Question 1

The government bailout of large institutions creates the problem of moral hazard, which means that these large ﬁrms will

Accepted Answer

A)   not be able to pay back the bailout money.
B)   have an incentive to make highly risky investments.
C)   now have to play it safer to reduce their risks.
D)   be limited in terms of the securities and services that they get involved in.E) B) and D)
F) C) and D)

Question 2

The paper currencies of the United States are also called

Accepted Answer

A)   Federal Reserve notes.
B)   Treasury bills.
C)   U.S. Government notes.
D)   Treasury bonds.E) B) and C)
F) B) and D)

Question 3

Currency and checkable deposits are

Accepted Answer

A)   assets of the Federal Reserve Banks or of ﬁnancial institutions.
B)   redeemable for gold and silver from the Federal Reserve System.
C)   of intrinsic value, which determines the relative worth of money.
D)   the major components of money supply M1.E) A) and D)
F) B) and D)

Question 4

The M2 money supply is larger than the M1 money supply.

Accepted Answer

A) True 
 B)False

Question 5

What is a commercial bank? What kinds of loans do they provide?

Accepted Answer

A commercial bank is a ﬁrm that engages ...

Question 6

"Subprime mortgage loans" refer to

Accepted Answer

A)   high-interest-rate loans to home buyers with above-average credit risk.
B)   home-buying loans that charge interest rates below the prime interest rate.
C)   loans to buyers of homes that are in need of substantial repair.
D)   loans from the Federal Reserve to home mortgage lenders to support a greater volume of home-buying loans at affordable interest rates.E) A) and C)
F) C) and D)

Question 7

The value of money in the United States is based on the stock of gold and silver held by the United States government.

Accepted Answer

A) True 
 B)False

Question 8

Money Market Mutual Fund Balances Held by Businesses $100 Money Market Mutual Fund Balances Held by Individuals 220 Currency in Banks 10 Currency in Circulation 60 Savings Deposits, Including Money Market Deposit Accounts 50 Large-denominated ($100,000 or more)  Time Deposits 180 Small-denominated ( $100,000 or less)  Time Deposits 80 Checkable Deposits 70\begin{array} { | l | c | } \hline 	ext { Money Market Mutual Fund Balances Held by Businesses } & \$ 100 \\hline 	ext { Money Market Mutual Fund Balances Held by Individuals } & 220 \\hline 	ext { Currency in Banks } & 10 \\hline 	ext { Currency in Circulation } & 60 \\hline 	ext { Savings Deposits, Including Money Market Deposit Accounts } & 50 \\hline 	ext { Large-denominated (\$100,000 or more)  Time Deposits } & 180 \\hline 	ext { Small-denominated ( } \$ 100,000 	ext { or less)  Time Deposits } & 80 \\hline 	ext { Checkable Deposits } & 70\\hline\end{array} Money Market Mutual Fund Balances Held by Businesses  Money Market Mutual Fund Balances Held by Individuals  Currency in Banks  Currency in Circulation  Savings Deposits, Including Money Market Deposit Accounts  Large-denominated ($100,000 or more)  Time Deposits  Small-denominated ( $100,000 or less)  Time Deposits  Checkable Deposits ​$1002201060501808070​​  Refer to the table. Money supply M2 for this economy is

Accepted Answer

A)   $480.
B)   $130.
C)   $490.
D)   $630. E) None of the above
F) B) and C)

Question 9

(Consider This)  Credit card balances are

Accepted Answer

A)   a component of M1.
B)   a component of M2 but not of M1.
C)   a component of M1 but not of M2.
D)   not a component of M1 or M2.E) A) and B)
F) A) and C)

Question 10

Assuming no other changes, if checkable deposits increase by $40 billion and currency in circulation decreases by $40 billion, the

Accepted Answer

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

Question 11

Which of the following ﬁnancial institutions was acquired by Bank of America as a result of the ﬁnancial crisis of 2007- 2008?

Accepted Answer

A)   Merrill Lynch
B)   Lehman Brothers
C)   Goldman Sachs
D)   AIGE) None of the above
F) A) and B)

Question 12

If a ﬁrm possesses assets whose value exceeds the value of its debts, the ﬁrm is said to be

Accepted Answer

A)   insolvent.
B)   illiquid.
C)   solvent.
D)   liquid.E) A) and D)
F) None of the above

Question 13

How many members can serve on the Board of Governors of the Federal Reserve System?

