Question 1

A money-market mutual fund account is a(n)  _____

Accepted Answer

A)   checking account that earns interest.
B)   savings account against which one can write checks.
C)   group of stocks sold under one name.
D)   claim on a collection of interest-earning assets that is not guaranteed by the FDIC.
E)   account with which the Fed buys and sells U.S. government securities.F) A) and B)
G) A) and C)

Question 2

Alan puts $20,000 in an uninsured savings account at the Boston National Bank. Susie borrows $20,000 from the Boston National Bank, flies to a Central African country, and is never heard from again. Which of the following is true in this case?

Accepted Answer

A)   Alan will lose his $20,000 because he did not provide any security.
B)   Alan will lose his $20,000 if he and Susie are related.
C)   Alan will lose his $20,000 if the Boston National Bank makes all of its loans to people who run off to South Pacific islands.
D)   Alan will not lose his $20,000 no matter what happens to the Boston National Bank.
E)   Alan will not lose his $20,000 because the Fed will return the amount to him.F) A) and B)
G) B) and C)

Question 3

Institutions that serve as go-betweens by borrowing from people who have saved to make loans to others are known as _____

Accepted Answer

A)   stock markets.
B)   bond markets.
C)   financial markets.
D)   financial intermediaries.
E)   government agencies.F) B) and D)
G) A) and D)

Question 4

The chair of the Board of Governors of the Fed serves _____

Accepted Answer

A)   a two-year term that coincides with that of members of Congress.
B)   a four-year term.
C)   a seven-year term.
D)   a fourteen-year term.
E)   a six-year term.F) D) and E)
G) A) and B)

Question 5

Barter works best when _____

Accepted Answer

A)   there is an absence of a double coincidence of wants.
B)   many different products are available in the economy.
C)   money is readily available to establish relative prices.
D)   each trader has what the other wants and wants what the other has.
E)   highly developed economies achieve extensive specialization of labor.F) All of the above
G) None of the above

Question 6

Which of the following was the earliest type of money?

Accepted Answer

A)   coins
B)   barter
C)   commodity money
D)   token money
E)   fiat moneyF) C) and D)
G) D) and E)

Question 7

As a result of the financial crises in 2008, the number of banks in the United States declined from about 18,000 in 1984 to about _____ in 2015.

Accepted Answer

A)   15,000
B)   10,000
C)   8,900
D)   6,500
E)   5,000F) A) and E)
G) All of the above

Question 8

Each member of the Federal Reserve's Board of Governors is appointed for life.

Accepted Answer

A) True 
 B)False

Question 9

If the purchasing power of a dollar measured in terms of the base year was $0.42, what was the price index?

Accepted Answer

A)   238
B)   244
C)   41
D)   42
E)   100F) A) and E)
G) C) and D)

Question 10

The law that established the Federal Reserve System is the _____

Accepted Answer

A)   Federal Reserve Act of 1913.
B)   National Banking Act of 1863.
C)   Banking Act of 1933.
D)   National Banking Act of 1813.
E)   Federal Reserve Act of 1963.F) A) and C)
G) B) and E)

Question 11

Specialization of labor means that _____

Accepted Answer

A)   production requires a special kind of labor.
B)   the overall skill level of labor is increasing over time.
C)   individuals produce goods that they are relatively good at producing and trade for those that they do not produce.
D)   individuals achieve self-sufficiency in production by producing all the goods that they require.
E)   exchange within the economy consists of trading in services.F) A) and D)
G) B) and D)

Question 12

Which of the following is correct regarding the discount rate?

Accepted Answer

A)   It is the interest rate that commercial banks charge their most creditworthy customers.
B)   It is the interest rate that thrift institutions charge for home mortgages.
C)   It is the interest rate at which depository institutions can borrow from the Federal Reserve.
D)   It is the interest rate set in the market for U.S. Treasury Bills.
E)   It is the prime interest rate.F) A) and E)
G) A) and D)

Question 13

One purpose of interest-rate ceilings was to _____

Accepted Answer

A)   establish a ceiling on bank profits.
B)   establish a floor on bank profits.
C)   encourage competition in other areas.
D)   eliminate the need for the FDIC.
E)   reduce the chance of bank failures.F) C) and D)
G) A) and B)

Question 14

The reserve requirement refers to _____

Accepted Answer

A)   the fraction of deposits that banks are required by the Fed to hold as reserves.
B)   the amount of gold required to back up all Federal Reserve notes.
C)   the requirement that banks reserve part of their lending capacity for small businesses.
D)   the requirement that Reserve bank presidents be part of the FOMC.
E)   the Treasury deposits held by the Fed.F) A) and B)
G) B) and C)

Question 15

If the purchasing power of a dollar measured in terms of the base year was $0.41, what was the price index?

