Question 1

Which of the following statements is correct? I. The Fed can periodically and without warning examine member commercial banks to ensure that they are conforming to current banking standards.
II)  The Fed helps the government collect certain tax revenues and aids in the purchase and sale of government securities.

Accepted Answer

A)   I only
B)   II only
C)   Both I and II
D)   Neither I nor IIE) A) and D)
F) A) and C)

Question 2

The ability to quickly convert an asset into cash is

Accepted Answer

A)   disintermediation.
B)   the standard of deferred payment.
C)   financial intermediation.
D)   liquidity.E) A) and B)
F) All of the above

Question 3

Transaction deposits

Accepted Answer

A)   are deposits in a banking institution on which a check may be written.
B)   are only deposits that you can check on through the Internet.
C)   include savings accounts.
D)   are accounts that pay interest to the depositor.E) B) and C)
F) A) and D)

Question 4

Two people are involved in a borrower/lender situation, and one person has superior knowledge of its own current and future prospects over the other person. This is known as

Accepted Answer

A)   preventable information.
B)   symmetric information.
C)   asymmetric information.
D)   deceptive knowledge.E) A) and D)
F) B) and C)

Question 5

A monetary system is preferable over the barter system because of the problems associated with

Accepted Answer

A)   cash leakages.
B)   the double coincidence of wants.
C)   the law of diminishing marginal utility.
D)   the law of increasing relative costs.E) A) and B)
F) A) and C)

Question 6

When the Fed buys a U.S. bond in the open market

Accepted Answer

A)   its action has no effect on the total reserves or the money supply because the check it writes increases reserves at one bank but they fall at another.
B)   total reserves increase by the amount of the purchase but the money supply stays the same.
C)   its action expands total reserves and the money supply.
D)   its action contracts total reserves and the money supply.E) A) and B)
F) B) and C)

Question 7

Which of the following is NOT part of M1 but is included in M2?

Accepted Answer

A)   currency
B)   small-denomination certificates of deposits
C)   traveler's checks
D)   cashE) None of the above
F) All of the above

Question 8

The reserve ratio is 10 percent. After the Fed buys $1 million in U.S. government securities from a bond dealer by transmitting the funds to the dealer's deposit account at Bank A, Bank A lends a construction company an amount equal to its excess reserves. The construction company spends the entire amount on lumber from a lumber yard, which deposits the construction company's check in its deposit account with Bank A. The maximum loan Bank A can now make is

Accepted Answer

A)   $900,000.
B)   $100,000.
C)   $810,000.
D)   $1 million.E) A) and D)
F) All of the above

Question 9

Deposits held by Federal Reserve district banks for depository institutions, plus depository institutions' vault cash are known as

Accepted Answer

A)   reserves.
B)   a sweep account.
C)   adverse selection.
D)   the discount rate.E) B) and D)
F) A) and B)

Question 10

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

Accepted Answer

A)   the Federal Reserve System.
B)   the federal funds market.
C)   sweep accounts.
D)   fractional reserve banking.E) All of the above
F) A) and C)

Question 11

A checkable account

Accepted Answer

A)   is a very illiquid asset.
B)   allows its holder to make transactions by writing checks.
C)   must be traded on the stock exchange.
D)   cannot serve as a store of value.E) All of the above
F) B) and C)

Question 12

When Jack and Jill use dollars to compare the market values of their cellphones, 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) A) and B)
F) B) and C)

Question 13

Which of the following is NOT included in the M1 money supply?

Accepted Answer

A)   currency
B)   passbook savings accounts
C)   checkable and debitable accounts
D)   traveler's checksE) A) and D)
F) B) and D)

Question 14

The level of reserves in the monetary system is determined by

Accepted Answer

A)   the Federal Open Market Committee.
B)   the Treasury Department.
C)   Congress.
D)   the President of the United States.E) A) and C)
F) B) and D)

Question 15

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

Question 16

What differentiates a savings deposit from a small-denomination certificate of deposit (CD) ?

