Question 1

Which of the following statements best describes the 12 Federal Reserve Banks?

Accepted Answer

A)   They are privately owned and privately controlled central banks whose basic goal is to provide an ample and orderly market for U.S. Treasury securities.
B)   They are privately owned and publicly controlled central banks whose basic function is to minimize the risks in commercial banking in order to make it a reasonably profitable industry.
C)   They are privately owned and publicly controlled central banks whose basic goal is to control the money supply and interest rates in promoting the general economic welfare.
D)   They are privately owned and publicly controlled central banks whose basic goal is to earn profits for their owners.

Question 2

The United States faced the most serious financial crisis since the Great Depression during the period of 2007-2008.

Accepted Answer

A) True 
 B)False

Question 3

How are the following items treated in the calculation of M1?

Accepted Answer

A)   Small time deposits and currency are both included.
B)   Small time deposits and money market mutual funds of individuals are both included.
C)   Checkable deposits are excluded and currency is included.
D)   Checkable deposits and currency are both included.

Question 4

Cash held by a bank is sometimes called:

Accepted Answer

A)   token money.
B)   legal tender.
C)   vault cash.
D)   fractional reserves.

Question 5

In the United States, credit cards account for about what percentage of the dollar volume of transactions for goods and services?

Accepted Answer

A)   10 percent
B)   25 percent
C)   40 percent
D)   65 percent

Question 6

Federal deposit insurance is currently capped at $100,000 per account.

Accepted Answer

A) True 
 B)False

Question 7

U.S. 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.

Question 8

If actual reserves in the banking system are $8,000, checkable deposits are $70,000, and the legal reserve ratio is 10 percent, then excess reserves are:

Accepted Answer

A)   zero.
B)   $1,000.
C)   $2,000.
D)   $500.

Question 9

The M1 money supply is composed of:

Accepted Answer

A)   money market mutual funds held by individuals.
B)   money market mutual funds held by businesses.
C)   savings deposits and time deposits.
D)   checkable deposits and currency.

Question 10

One reason that "near-monies" are important is because:

Accepted Answer

A)   they simplify the definition of money and therefore the formulation of monetary policy.
B)   they can be easily converted into money or vice versa, and thereby can influence the stability of the economy.
C)   they do not reflect the level of consumer spending, but they have a critical impact on saving and investment in the economy.
D)   credit cards synchronize one's expenditures and income, thereby reducing the cash and checkable deposits one must hold.

Question 11

Firms that help corporations and governments raise money by selling stocks and bonds are known as:

Accepted Answer

A)   insurance companies
B)   thrifts
C)   mutual fund companies
D)   investment banks

Question 12

The Federal Reserve is prohibited from lending money to banks and thrifts.

Accepted Answer

A) True 
 B)False

Question 13

Use the following balance sheet for the ABC National Bank in answering the next question. Assume the required reserve ratio is 20 percent.
 
-Refer to the above data. If the original balance sheet was for the commercial banking system, rather than a single bank, loans and checkable deposits could have been expanded by a maximum of:

Accepted Answer

A)   $8,000.
B)   $15,000.
C)   $48,000.
D)   $25,000.

Question 14

The use of a credit card is most similar to:

Accepted Answer

A)   creating legal tender.
B)   reducing the value of the U.S. dollar.
C)   purchasing a certificate of deposit at a commercial bank.
D)   obtaining a short-term loan from a financial institution.

Question 15

All coins in circulation within the United States are:

Accepted Answer

A)   near monies.
B)   checkable deposits.
C)   token money.
D)   time deposits.

Question 16

The Federal Open Market Committee (FOMC) is made up of the presidents of the Federal Reserve Banks, the secretary of the Treasury, and the chair of the President's Council of Economic Advisers.

Accepted Answer

A) True 
 B)False

Question 17

Commercial banks, mutual fund companies, and securities firms are all part of the ________ services industry.

Accepted Answer

A)   government
B)   economic
C)   financial
D)   political

Question 18

If excess reserves in the banking system are $4,000, checkable deposits are $40,000, and the legal reserve ratio is 10 percent, then actual reserves are:

Accepted Answer

A)   $4,000.
B)   $6,000.
C)   $8,000.
D)   $5,000.

Question 19

The primary responsibility of the Federal Open Market Committee (FOMC)  is:

Accepted Answer

A)   issuing currency and acting as the fiscal agent for the federal government.
B)   handling the Fed's collection of checks and adjusting legal reserves among banks.
C)   setting the Fed's monetary policy and directing the buying and selling of government securities.
D)   supervising bank operations to make sure they follow regulations and monitoring banks for fraud.