Accepted Answer

A)   238
B)   244
C)   41
D)   42
E)   100F) A) and E)
G) A) and B)

Question 16

Federal Reserve notes are _____

Accepted Answer

A)   checks.
B)   commodity money.
C)   coins.
D)   backed by gold.
E)   fiat money.F) C) and D)
G) B) and E)

Question 17

The United States has a _____ consisting of state banks and national banks.

Accepted Answer

A)   central banking system.
B)   federal banking system.
C)   chartered banking system.
D)   free banking system.
E)   dual banking system.F) A) and E)
G) None of the above

Question 18

Which of the following statements is true of a barter system?

Accepted Answer

A)   In a barter system economy, no rates of exchange are defined.
B)   In a barter system economy, there are as many different rates of exchange as there are pairs of goods to trade.
C)   In a barter system economy, rates of exchange are expressed in goods per dollar.
D)   In a barter system economy, rates of exchange are expressed in dollars per good.
E)   In a barter system economy, rates of exchange are denominated in gold or silver.F) C) and D)
G) B) and E)

Question 19

Which of the following best illustrates the double coincidence of wants?

Accepted Answer

A)   Both Tom and Jerry would like to purchase the same good.
B)   Tom has something he's willing to trade with Jerry; Jerry has something he's not willing to trade with Tom.
C)   Tom and Jerry have very similar tastes; hence, Tom's wants coincide with Jerry's.
D)   Tom has something he's willing to trade with Jerry, who wants it; Jerry has something he's willing to trade with Tom, who wants it.
E)   Tom has something Jerry wants; Jerry has nothing Tom wants.F) A) and B)
G) A) and C)

Question 20

Which act repealed some Depression-era restrictions on the kinds of assets a bank could own?

Accepted Answer

A)   the Gramm-Leach-Bliley Act of 1999
B)   the Dodd-Frank Act of 2010
C)   the Garn-St. Germain Act of 1982
D)   the Sarbanes-Oxley Act of 2002
E)   the National Banking Act of 1863F) A) and E)
G) A) and B)

Exam 13: Money and the Financial System.

As a result of the financial crises in 2008, the number of banks in the United States declined from about 18,000 in 1984 to about _____ in 2015.

Correct AnswerverifiedShow Answer

Specialization of labor means that _____

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Which act repealed some Depression-era restrictions on the kinds of assets a bank could own?

Correct AnswerverifiedShow Answer

If the purchasing power of a dollar measured in terms of the base year was $0.42, what was the price index?

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The chair of the Board of Governors of the Fed serves _____

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The United States has a _____ consisting of state banks and national banks.

Correct AnswerverifiedShow Answer

One purpose of interest-rate ceilings was to _____

Correct AnswerverifiedShow Answer

Which of the following is correct regarding the discount rate?

Correct AnswerverifiedShow Answer

The law that established the Federal Reserve System is the _____

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Federal Reserve notes are _____

Correct AnswerverifiedShow Answer

Which of the following was the earliest type of money?

Correct AnswerverifiedShow Answer

Which of the following statements is true of a barter system?

Correct AnswerverifiedShow Answer

Institutions that serve as go-betweens by borrowing from people who have saved to make loans to others are known as _____

Correct AnswerverifiedShow Answer

If the purchasing power of a dollar measured in terms of the base year was $0.41, what was the price index?

Correct AnswerverifiedShow Answer

Each member of the Federal Reserve's Board of Governors is appointed for life.

Correct AnswerverifiedShow Answer

The reserve requirement refers to _____

Correct AnswerverifiedShow Answer

Barter works best when _____

Correct AnswerverifiedShow Answer

A money-market mutual fund account is a(n) _____

Correct AnswerverifiedShow Answer

Which of the following best illustrates the double coincidence of wants?

Correct AnswerverifiedShow Answer

Alan puts $20,000 in an uninsured savings account at the Boston National Bank. Susie borrows $20,000 from the Boston National Bank, flies to a Central African country, and is never heard from again. Which of the following is true in this case?

Correct AnswerverifiedShow Answer

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