Accepted Answer

A)   A CD has a fixed maturity date; a savings deposit can be withdrawn at any time.
B)   A savings deposit cannot be withdrawn before its maturity date without incurring a penalty; funds in a CD are available at any time with no interest penalty.
C)   Only a savings deposit is a time deposit.
D)   All depository institutions accept savings deposits, whereas only a thrift institution can issue a CD.E) None of the above
F) A) and B)

Question 17

Which of the following statements is NOT true about money?

Accepted Answer

A)   Anything that serves as a medium of exchange, as a unit of accounting, as a store of value, and as a standard of deferred payment can be called money.
B)   Money is any medium that is universally accepted by sellers and creditors.
C)   Money is a standard of deferred payment.
D)   Money can only be coins and paper.E) B) and D)
F) B) and C)

Question 18

Money functions as

Accepted Answer

A)   a store of value.
B)   an unit of account.
C)   a medium of exchange.
D)   all of the above.E) C) and D)
F) A) and B)

Question 19

Which of the following is included in M2 but NOT in M1?

Accepted Answer

A)   small-denomination time deposits
B)   transaction deposits
C)   currency
D)   traveler's checksE) A) and D)
F) B) and C)

Question 20

Check collection and clearing happen

Accepted Answer

A)   at the bank where the check was written.
B)   only at private clearing centers.
C)   at the Fed and at private clearing centers.
D)   only at the Fed.E) A) and B)
F) B) and D)

Exam 15: Money, Banking, and Central Banking

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

Correct Answer
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Correct Answer
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Transaction deposits

Correct Answer
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Check collection and clearing happen

Correct Answer
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When Jack and Jill use dollars to compare the market values of their cellphones, money is acting as a

Correct Answer
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Which of the following is NOT part of M1 but is included in M2?

Correct Answer
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A checkable account

Correct Answer
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Money functions as

Correct Answer
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Which of the following is NOT included in the M1 money supply?

Correct Answer
verified

The ability to quickly convert an asset into cash is

Correct Answer
verified

A monetary system is preferable over the barter system because of the problems associated with

Correct Answer
verified

In a fractional reserve banking system

Correct Answer
verified

Two people are involved in a borrower/lender situation, and one person has superior knowledge of its own current and future prospects over the other person. This is known as

Correct Answer
verified

Which of the following is included in M2 but NOT in M1?

Correct Answer
verified

The level of reserves in the monetary system is determined by

Correct Answer
verified

Which of the following statements is NOT true about money?

Correct Answer
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Correct Answer
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When the Fed buys a U.S. bond in the open market

Correct Answer
verified

What differentiates a savings deposit from a small-denomination certificate of deposit (CD) ?

Correct Answer
verified

Deposits held by Federal Reserve district banks for depository institutions, plus depository institutions' vault cash are known as

Correct Answer
verified

Exam 15: Money, Banking, and Central Banking

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Transaction deposits

Correct AnswerverifiedShow Answer

Check collection and clearing happen

Correct AnswerverifiedShow Answer

When Jack and Jill use dollars to compare the market values of their cellphones, money is acting as a

Correct AnswerverifiedShow Answer

Which of the following is NOT part of M1 but is included in M2?

Correct AnswerverifiedShow Answer

A checkable account

Correct AnswerverifiedShow Answer

Money functions as

Correct AnswerverifiedShow Answer

Which of the following is NOT included in the M1 money supply?

Correct AnswerverifiedShow Answer

The ability to quickly convert an asset into cash is

Correct AnswerverifiedShow Answer

A monetary system is preferable over the barter system because of the problems associated with

Correct AnswerverifiedShow Answer

In a fractional reserve banking system

Correct AnswerverifiedShow Answer

Two people are involved in a borrower/lender situation, and one person has superior knowledge of its own current and future prospects over the other person. This is known as

Correct AnswerverifiedShow Answer

Which of the following is included in M2 but NOT in M1?

Correct AnswerverifiedShow Answer

The level of reserves in the monetary system is determined by

Correct AnswerverifiedShow Answer

Which of the following statements is NOT true about money?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the Fed buys a U.S. bond in the open market

Correct AnswerverifiedShow Answer

What differentiates a savings deposit from a small-denomination certificate of deposit (CD) ?

Correct AnswerverifiedShow Answer

Deposits held by Federal Reserve district banks for depository institutions, plus depository institutions' vault cash are known as

Correct AnswerverifiedShow Answer

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