Question 20

In which of the following U.S. cities is one of the 12 Federal Reserve Banks located?

Accepted Answer

A)   New York City
B)   Seattle
C)   Miami
D)   Denver

Exam 14: Money, Banking, and Financial Institutions

The primary responsibility of the Federal Open Market Committee (FOMC) is:

Correct Answer
verified

U.S. currency has value primarily because it:

Correct Answer
verified

If actual reserves in the banking system are $8,000, checkable deposits are $70,000, and the legal reserve ratio is 10 percent, then excess reserves are:

Correct Answer
verified

The Federal Reserve is prohibited from lending money to banks and thrifts.

Correct Answer
verified

In which of the following U.S. cities is one of the 12 Federal Reserve Banks located?

Correct Answer
verified

All coins in circulation within the United States are:

Correct Answer
verified

Which of the following statements best describes the 12 Federal Reserve Banks?

Correct Answer
verified

In the United States, credit cards account for about what percentage of the dollar volume of transactions for goods and services?

Correct Answer
verified

The use of a credit card is most similar to:

Correct Answer
verified

Correct Answer
verified

Firms that help corporations and governments raise money by selling stocks and bonds are known as:

Correct Answer
verified

Federal deposit insurance is currently capped at $100,000 per account.

Correct Answer
verified

Cash held by a bank is sometimes called:

Correct Answer
verified

One reason that "near-monies" are important is because:

Correct Answer
verified

How are the following items treated in the calculation of M1?

Correct Answer
verified

The M1 money supply is composed of:

Correct Answer
verified

The United States faced the most serious financial crisis since the Great Depression during the period of 2007-2008.

Correct Answer
verified

The Federal Open Market Committee (FOMC) is made up of the presidents of the Federal Reserve Banks, the secretary of the Treasury, and the chair of the President's Council of Economic Advisers.

Correct Answer
verified

Commercial banks, mutual fund companies, and securities firms are all part of the ________ services industry.

Correct Answer
verified

If excess reserves in the banking system are $4,000, checkable deposits are $40,000, and the legal reserve ratio is 10 percent, then actual reserves are:

Correct Answer
verified

Exam 14: Money, Banking, and Financial Institutions

The primary responsibility of the Federal Open Market Committee (FOMC) is:

Correct AnswerverifiedShow Answer

U.S. currency has value primarily because it:

Correct AnswerverifiedShow Answer

If actual reserves in the banking system are $8,000, checkable deposits are $70,000, and the legal reserve ratio is 10 percent, then excess reserves are:

Correct AnswerverifiedShow Answer

The Federal Reserve is prohibited from lending money to banks and thrifts.

Correct AnswerverifiedShow Answer

In which of the following U.S. cities is one of the 12 Federal Reserve Banks located?

Correct AnswerverifiedShow Answer

All coins in circulation within the United States are:

Correct AnswerverifiedShow Answer

Which of the following statements best describes the 12 Federal Reserve Banks?

Correct AnswerverifiedShow Answer

In the United States, credit cards account for about what percentage of the dollar volume of transactions for goods and services?

Correct AnswerverifiedShow Answer

The use of a credit card is most similar to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Firms that help corporations and governments raise money by selling stocks and bonds are known as:

Correct AnswerverifiedShow Answer

Federal deposit insurance is currently capped at $100,000 per account.

Correct AnswerverifiedShow Answer

Cash held by a bank is sometimes called:

Correct AnswerverifiedShow Answer

One reason that "near-monies" are important is because:

Correct AnswerverifiedShow Answer

How are the following items treated in the calculation of M1?

Correct AnswerverifiedShow Answer

The M1 money supply is composed of:

Correct AnswerverifiedShow Answer

The United States faced the most serious financial crisis since the Great Depression during the period of 2007-2008.

Correct AnswerverifiedShow Answer

The Federal Open Market Committee (FOMC) is made up of the presidents of the Federal Reserve Banks, the secretary of the Treasury, and the chair of the President's Council of Economic Advisers.

Correct AnswerverifiedShow Answer

Commercial banks, mutual fund companies, and securities firms are all part of the ________ services industry.

Correct AnswerverifiedShow Answer

If excess reserves in the banking system are $4,000, checkable deposits are $40,000, and the legal reserve ratio is 10 percent, then actual reserves are:

Correct AnswerverifiedShow Answer

Correct Answer
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