Question 1

If P equals the price level expressed as an index number and  $V\$ V$V  equals the value of the dollar, then

Accepted Answer

A)    P=$V−1P = \$ V - 1P=$V−1 
B)    $V=1/P\$ V = 1 / P$V=1/P 
C)    1=$V/P1 = \$ V / P1=$V/P 
D)    $V=P−1.\$ V = P - 1 .$V=P−1.E) A) and B)
F) None of the above

Question 2

The value (or purchasing power) of money increases when the price level increases.

Accepted Answer

A) True 
 B)False

Question 3

(Consider This) Credit cards are deﬁned as money because they facilitate transactions.

Accepted Answer

A) True 
 B)False

Question 4

What "backs" the money supply of the United States?

Accepted Answer

A)   the U.S. government's ability to keep the value of money relatively stable
B)   the amount of gold the U.S. government has on deposit at its banks
C)   the fact that currency is issued by the Federal Reserve System
D)   the fact that the intrinsic value of coins in circulation is greater than their face valueE) C) and D)
F) B) and D)

Question 5

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 965\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 } & 965 \\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 $5978186391,0452,866965​​  Refer to the accompanying table. The value of the money included in M2 but not counted in M1 is

Accepted Answer

A)   $4,649 billion.
B)   $818 billion.
C)   $2,866 billion.
D)   $5,694 billion. E) A) and D)
F) A) and B)

Question 6

Economic studies suggest there is

Accepted Answer

A)   a positive relationship between the degree of independence of the central bank and the size of the average annual rate of inﬂation.
B)   an inverse relationship between the degree of independence of the central bank and the size of the average annual rate of inﬂation.
C)   no relationship between the degree of independence of the central bank and the size of the average annual rate of inﬂation.
D)   a positive relationship between the degree of independence of the central bank and the size of the central bank.E) None of the above
F) B) and C)

Question 7

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. The M1 money supply is composed of items

Accepted Answer

A)   5 and 6.
B)   4 and 6.
C)   6 and 7.
D)   1 and 4.E) A) and D)
F) C) and D)

Question 8

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 C)
F) None of the above

Question 9

The destabilizing effects of defaulting mortgages quickly spread throughout the ﬁnancial system because those mortgages were involved in widespread

Accepted Answer

A)   diversiﬁcation.
B)   securitization.
C)   multiplier effects.
D)   real-balance effects.E) C) and D)
F) B) and C)

Question 10

Refer to the given list of assets. 1. Large-denominated ($100,000 and over)  time deposits
2)  Savings deposits
3)  Currency (coins and paper money)  in circulation
4)  Small-denominated (under $100,000)  time deposits
5)  Stock certiﬁcates
6)  Checkable deposits
7)  Money market deposit accounts
8)  Money market mutual fund balances held by individuals
9)  Money market mutual fund balances held by businesses
10)  Currency held in bank vaults
The M2 deﬁnition of money includes

Accepted Answer

A)   items 2, 3, 4, 6, 7, 8, and 10.
B)   items 3, 4, 5, and 6.
C)   items 2, 3, 4, 6, 7, and 8.
D)   all of the items listed.E) A) and B)
F) A) and C)

Question 11

Which of the following "backs" the value of money in the United States?

Accepted Answer

A)   the gold stored in the Federal Reserve Bank of New York
B)   the acceptability of it as a medium of exchange
C)   the willingness of foreign governments to hold U.S. dollars
D)   the size of the budget surplus in the U.S. governmentE) A) and B)
F) A) and C)

Question 12

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 13

The 12 Federal Reserve Banks can best be characterized as

Accepted Answer

A)   central banks, bankers' banks, and quasi-public banks.
B)   regional banks, public banks, and member banks.
C)   investment banks, bankers' banks, and public banks.
D)   national banks, quasi-public banks, and investment banks.E) A) and B)
F) B) and C)

Question 14

If the price index rises from 200 to 250, the purchasing power value of the dollar

Accepted Answer

A)   may either rise or fall.
B)   will rise by 25 percent.
C)   will fall by 25 percent.
D)   will fall by 20 percent.E) A) and B)
F) A) and C)

Question 15

Currency held by 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) B) and C)
F) A) and D)

Question 16

Which one of the following is considered to be a "stock" rather than a "ﬂow" variable?