Accepted Answer

A)   7
B)   9
C)   12
D)   14E) A) and D)
F) All of the above

Question 14

Money supply M1 does not include the currency held by

Accepted Answer

A)   households in their wallets or purses.
B)   business ﬁrms.
C)   commercial banks.
D)   state and local governments.E) A) and B)
F) A) and C)

Question 15

As of March 2019, the supply of money (M1)  in the United States was about

Accepted Answer

A)   $2,472 billion.
B)   $3,760 billion.
C)   $1,359 billion.
D)   $12,479 billion.E) A) and B)
F) A) and C)

Question 16

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

Question 17

Other things equal, an excessive increase in the money supply will

Accepted Answer

A)   increase the purchasing power of each dollar.
B)   decrease the purchasing power of each dollar.
C)   have no impact on the purchasing power of the dollar.
D)   reduce the price level.E) A) and C)
F) B) and D)

Question 18

(Last Word)  After years of helping terrorist groups launder money, and aiding Iran and North Korea evade sanctions, HSBC bank was:

Accepted Answer

A)   ﬁned about ﬁve weeks' worth of proﬁts.
B)   taken over and run by the government, pending reorganization.
C)   dismantled by the government, with different sectors in the bank sold to other banks in the system.
D)   ﬁned nearly $1 trillion, and key executives were held criminally responsible.E) A) and B)
F) B) and C)

Question 19

The general public can open deposit accounts at their district's Federal Reserve Bank.

Accepted Answer

A) True 
 B)False

Question 20

As of March 2019, M1 accounted for roughly what percentage of M2?

Accepted Answer

A)   10 percent
B)   25 percent
C)   50 percent
D)   75 percentE) A) and B)
F) None of the above

Exam 14: Money, Banking, and Financial Institutions

The paper currencies of the United States are also called

Correct Answer
verified

Other things equal, an excessive increase in the money supply will

Correct Answer
verified

The M2 money supply is larger than the M1 money supply.

Correct Answer
verified

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

Correct Answer
verified

How many members can serve on the Board of Governors of the Federal Reserve System?

Correct Answer
verified

As of March 2019, M1 accounted for roughly what percentage of M2?

Correct Answer
verified

Money supply M1 does not include the currency held by

Correct Answer
verified

(Last Word) After years of helping terrorist groups launder money, and aiding Iran and North Korea evade sanctions, HSBC bank was:

Correct Answer
verified

"Subprime mortgage loans" refer to

Correct Answer
verified

Assuming no other changes, if checkable deposits increase by $40 billion and currency in circulation decreases by $40 billion, the

Correct Answer
verified

The general public can open deposit accounts at their district's Federal Reserve Bank.

Correct Answer
verified

The government bailout of large institutions creates the problem of moral hazard, which means that these large ﬁrms will

Correct Answer
verified

If a ﬁrm possesses assets whose value exceeds the value of its debts, the ﬁrm is said to be

Correct Answer
verified

(Consider This) Credit card balances are

Correct Answer
verified

Which of the following ﬁnancial institutions was acquired by Bank of America as a result of the ﬁnancial crisis of 2007- 2008?

Correct Answer
verified

As of March 2019, the supply of money (M1) in the United States was about

Correct Answer
verified

The value of money in the United States is based on the stock of gold and silver held by the United States government.

Correct Answer
verified

Correct Answer
verified

Currency and checkable deposits are

Correct Answer
verified

What is a commercial bank? What kinds of loans do they provide?

Correct Answer
verified
A commercial bank is a ﬁrm that engages ...
View Answer

Exam 14: Money, Banking, and Financial Institutions

The paper currencies of the United States are also called

Correct AnswerverifiedShow Answer

Other things equal, an excessive increase in the money supply will

Correct AnswerverifiedShow Answer

The M2 money supply is larger than the M1 money supply.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

How many members can serve on the Board of Governors of the Federal Reserve System?

Correct AnswerverifiedShow Answer

As of March 2019, M1 accounted for roughly what percentage of M2?

Correct AnswerverifiedShow Answer

Money supply M1 does not include the currency held by

Correct AnswerverifiedShow Answer

(Last Word) After years of helping terrorist groups launder money, and aiding Iran and North Korea evade sanctions, HSBC bank was:

Correct AnswerverifiedShow Answer

"Subprime mortgage loans" refer to

Correct AnswerverifiedShow Answer

Assuming no other changes, if checkable deposits increase by $40 billion and currency in circulation decreases by $40 billion, the

Correct AnswerverifiedShow Answer

The general public can open deposit accounts at their district's Federal Reserve Bank.

Correct AnswerverifiedShow Answer

The government bailout of large institutions creates the problem of moral hazard, which means that these large ﬁrms will

Correct AnswerverifiedShow Answer

If a ﬁrm possesses assets whose value exceeds the value of its debts, the ﬁrm is said to be

Correct AnswerverifiedShow Answer

(Consider This) Credit card balances are

Correct AnswerverifiedShow Answer

Which of the following ﬁnancial institutions was acquired by Bank of America as a result of the ﬁnancial crisis of 2007- 2008?

Correct AnswerverifiedShow Answer

As of March 2019, the supply of money (M1) in the United States was about

Correct AnswerverifiedShow Answer

The value of money in the United States is based on the stock of gold and silver held by the United States government.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Currency and checkable deposits are

Correct AnswerverifiedShow Answer

What is a commercial bank? What kinds of loans do they provide?

Correct AnswerverifiedA commercial bank is a ﬁrm that engages ...View AnswerShow Answer

Correct Answer
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Correct Answer
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Correct Answer
verified
A commercial bank is a ﬁrm that engages ...
View Answer