Question 1

The cash you have in your wallet would be counted in which measure of money?

Accepted Answer

A)   Hard money
B)   M1
C)   M2
D)   It would be counted in all of theseE) None of the above
F) C) and D)

Question 2

The narrowest definition of money:

Accepted Answer

A)   includes the things that can be used in transactions immediately.
B)   contains only cash and bank reserves held at the Fed.
C)   is referred to as hard money.
D)   All of these are true.E) A) and C)
F) A) and B)

Question 3

One of the main roles of a central bank is:

Accepted Answer

A)   managing the nation's money demand.
B)   coordinating the banking system to ensure a sound economy.
C)   accepting deposits from households and other private individuals.
D)   funding federal government spending.E) B) and D)
F) B) and C)

Question 4

When deciding what to use as money, one characteristic to look for is its:

Accepted Answer

A)   convenience.
B)   exchange value.
C)   intrinsic value.
D)   shape.E) C) and D)
F) A) and C)

Question 5

When considering the change to the money demand curve, if the interest rate rises, the quantity demanded is:

Accepted Answer

A)   lower, moving leftward along the money demand curve.
B)   higher, moving leftward along the money demand curve.
C)   lower, moving rightward along the money demand curve.
D)   higher, moving rightward along the money demand curve.E) All of the above
F) None of the above

Question 6

One of the main roles of a central bank is:

Accepted Answer

A)   managing the nation's money supply.
B)   coordinating the relationship between banking system and federal government.
C)   ensuring that banks provide enough loans.
D)   monitoring federal spending.E) B) and C)
F) A) and B)

Question 7

The money supply is the amount of money:

Accepted Answer

A)   available in the economy.
B)   that banks keep on hand.
C)   that banks keep on hand beyond the reserve requirement.
D)   available for banks to lend.E) None of the above
F) A) and C)

Question 8

The chairman of the Federal Reserve is considered one of the most important economic positions in the world because this person has significant direct control over the conduct of:

Accepted Answer

A)   fiscal policy in the United States.
B)   monetary policy in the United States.
C)   international trade policy in the United States.
D)   government budget in the United States.E) C) and D)
F) B) and D)

Question 9

The primary way that banks earn money is:

Accepted Answer

A)   through lending funds and collecting interest on those loans.
B)   through the accumulation of deposits.
C)   by lending money to the government.
D)   by the government paying them to regulate the financial system.E) A) and C)
F) B) and C)

Question 10

The twin responsibilities of the Federal Reserve is called the:

Accepted Answer

A)   dual mandate.
B)   double duty.
C)   twin spin.
D)   two tasks.E) A) and D)
F) C) and D)

Question 11

In the United States, the dollar was commodity backed:

Accepted Answer

A)   until 1971.
B)   until the Civil War.
C)   Until financial crisis of 2008.
D)   until World War II.E) A) and B)
F) None of the above

Question 12

If there was only full-reserve banking:

Accepted Answer

A)   the financial system would work better.
B)   absolutely no lending using deposits would be able to occur.
C)   banks would make more money lending deposits.
D)   The money multiplier would be at maximum.E) A) and C)
F) A) and B)

Question 13

When goods that have intrinsic value are used as money, if their value as money falls, the good:

Accepted Answer

A)   is still useful to people for other reasons.
B)   loses its intrinsic value.
C)   is no longer useful to people for other reasons.
D)   tends to gain in intrinsic value.E) A) and D)
F) B) and C)

Question 14

One of the functions of money is to serve as a:

Accepted Answer

A)   store of value.
B)   valuation tool.
C)   equality enhancer.
D)   sole way to make payments.E) All of the above
F) A) and B)

Question 15

Liquidity refers to how:

Accepted Answer

A)   easy an asset is to convert immediately to cash without losing value.
B)   quickly the same dollar changes hands in the economy.
C)   quickly the average household spends its disposable income.
D)   easy money converts to assets in an economy.E) A) and D)
F) A) and C)

Question 16

Monetary policy primarily influences the economy through changes in:

Accepted Answer

A)   the interest rate.
B)   spending by government.
C)   spending by the Fed.
D)   the discount rate.E) A) and C)
F) None of the above

Question 17

The amount of money available in the economy:

Accepted Answer

A)   is called the money supply.
B)   is managed by the Federal Reserve.
C)   varies depending on what is considered money.
D)   All of these are true.E) B) and C)
F) A) and D)

Question 18

Which of the following countries have used adjustments to the required reserve ratio as a primary tool of monetary policy?

Accepted Answer

A)   United States
B)   China
C)   Mexico
D)   IndiaE) A) and B)
F) All of the above

Question 19

Banks create money in the economy by:

Accepted Answer

A)   loaning out part of each deposit, which will be redeposited by someone else.
B)   charging higher interest on loans than savings.
C)   charging higher interest on savings than loans.
D)   loaning out all of their deposits to borrowers.E) All of the above
F) C) and D)

Question 20

In the simple liquidity-preference model, the money supply curve is:

Accepted Answer

A)   vertical, and moves at the sole discretion of the Fed.
B)   horizontal, and moves at the sole discretion of the Fed.
C)   vertical, and moves when people change their rate of savings.
D)   horizontal, and moves when people change their rate of savings.E) All of the above
F) B) and D)

Exam 15: Money and the Monetary System

In the simple liquidity-preference model, the money supply curve is:

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One of the main roles of a central bank is:

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Which of the following countries have used adjustments to the required reserve ratio as a primary tool of monetary policy?

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The narrowest definition of money:

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The chairman of the Federal Reserve is considered one of the most important economic positions in the world because this person has significant direct control over the conduct of:

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When considering the change to the money demand curve, if the interest rate rises, the quantity demanded is:

Correct AnswerverifiedShow Answer

Liquidity refers to how:

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The amount of money available in the economy:

Correct AnswerverifiedShow Answer

When deciding what to use as money, one characteristic to look for is its:

Correct AnswerverifiedShow Answer

If there was only full-reserve banking:

Correct AnswerverifiedShow Answer

Banks create money in the economy by:

Correct AnswerverifiedShow Answer

The cash you have in your wallet would be counted in which measure of money?

Correct AnswerverifiedShow Answer

The primary way that banks earn money is:

Correct AnswerverifiedShow Answer

The twin responsibilities of the Federal Reserve is called the:

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When goods that have intrinsic value are used as money, if their value as money falls, the good:

Correct AnswerverifiedShow Answer

One of the main roles of a central bank is:

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One of the functions of money is to serve as a:

Correct AnswerverifiedShow Answer

The money supply is the amount of money:

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In the United States, the dollar was commodity backed:

Correct AnswerverifiedShow Answer

Monetary policy primarily influences the economy through changes in:

Correct AnswerverifiedShow Answer

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