Accepted Answer

A)   income
B)   money
C)   wages
D)   proﬁtsE) B) and C)
F) A) and D)

Question 17

If the price index rises from 100 to 120, the purchasing power value of the dollar

Accepted Answer

A)   may either rise or fall.
B)   will rise by one-sixth.
C)   will fall by one-sixth.
D)   will rise by 20 percent.E) None of the above
F) B) and D)

Question 18

When economists say that money serves as a unit of account, they mean that it is

Accepted Answer

A)   a way to keep wealth in a readily spendable form for future use.
B)   a means of payment.
C)   a monetary unit for measuring and comparing the relative values of goods.
D)   declared as legal tender by the government.E) B) and C)
F) A) and B)

Question 19

Currency and coins held by banks are part of the M1 deﬁnition of money supply.

Accepted Answer

A) True 
 B)False

Question 20

The seven members of the Board of Governors of the Federal Reserve System are

Accepted Answer

A)   appointed by the president with the conﬁrmation of the Senate.
B)   elected by Congress from a slate of nominees provided by the president.
C)   appointed by the Senate Finance Committee.
D)   appointed by the presidents of the 12 Federal Reserve Banks.E) A) and B)
F) A) and C)

Exam 14: Money, Banking, and Financial Institutions

Which of the following "backs" the value of money in the United States?

Correct Answer
verified

When economists say that money serves as a unit of account, they mean that it is

Correct Answer
verified

Currency and coins held by banks are part of the M1 deﬁnition of money supply.

Correct Answer
verified

What "backs" the money supply of the United States?

Correct Answer
verified

Currency held by banks is part of

Correct Answer
verified

The Federal Reserve System

Correct Answer
verified

If the price index rises from 200 to 250, the purchasing power value of the dollar

Correct Answer
verified

Which one of the following is considered to be a "stock" rather than a "ﬂow" variable?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The seven members of the Board of Governors of the Federal Reserve System are

Correct Answer
verified

The 12 Federal Reserve Banks can best be characterized as

Correct Answer
verified

The value (or purchasing power) of money increases when the price level increases.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Economic studies suggest there is

Correct Answer
verified

If the price index rises from 100 to 120, the purchasing power value of the dollar

Correct Answer
verified

If P equals the price level expressed as an index number and $\$ V$ equals the value of the dollar, then

Correct Answer
verified

The destabilizing effects of defaulting mortgages quickly spread throughout the ﬁnancial system because those mortgages were involved in widespread

Correct Answer
verified

(Consider This) Credit cards are deﬁned as money because they facilitate transactions.

Correct Answer
verified

Exam 14: Money, Banking, and Financial Institutions

Which of the following "backs" the value of money in the United States?

Correct AnswerverifiedShow Answer

When economists say that money serves as a unit of account, they mean that it is

Correct AnswerverifiedShow Answer

Currency and coins held by banks are part of the M1 deﬁnition of money supply.

Correct AnswerverifiedShow Answer

What "backs" the money supply of the United States?

Correct AnswerverifiedShow Answer

Currency held by banks is part of

Correct AnswerverifiedShow Answer

The Federal Reserve System

Correct AnswerverifiedShow Answer

If the price index rises from 200 to 250, the purchasing power value of the dollar

Correct AnswerverifiedShow Answer

Which one of the following is considered to be a "stock" rather than a "ﬂow" variable?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The seven members of the Board of Governors of the Federal Reserve System are

Correct AnswerverifiedShow Answer

The 12 Federal Reserve Banks can best be characterized as

Correct AnswerverifiedShow Answer

The value (or purchasing power) of money increases when the price level increases.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Economic studies suggest there is

Correct AnswerverifiedShow Answer

If the price index rises from 100 to 120, the purchasing power value of the dollar

Correct AnswerverifiedShow Answer

If P equals the price level expressed as an index number and $V\$ V$V equals the value of the dollar, then

Correct AnswerverifiedShow Answer

The destabilizing effects of defaulting mortgages quickly spread throughout the ﬁnancial system because those mortgages were involved in widespread

Correct AnswerverifiedShow Answer

(Consider This) Credit cards are deﬁned as money because they facilitate transactions.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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If P equals the price level expressed as an index number and $\$ V$ equals the value of the dollar, then

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified