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Exam 14: Money, Banking, and Financial Institutions

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Question 71

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TARP and other lender-of-last-resort programs implemented by the Fed in response to the financial crisis of 2007-2008

A) severely depleted the assets of the Federal Reserve.
B) have been little used and therefore are ineffective.
C) increased the moral hazard problem by limiting losses from bad financial decisions.
D) were designed to offset the moral hazard created by the TARP and other bailout programs.

E) B) and C)
F) None of the above

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Question 72

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The Federal Reserve System is an

A) agency that is controlled by Congress.
B) agency that is under the direction of the president.
C) independent agency of government.
D) agency run by popularly elected officials.

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

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Question 73

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$\begin{array} { | l | c | } \hline { \text { Item } } & \text { Billions of Dollars } \\\hline \text { Checkable Deposits } & \$ 598 \\\hline \text { Small Time Deposits } & 818 \\\hline \text { Currency } & 644 \\\hline \text { Money-Market Mutual Funds Held by Businesses } & 1,045 \\\hline \text { Savings Deposits, Including Money-Market Deposit Accounts } & 2,866 \\\hline \text { Money-Market Mutual Funds Held by Individuals } & 979 \\\hline\end{array}$ Refer to the accompanying table. The size of the M1 money supply is

Subprime mortgages, which played a central role in the Financial Crisis of 2007-2008, had been strongly encouraged and supported by the government before the crisis.

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

Which of the following does not explain what backs the money supply in the United States?

If you place a part of your summer earnings in a savings account, you are using money primarily as a

During the Financial Crisis of 2007-2008, Goldman Sachs, Morgan Stanley, and other financial firms with heavy exposure to the mortgage-related problems rushed to become bank holding companies in order to

Thrifts are known as "banker's banks" because they lend money to commercial banks.

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

$\begin{array} { | l | c | } \hline { \text { Item } } & \text { Billions of Dollars } \\\hline \text { Checkable Deposits } & \$ 597 \\\hline \text { Small Time Deposits } & 618 \\\hline \text { Currency } & 639 \\\hline \text { Money-Market Mutual Funds Held by Businesses } & 1,045 \\\hline \text { Savings Deposits, Including Money-Market Deposit Accounts } & 2,866 \\\hline \text { Money-Market Mutual Funds Held by Individuals } & 979 \\\hline\end{array}$ Refer to the accompanying table. The size of the M2 money supply is

Money functions as

The Federal Open Market Committee (FOMC) .

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

The U.S. Treasury is the only agency authorized to put money into circulation in the U.S. economy.

The paper money used in the United States is

Checkable deposits are

As long as the owner (seller) of an asset is willing to accept any price, the asset will sell quickly, thus making it meet the full definition of liquidity.

TARP, created in 2008, stands for

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