Question 1

The functions of money are to serve as a:

Accepted Answer

A)   Resource allocator, method for accounting, and means of income distribution
B)   Unit of account, store of value, and medium of exchange
C)   Determinant of consumption, investment, and government spending
D)   Factor of production, exchange, and aggregate supplyE) C) and D)
F) A) and D)

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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.

Accepted Answer

A) True 
 B)False

Question 4

Refer to the table above. The size of the M1 money supply is:

Accepted Answer

A)   $979 billion
B)   $1,236 billion
C)   $1,415 billion
D)   $1,618 billionE) A) and D)
F) All of the above

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

Question 6

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

Accepted Answer

A)   Highly liquid assets
B)   Not a means of payment
C)   Part of money supply M1
D)   Readily converted into cashE) All of the above
F) B) and C)

Question 7

"Thrifts" refer to the following institutions, except:

Accepted Answer

A)   Commercial banks
B)   Credit unions
C)   Mutual savings banks
D)   Savings and loan associationsE) A) and D)
F) B) and C)

Question 8

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 percentE) C) and D)
F) A) and D)

Question 9

Money eliminates the need for a coincidence of wants in trading primarily through its role as a:

Accepted Answer

A)   Unit of account
B)   Medium of exchange
C)   Store of value
D)   Medium of deferred paymentE) A) and B)
F) B) and C)

Question 10

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) None of the above
F) All of the above

Question 11

People can generally get the following items at their commercial banks, except:

Accepted Answer

A)   Money market deposit accounts
B)   Time deposits
C)   Certificates of deposit
D)   Money market mutual fundsE) None of the above
F) A) and C)

Question 12

Given the fact that "too big to fail" could translate into "too big to jail", many economists are calling for a return to the separation of high-risk from the low-risk activities in the financial sector. This separation is embodied in the Wall Street Reform and Consumer Protection Act of 2010 in the so-called:

Accepted Answer

A)   Greenspan Policy
B)   Volker Rule
C)   Bernanke Policy
D)   Obama RuleE) B) and C)
F) A) and D)

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Securitization, the process of forming new securities by bundling or slicing up groups of securities like mortgages and bonds, is:

Accepted Answer

A)   A way of reducing risk though diversification
B)   Well-understood by financial analysts and managers who engaged in it
C)   Considered shady by legitimate financial institutions
D)   Still only a minor portion of the modern financial systemE) B) and C)
F) None of the above

Question 15

When there is inflation in the economy, it implies that the:

Accepted Answer

A)   Price index is rising and the purchasing power of money is also rising
B)   Price index is falling and the purchasing power of money is also falling
C)   Price index is falling and the purchasing power of money is rising
D)   Price index is rising and the purchasing power of money is fallingE) B) and C)
F) A) and D)

Question 16

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 functionsE) All of the above
F) A) and C)

Question 17

A few years prior to the Financial Crisis of 2007-2008, many people were getting approved for mortgage loans even without proper documentation or credit checks.

Accepted Answer

A) True 
 B)False

Question 18

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) None of the above
F) All of the above

Question 19

Use the following list to answer the question about the money supply. 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 list above. The M2 money supply is composed of items:

Accepted Answer

A)   1, 2, 3, 4, 5, and 6
B)   1, 2, 4, 5, and 6
C)   1, 2, 4, and 6
D)   2, 4, 5, and 6E) A) and D)
F) A) and C)

Question 20

The Federal Reserve System performs many functions but its most important one is:

Accepted Answer

A)   Issuing currency
B)   Controlling the money supply
C)   Providing for check clearing and collection
D)   Acting as fiscal agent for the U.S. governmentE) B) and C)
F) None of the above

Exam 14: Money, Banking, and Financial Institutions

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

Correct Answer
verified

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

Correct Answer
verified

Securitization, the process of forming new securities by bundling or slicing up groups of securities like mortgages and bonds, is:

Correct Answer
verified

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

Correct Answer
verified

The functions of money are to serve as a:

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Refer to the table above. The size of the M1 money supply is:

Correct Answer
verified

The Federal Reserve System performs many functions but its most important one is:

Correct Answer
verified

Money in the U.S. is essentially debt of:

Correct Answer
verified

People can generally get the following items at their commercial banks, except:

Correct Answer
verified

Correct Answer
verified

A few years prior to the Financial Crisis of 2007-2008, many people were getting approved for mortgage loans even without proper documentation or credit checks.

Correct Answer
verified

"Thrifts" refer to the following institutions, except:

Correct Answer
verified

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

Correct Answer
verified

Money eliminates the need for a coincidence of wants in trading primarily through its role as a:

Correct Answer
verified

When there is inflation in the economy, it implies that 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

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.

Correct Answer
verified

Exam 14: Money, Banking, and Financial Institutions

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Securitization, the process of forming new securities by bundling or slicing up groups of securities like mortgages and bonds, is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The functions of money are to serve as a:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Refer to the table above. The size of the M1 money supply is:

Correct AnswerverifiedShow Answer

The Federal Reserve System performs many functions but its most important one is:

Correct AnswerverifiedShow Answer

Money in the U.S. is essentially debt of:

Correct AnswerverifiedShow Answer

People can generally get the following items at their commercial banks, except:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A few years prior to the Financial Crisis of 2007-2008, many people were getting approved for mortgage loans even without proper documentation or credit checks.

Correct AnswerverifiedShow Answer

"Thrifts" refer to the following institutions, except:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Money eliminates the need for a coincidence of wants in trading primarily through its role as a:

Correct AnswerverifiedShow Answer

When there is inflation in the economy, it implies that 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

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.

Correct AnswerverifiedShow Answer

Correct Answer
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