Question 1

The purchasing power of money and the price level vary

Accepted Answer

A)   inversely.
B)   directly during recessions but inversely during inﬂations.
C)   directly but not proportionately.
D)   directly and proportionately.E) B) and C)
F) All of the above

Question 2

The currency, or money, of the United States, like those of other countries, is

Accepted Answer

A)   commodity money.
B)   intrinsic money.
C)   token money.
D)   deposit money.E) A) and B)
F) A) and C)

Question 3

What does it mean that a currency has been designated legal tender? How important is this designation?

Accepted Answer

A currency that is designated legal tend...

Question 4

(Consider This)  The use of a credit card is most similar to

Accepted Answer

A)   paying with a check.
B)   an ACH (automatic clearinghouse)  transaction.
C)   purchasing a certiﬁcate of deposit.
D)   obtaining a short-term loan.E) A) and D)
F) A) and C)

Question 5

Assuming no other changes, if balances in money market deposit accounts increase by $50 billion and small- denominated time deposits decrease by $50 billion, the

Accepted Answer

A)   M1 and M2 money supplies will not change.
B)   M2 money supply will increase.
C)   M1 money supply will decline.
D)   M2 money supply will increase and the M1 money supply will decrease.E) None of the above
F) A) and C)

Question 6

Some economists are concerned that the ﬁnancial rescue provided by the TARP will encourage ﬁnancial investors and ﬁrms to take on greater risks in the future. This is an example of

Accepted Answer

A)   moral hazard.
B)   adverse selection.
C)   a prisoner's dilemma.
D)   shadow banking.E) B) and C)
F) A) and D)

Question 7

The purchasing power of the dollar

Accepted Answer

A)   has been increasing in recent years because of economic growth.
B)   varies directly with the cost-of-living index.
C)   is inversely related to the level of aggregate demand.
D)   is the reciprocal of the price level.E) None of the above
F) A) and D)

Question 8

The Financial Crisis of 2007-2008 started in which sector of the economy?

Accepted Answer

A)   foreign trade sector
B)   consumer durables sector
C)   dot-com and technology sector
D)   real estate and housing sectorE) B) and D)
F) All of the above

Question 9

Which of the following is not true about so-called mortgage-backed securities?

Accepted Answer

A)   Before the crisis, they were believed by many banks to be a way of reducing loan risks.
B)   Before the crisis, they played a major role in broadening home ownership in America.
C)   They were links that spread instability across many ﬁnancial institutions.
D)   Their use was strongly discouraged by the Federal government.E) A) and B)
F) All of the above

Question 10

United States currency has value primarily because it

Accepted Answer

A)   is legal tender, is generally acceptable in exchange for goods or services, and is backed by the gold and silver of the Federal government.
B)   is generally acceptable in exchange for goods or services, is backed by the gold and silver of the federal government, and facilitates trade.
C)   is relatively scarce, is legal tender, and is generally acceptable in exchange for goods and services.
D)   facilitates trade, is legal tender, and permits the use of credit cards and near monies.E) B) and C)
F) A) and D)

Question 11

Discuss three major points about what gives money its value.

Accepted Answer

Money gets its value because it is accep...

Question 12

Time deposits of $100,000 or more are

Accepted Answer

A)   a component of M1.
B)   a component of M2 but not of M1.
C)   a component of M1 but not of M2.
D)   not a component of M1 or M2.E) A) and D)
F) A) and C)

Question 13

When a bank's loans are written off, then the bank's

Accepted Answer

A)   ability to make more new loans increases.
B)   ability to make new loans is restricted.
C)   assets will grow, while its liabilities stay the same.
D)   assets stay the same, while its liabilities grow.E) A) and B)
F) B) and C)

Question 14

How much did the U.S. Congress allocate to the Troubled Asset Relief Program in 2008?

Accepted Answer

A)   $170 billion
B)   $700 billion
C)   $787 billion
D)   $885 billionE) B) and D)
F) A) and D)

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 falling.E) A) and D)
F) A) and C)

Question 16

The Great Recession was the main cause of the Financial Crisis of 2007-2008.

Accepted Answer

A) True 
 B)False

Question 17

The group that sets the Federal Reserve System's policy on buying and selling government securities (bills, notes, and bonds)  is the

Accepted Answer

A)   Federal Deposit Insurance Corporation (FDI
C)  .
B)   Federal Bond Sale Authority.
C)   Council of Economic Advisers.
D)   Federal Open Market Committee (FOM
C)  .E) B) and D)
F) None of the above

Question 18

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

Question 19

Unlike banks, thrifts are not subject to monetary control by the Fed, and thus they (thrifts) do not have to hold reserves
against their checkable deposits.

Accepted Answer

A) True 
 B)False

Question 20

Year  Price Level  Value of Dollar 11.00$1.0021.2530.8040.50\begin{array} { | c | c | c | } \hline 	ext { Year } & 	ext { Price Level } & 	ext { Value of Dollar } \\hline 1 & 1.00 & \$ 1.00 \\hline 2 & 1.25 & \\hline 3 & 0.80 & \\hline 4 & 0.50 & \\hline\end{array} Year 1234​ Price Level 1.001.250.800.50​ Value of Dollar $1.00​​  Refer to the given table. The value of the dollar in year 2 is

Accepted Answer

A)   $1.25.
B)   $1.33.
C)   $0.80.
D)   $0.75. E) B) and C)
F) A) and B)

Exam 14: Money, Banking, and Financial Institutions

Discuss three major points about what gives money its value.

Correct AnswerverifiedMoney gets its value because it is accep...View AnswerShow Answer

Unlike banks, thrifts are not subject to monetary control by the Fed, and thus they (thrifts) do not have to hold reserves against their checkable deposits.

Correct AnswerverifiedShow Answer

The group that sets the Federal Reserve System's policy on buying and selling government securities (bills, notes, and bonds) is the

Correct AnswerverifiedShow Answer

Assuming no other changes, if balances in money market deposit accounts increase by $50 billion and small- denominated time deposits decrease by $50 billion, the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Great Recession was the main cause of the Financial Crisis of 2007-2008.

Correct AnswerverifiedShow Answer

When a bank's loans are written off, then the bank's

Correct AnswerverifiedShow Answer

How much did the U.S. Congress allocate to the Troubled Asset Relief Program in 2008?

Correct AnswerverifiedShow Answer

The currency, or money, of the United States, like those of other countries, is

Correct AnswerverifiedShow Answer

Time deposits of $100,000 or more are

Correct AnswerverifiedShow Answer

United States currency has value primarily because it

Correct AnswerverifiedShow Answer

What does it mean that a currency has been designated legal tender? How important is this designation?

Correct AnswerverifiedA currency that is designated legal tend...View AnswerShow Answer

The Financial Crisis of 2007-2008 started in which sector of the economy?

Correct AnswerverifiedShow Answer

The purchasing power of the dollar

Correct AnswerverifiedShow Answer

Which of the following is not true about so-called mortgage-backed securities?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

(Consider This) The use of a credit card is most similar to

Correct AnswerverifiedShow Answer

Some economists are concerned that the ﬁnancial rescue provided by the TARP will encourage ﬁnancial investors and ﬁrms to take on greater risks in the future. This is an example of

Correct AnswerverifiedShow Answer

The purchasing power of money and the price level vary

Correct AnswerverifiedShow Answer

Correct Answer
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Money gets its value because it is accep...
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A currency that is designated legal tend...
View Answer

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