to reduce mortgage default risk.
C)   bundling groups of loans, bonds, mortgages, and other ﬁnancial debts into new securities.
D)   increasing collateral requirements on loans.E) None of the above
F) A) and C)

Question 12

(Consider This)  Which of the following is not part of the M2 money supply?

Accepted Answer

A)   currency in circulation
B)   credit card balances
C)   small-denominated time deposits of less than $100,000
D)   checkable depositsE) All of the above
F) B) and D)

Question 13

When you use money to purchase groceries, money is functioning as a store of value.

Accepted Answer

A) True 
 B)False

Question 14

One reason that near monies are important is because

Accepted Answer

A)   they simplify the deﬁnition of money and therefore the formulation of monetary policy.
B)   they can be easily converted into money or vice versa, and thereby can inﬂuence the stability of the economy.
C)   they do not reﬂect the level of consumer spending but they have a critical impact on saving and investment in the economy.
D)   credit cards synchronize one's expenditures and income, thereby reducing the cash and checkable deposits one must hold.E) A) and C)
F) B) and D)

Question 15

Which of the following is not true about subprime mortgage loans?

Accepted Answer

A)   They played a central role in the ﬁnancial crisis of 2007-2008.
B)   They were encouraged by the Federal government for many years before the ﬁnancial crisis.
C)   They had always been discouraged by the government and even banned in some cases.
D)   They were considered high-risk loans because the borrowers had poor credit ratings.E) B) and C)
F) A) and D)

Question 16

(Consider This) Are credit cards money? Explain.

Accepted Answer

No, credit cards are not money...

Question 17

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) B) and C)
F) A) and B)

Question 18

Year  Price Level  Value of Dollar 11.00$1.0021.2530.8040.50\begin{array} { | c | c | c | } \hline 	ext { Year } & 	ext { Price Level } & 	ext { Value of Dollar } \\hline 1 & 1.00 & \$ 1.00 \\hline 2 & 1.25 & \\hline 3 & 0.80 & \\hline 4 & 0.50 & \\hline\end{array} Year 1234​ Price Level 1.001.250.800.50​ Value of Dollar $1.00​​  Refer to the given table. The value of the dollar in year 4 is

Accepted Answer

A)   $1.50.
B)   $0.33.
C)   $0.50.
D)   $2.00. E) C) and D)
F) A) and C)

Question 19

Which of the following is included as part of the M1 money supply?

Accepted Answer

A)   $200,000 balance in the checking account of Main Street Trading Corp.
B)   $200,000 in reserves held by Main Street Commercial Bank in its vaults
C)   $2 million balance in the checking account of the U.S. Treasury
D)   $200 million in the vaults of the Federal Reserve BanksE) B) and D)
F) All of the above

Question 20

The currency held in the vaults of commercial banks is included in the money supply M1.

Accepted Answer

A) True 
 B)False

Exam 14: Money, Banking, and Financial Institutions

When you use money to purchase groceries, money is functioning as a store of value.

Correct Answer
verified

(Consider This) Are credit cards money? Explain.

Correct Answer
verified
No, credit cards are not money...
View Answer

One reason that near monies are important is because

Correct Answer
verified

Which of the following is not true about subprime mortgage loans?

Correct Answer
verified

(Consider This) Which of the following is not part of the M2 money supply?

Correct Answer
verified

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

Correct Answer
verified

An inﬂation rate of 8 percent would erode the purchasing power of the dollar by

Correct Answer
verified

Which of the following is included as part of the M1 money supply?

Correct Answer
verified

Which of the following statements is true about the high rate of mortgage defaults that contributed to the ﬁnancial crisis of 2007-2008?

Correct Answer
verified

Money market deposit accounts are included in

Correct Answer
verified

When paper money is designated as legal tender, it means that

Correct Answer
verified

Checkable deposits include

Correct Answer
verified

The currency held in the vaults of commercial banks is included in the money supply M1.

Correct Answer
verified

Correct Answer
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To say that the Federal Reserve Banks are quasi-public banks means that

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
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The difference between M1 and M2 is that

Correct Answer
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$\begin{array} { | c | c | c | } \hline \text { Year } & \text { Price Level } & \text { Value of Dollar } \\\hline 1 & 1.00 & \$ 1.00 \\\hline 2 & 1.25 & \\\hline 3 & 0.80 & \\\hline 4 & 0.50 & \\\hline\end{array}$ Refer to the given table. The value of the dollar in year 4 is

Correct Answer
verified

In the ﬁnancial industry, "securitization" refers to

Correct Answer
verified

Exam 14: Money, Banking, and Financial Institutions

When you use money to purchase groceries, money is functioning as a store of value.

Correct AnswerverifiedShow Answer

(Consider This) Are credit cards money? Explain.

Correct AnswerverifiedNo, credit cards are not money...View AnswerShow Answer

One reason that near monies are important is because

Correct AnswerverifiedShow Answer

Which of the following is not true about subprime mortgage loans?

Correct AnswerverifiedShow Answer

(Consider This) Which of the following is not part of the M2 money supply?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An inﬂation rate of 8 percent would erode the purchasing power of the dollar by

Correct AnswerverifiedShow Answer

Which of the following is included as part of the M1 money supply?

Correct AnswerverifiedShow Answer

Which of the following statements is true about the high rate of mortgage defaults that contributed to the ﬁnancial crisis of 2007-2008?

Correct AnswerverifiedShow Answer

Money market deposit accounts are included in

Correct AnswerverifiedShow Answer

When paper money is designated as legal tender, it means that

Correct AnswerverifiedShow Answer

Checkable deposits include

Correct AnswerverifiedShow Answer

The currency held in the vaults of commercial banks is included in the money supply M1.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

To say that the Federal Reserve Banks are quasi-public banks means that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The difference between M1 and M2 is that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the ﬁnancial industry, "securitization" refers to

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
No, credit cards are not money...
View Answer

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Correct Answer
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