Question 1

Refer to the table above. The size of the M2 money supply is:

Accepted Answer

A)   $2,054 billion
B)   $2,696 billion
C)   $5,899 billion
D)   $6,792 billionE) None of the above
F) B) and C)

Question 2

Money performs its function as a store of value very well, because it protects one against the erosion of purchasing power from inflation.

Accepted Answer

A) True 
 B)False

Question 3

When a consumer wants to compare the price of one product with another, money is primarily functioning as a:

Accepted Answer

A)   Store of value
B)   Unit of account
C)   Checkable deposit
D)   Medium of exchangeE) A) and C)
F) None of the above

Question 4

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 ratingsE) A) and D)
F) None of the above

Question 5

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 government to hold U.S. dollars
D)   The size of the budget surplus in the U.S. governmentE) C) and D)
F) B) and D)

Question 6

Debit card balances are part of money supply M1, but credit card balances are not.

Accepted Answer

A) True 
 B)False

Question 7

What function is money serving when you deposit money in a savings account?

Accepted Answer

A)   A store of value
B)   A unit of account
C)   A checkable deposit
D)   A medium of exchangeE) A) and D)
F) C) and D)

Question 8

What function is money serving when you use it when you go shopping?

Accepted Answer

A)   A store of value
B)   A unit of account
C)   A medium of deferred payment
D)   A medium of exchangeE) A) and D)
F) A) and C)

Question 9

The Federal backing for money in the United States comes from:

Accepted Answer

A)   Providing sufficient quantities of precious metals such as gold and silver to cover the amount of paper money in circulation
B)   Pledging physical assets, such as land, natural resources, and public buildings as collateral for outstanding currency
C)   Controlling the money supply in order to keep the value of money relatively stable over time
D)   Protecting checkable deposits at financial institutions with deposit guaranteesE) A) and B)
F) All of the above

Question 10

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

Accepted Answer

A)   Checkable deposits
B)   Small time deposits
C)   Money market mutual funds
D)   Savings depositsE) B) and D)
F) A) and C)

Question 11

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 M1E) All of the above
F) C) and D)

Question 12

The following financial institutions traditionally accept deposits from savers, except:

Accepted Answer

A)   Thrifts
B)   Mutual fund companies
C)   Investment banks
D)   Pension fundsE) A) and C)
F) None of the above

Question 13

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. 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) All of the above
F) None of the above

Question 14

Which of the following is not true about the use of a credit card?

Accepted Answer

A)   It is a means of deferring payment for a short period of time
B)   It allows people to "economize" on the use of money
C)   Credit-card balances are part of M2, but not part of M1
D)   A credit card transaction is not the same as a debit card transactionE) A) and D)
F) A) and B)

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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 holdE) B) and C)
F) B) and D)

Question 17

The reason for the Fed being set up as an independent agency of government is to:

Accepted Answer

A)   Protect it from political pressure
B)   Allow it to earn profits like private firms
C)   Make it be managed and controlled by member banks
D)   Let it be able to compete with other financial institutionsE) B) and C)
F) A) and C)

Question 18

The Bureau of Consumer Financial Protection was created in 2010 to become part of the:

Accepted Answer

A)   U.S. Treasury Department
B)   Federal Reserve System
C)   Department of Commerce
D)   Office of the PresidentE) C) and D)
F) A) and C)

Question 19

The M1 money supply is composed of:

Accepted Answer

A)   All coins and paper money held by the general public and the banks
B)   Bank deposits of households and business firms
C)   Bank deposits and mutual funds
D)   Checkable deposits and currency in circulationE) B) and C)
F) B) and D)

Question 20

Credit card balances are part of money supply M2.

Accepted Answer

A) True 
 B)False

Exam 14: Money, Banking, and Financial Institutions

What function is money serving when you use it when you go shopping?

Correct Answer
verified

Currency and checkable deposits are:

Correct Answer
verified

Credit card balances are part of money supply M2.

Correct Answer
verified

Money performs its function as a store of value very well, because it protects one against the erosion of purchasing power from inflation.

Correct Answer
verified

Which of the following is NOT true about subprime mortgage loans:

Correct Answer
verified

The Bureau of Consumer Financial Protection was created in 2010 to become part of the:

Correct Answer
verified

Which of the following is not true about the use of a credit card?

Correct Answer
verified

What function is money serving when you deposit money in a savings account?

Correct Answer
verified

One reason that "near-monies" are important is because:

Correct Answer
verified

When a consumer wants to compare the price of one product with another, money is primarily functioning as a:

Correct Answer
verified

Debit card balances are part of money supply M1, but credit card balances are not.

Correct Answer
verified

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

Correct Answer
verified

The reason for the Fed being set up as an independent agency of government is to:

Correct Answer
verified

Refer to the table above. The size of the M2 money supply is:

Correct Answer
verified

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

Correct Answer
verified

The M1 money supply is composed of:

Correct Answer
verified

Correct Answer
verified

The following financial institutions traditionally accept deposits from savers, except:

Correct Answer
verified

The Federal backing for money in the United States comes from:

Correct Answer
verified

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

Correct Answer
verified

Exam 14: Money, Banking, and Financial Institutions

What function is money serving when you use it when you go shopping?

Correct AnswerverifiedShow Answer

Currency and checkable deposits are:

Correct AnswerverifiedShow Answer

Credit card balances are part of money supply M2.

Correct AnswerverifiedShow Answer

Money performs its function as a store of value very well, because it protects one against the erosion of purchasing power from inflation.

Correct AnswerverifiedShow Answer

Which of the following is NOT true about subprime mortgage loans:

Correct AnswerverifiedShow Answer

The Bureau of Consumer Financial Protection was created in 2010 to become part of the:

Correct AnswerverifiedShow Answer

Which of the following is not true about the use of a credit card?

Correct AnswerverifiedShow Answer

What function is money serving when you deposit money in a savings account?

Correct AnswerverifiedShow Answer

One reason that "near-monies" are important is because:

Correct AnswerverifiedShow Answer

When a consumer wants to compare the price of one product with another, money is primarily functioning as a:

Correct AnswerverifiedShow Answer

Debit card balances are part of money supply M1, but credit card balances are not.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The reason for the Fed being set up as an independent agency of government is to:

Correct AnswerverifiedShow Answer

Refer to the table above. The size of the M2 money supply is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The M1 money supply is composed of:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The following financial institutions traditionally accept deposits from savers, except:

Correct AnswerverifiedShow Answer

The Federal backing for money in the United States comes from:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
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