Question 1

The transactions approach to measuring M1 includes all of the following EXCEPT

Accepted Answer

A)  traveler's checks.
B)  certificates of deposit.
C)  checking accounts.
D)  currency.E) A) and B)
F) All of the above

Question 2

When the price level goes up, the purchasing power of the dollar

Accepted Answer

A)  also increases.
B)  falls.
C)  remains constant.
D)  varies directly with the value of the euro.E) B) and C)
F) A) and D)

Question 3

What is the typical role of a central bank?

Accepted Answer

A)  It serves as a bank for the national treasury.
B)  It regulates depository institutions.
C)  It serves as a lender of last resort.
D)  all of the aboveE) C) and D)
F) None of the above

Question 4

In a fractional reserve banking system

Accepted Answer

A)  banks are required to keep all deposits on hand so that they can pay their depositors when they desire to withdraw funds.
B)  banks are required to keep a fraction of deposits in bonds.
C)  banks are required to keep a fraction of all deposits on hand and send the rest to the Fed.
D)  banks do not keep sufficient reserves on hand to cover 100 percent of their depositors' accounts.E) B) and D)
F) All of the above

Question 5

Which of the following institutions has the responsibility for distributing currency and coins to the U.S. banking system?

Accepted Answer

A)  the Office of the Comptroller of the Currency
B)  the Federal Reserve System
C)  the U.S. Bureau of Engraving and Printing
D)  the U.S. Treasury DepartmentE) A) and C)
F) A) and D)

Question 6

What is a fractional reserve banking system?
 How long has the fractional reserve banking system been in existence?

Accepted Answer

A fractional reserve banking s...

Question 7

The liquidity approach to measuring money stresses the role of money as a

Accepted Answer

A)  medium of exchange.
B)  unit of account.
C)  temporary store of value.
D)  standard of deferred payment.E) A) and C)
F) A) and B)

Question 8

The part of the Federal Reserve System that determines monetary policy actions is the

Accepted Answer

A)  District Bank Board.
B)  Federal Deposit Insurance Corporation (FDI
C)  .
C)  Federal Open Market Committee.
D)  Comptroller's Office.E) B) and D)
F) All of the above

Question 9

A method of measuring the money supply by looking at money as a medium of exchange is the

Accepted Answer

A)  fiduciary monetary system.
B)  capital control.
C)  transactions approach.
D)  liquidity approach.E) All of the above
F) A) and B)

Question 10

A decrease in the reserve ratio will

Accepted Answer

A)  cause the money supply to decrease.
B)  cause the money supply to increase.
C)  not affect the money supply.
D)  decrease the money multiplier.E) B) and C)
F) A) and D)

Question 11

The M1 definition of the money supply includes all of the following EXCEPT

Accepted Answer

A)  currency.
B)  transaction deposits.
C)  savings accounts.
D)  travelers checks.E) A) and D)
F) A) and C)

Question 12

A system in which depository institutions hold reserves that are less than the amount of total deposits is

Accepted Answer

A)  a fractional reserve banking system.
B)  a percentage reserve banking system.
C)  a ratio reserve banking system.
D)  a legal reserve banking system.E) None of the above
F) A) and B)

Question 13

What type of intrinsic value or backing does U.S. currency have today?

Accepted Answer

A)  gold
B)  government bonds
C)  none
D)  silverE) C) and D)
F) A) and D)

Question 14

Money serves as a standard of value, which is another way of saying that money functions as

Accepted Answer

A)  a medium of exchange.
B)  a unit of accounting.
C)  an opportunity cost of investment.
D)  standard of deferred payment.E) C) and D)
F) None of the above

Question 15

Which one of the following would increase reserves for the banking system?

Accepted Answer

A)  The Fed sells government securities on the open market.
B)  The Fed buys government securities on the open market.
C)  You purchase a newly-issued U.S. Treasury bond.
D)  You purchase a U.S. Treasury bond from a bond dealer.E) C) and D)
F) B) and C)

Question 16

Fractional reserve banking refers to a banking system in which

Accepted Answer

A)  bank deposits are less than bank reserves.
B)  bank reserves are only a fraction of total deposits.
C)  bank reserves are only a fraction of required reserves.
D)  bank loans are less than bank reserves.E) A) and C)
F) C) and D)

Question 17

What are the functions of money?

Accepted Answer

Money serves as a medium of exchange, wh...

Question 18

When Kate and Sam use dollars to compare the market values of their automobiles, money is acting as a

Accepted Answer

A)  unit of accounting.
B)  standard of deferred payment.
C)  store of value.
D)  medium of exchange.E) None of the above
F) A) and D)

Question 19

Which of the following is NOT a part of the Federal Reserve System?

Accepted Answer

A)  the Twelve District Federal Reserve banks
B)  the Federal Open Market Committee
C)  the Federal Deposit Insurance Corporation
D)  the Board of GovernorsE) All of the above
F) C) and D)

Question 20

By affecting the amount of reserves in the banking system, the Fed can

Accepted Answer

A)  affect the size of the money supply.
B)  change the marginal tax rates.
C)  increase government purchases.
D)  reduce government purchases.E) A) and B)
F) A) and D)

Exam 14: Money Banking and Central Banking

What is a fractional reserve banking system? How long has the fractional reserve banking system been in existence?

Correct AnswerverifiedA fractional reserve banking s...View AnswerShow Answer

By affecting the amount of reserves in the banking system, the Fed can

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The M1 definition of the money supply includes all of the following EXCEPT

Correct AnswerverifiedShow Answer

In a fractional reserve banking system

Correct AnswerverifiedShow Answer

Which of the following institutions has the responsibility for distributing currency and coins to the U.S. banking system?

Correct AnswerverifiedShow Answer

A decrease in the reserve ratio will

Correct AnswerverifiedShow Answer

Which of the following is NOT a part of the Federal Reserve System?

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What type of intrinsic value or backing does U.S. currency have today?

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What is the typical role of a central bank?

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What are the functions of money?

Correct AnswerverifiedMoney serves as a medium of exchange, wh...View AnswerShow Answer

Money serves as a standard of value, which is another way of saying that money functions as

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The part of the Federal Reserve System that determines monetary policy actions is the

Correct AnswerverifiedShow Answer

Fractional reserve banking refers to a banking system in which

Correct AnswerverifiedShow Answer

When Kate and Sam use dollars to compare the market values of their automobiles, money is acting as a

Correct AnswerverifiedShow Answer

Which one of the following would increase reserves for the banking system?

Correct AnswerverifiedShow Answer

The liquidity approach to measuring money stresses the role of money as a

Correct AnswerverifiedShow Answer

A method of measuring the money supply by looking at money as a medium of exchange is the

Correct AnswerverifiedShow Answer

When the price level goes up, the purchasing power of the dollar

Correct AnswerverifiedShow Answer

A system in which depository institutions hold reserves that are less than the amount of total deposits is

Correct AnswerverifiedShow Answer

The transactions approach to measuring M1 includes all of the following EXCEPT

Correct AnswerverifiedShow Answer

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A fractional reserve banking s...
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Money serves as a medium of exchange, wh...
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