Question 1

The double coincidence of wants problem can be solved by:

Accepted Answer

A)  more resources.
B)  more production.
C)  money.
D)  economic growth.

Question 2

A private investment partnership open only to wealthy individuals and institutions is a(n) :

Accepted Answer

A)  hedge fund.
B)  investment bank.
C)  savings and loan.
D)  quasi-government agency.

Question 3

The largest monetary aggregate is:

Accepted Answer

A)  M1, because it contains all of the currency in circulation.
B)  M2, because it contains currency in circulation, all bank deposits, other deposits, and deposit-like assets.
C)  the reserves in the vaults of Federal Reserve banks, because they are the money multiplier.
D)  the total volume of stocks and bonds, because they store most of the national wealth.

Question 4

If a bank has deposits of $100,000, loans of $75,000, cash on hand of $10,000, and $15,000 on deposit at the Federal Reserve, then its reserve ratio is:

Accepted Answer

A)  5%.
B)  10%.
C)  12.5%.
D)  25%.

Question 5

The discount window is the branch of the Federal Reserve that monitors banks to be sure that they are meeting reserve and capital requirements.

Accepted Answer

A) True 
 B)False

Question 6

In return for injecting capital into banks, the U.S. government received:

Accepted Answer

A)  deposits at the bank.
B)  loans at an interest rate below the prime rate.
C)  bonds issued by the bank.
D)  shares of stock in the bank.

Question 7

Many S&Ls failed in the late 1970s and early 1980s when they lost most of their depositors to Fannie Mae and Freddie Mac.

Accepted Answer

A) True 
 B)False

Question 8

Commodity-backed money's value is guaranteed by a promise that it can be converted to a useful good.

Accepted Answer

A) True 
 B)False

Question 9

The federal funds rate is determined by the demand and supply for bank reserves, both of which are strongly influenced by the Federal Reserve.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following assets is money?

Accepted Answer

A)  a $20 bill
B)  a work of art
C)  a baseball signed by a famous player
D)  shares of stock in a profitable company

Question 11

The purpose of Regulation Q was to:

Accepted Answer

A)  prevent commercial banks from trading stocks and bonds.
B)  require investment banks to purchase deposit insurance.
C)  prevent unhealthy competition between banks by limiting the number of customers each bank could serve.
D)  prevent banks from paying interest on checking accounts.

Question 12

Open-market operations occur when the Federal Reserve:

Accepted Answer

A)  buys U.S. Treasury bills from the federal government.
B)  buys or sells foreign currency.
C)  buys or sells existing U.S. Treasury bills.
D)  sells U.S. Treasury bills to the federal government.

Question 13

Money is unique because it is the only asset that can be used as a store of value.

Accepted Answer

A) True 
 B)False

Question 14

The Wall Street Reform and Consumer Protection Act, also called Dodd-Frank, was passed in the 1930s to correct the problems that led to the Great Depression.

Accepted Answer

A) True 
 B)False

Question 15

Fiat money:

Accepted Answer

A)  is currency from Italy.
B)  can include currency backed by gold but not by silver.
C)  is currency backed by the gold in Fort Knox.
D)  has advantages over commodity-backed money.

Question 16

The Reconstruction Finance Corporation:

Accepted Answer

A)  was established to extract war reparations from the South after the Civil War.
B)  supervised the government assistance to AIG and Lehman Brothers.
C)  was established in the 1930s to make loans to banks and to buy their preferred stock.
D)  supervised the rebuilding of Iraq.

Question 17

Use the following to answer questions : 
-(Scenario: Assets and Liabilities of the Banking System)  Look at the scenario Assets and Liabilities of the Banking System. Suppose that the reserve ratio is 10% and the Federal Reserve sells $11,000 worth of U.S. Treasury bills to the banking system. If the banking system does NOT want to hold any excess reserves, _____ will be _____ the money supply.

Accepted Answer

A)  $110,000; added to
B)  $110,000; subtracted from
C)  $250,000; subtracted from
D)  $250,000; added to

Question 18

When a bank lends excess reserves to a customer:

Accepted Answer

A)  this does not affect the money supply.
B)  the money supply is increased.
C)  the money supply is decreased.
D)  it has the same effect as when one customer writes a check to another customer at a different bank.

Question 19

High inflation rates in the 1970s were harmful to S&Ls because they decreased the value of the thrifts' long-term mortgages.

Accepted Answer

A) True 
 B)False

Question 20

At the end of each business day, the Federal Reserve requires banks to hold reserves equal to 10% of their checkable deposits.

Accepted Answer

A) True 
 B)False

Exam 14: Money, Banking, and the Federal Reserve System

Open-market operations occur when the Federal Reserve:

Correct Answer
verified

Which of the following assets is money?

Correct Answer
verified

Many S&Ls failed in the late 1970s and early 1980s when they lost most of their depositors to Fannie Mae and Freddie Mac.

Correct Answer
verified

In return for injecting capital into banks, the U.S. government received:

Correct Answer
verified

The largest monetary aggregate is:

Correct Answer
verified

The Wall Street Reform and Consumer Protection Act, also called Dodd-Frank, was passed in the 1930s to correct the problems that led to the Great Depression.

Correct Answer
verified

The purpose of Regulation Q was to:

Correct Answer
verified

The Reconstruction Finance Corporation:

Correct Answer
verified

The federal funds rate is determined by the demand and supply for bank reserves, both of which are strongly influenced by the Federal Reserve.

Correct Answer
verified

Fiat money:

Correct Answer
verified

Commodity-backed money's value is guaranteed by a promise that it can be converted to a useful good.

Correct Answer
verified

If a bank has deposits of $100,000, loans of $75,000, cash on hand of $10,000, and $15,000 on deposit at the Federal Reserve, then its reserve ratio is:

Correct Answer
verified

High inflation rates in the 1970s were harmful to S&Ls because they decreased the value of the thrifts' long-term mortgages.

Correct Answer
verified

A private investment partnership open only to wealthy individuals and institutions is a(n) :

Correct Answer
verified

The discount window is the branch of the Federal Reserve that monitors banks to be sure that they are meeting reserve and capital requirements.

Correct Answer
verified

At the end of each business day, the Federal Reserve requires banks to hold reserves equal to 10% of their checkable deposits.

Correct Answer
verified

When a bank lends excess reserves to a customer:

Correct Answer
verified

The double coincidence of wants problem can be solved by:

Correct Answer
verified

Money is unique because it is the only asset that can be used as a store of value.

Correct Answer
verified

Correct Answer
verified

Exam 14: Money, Banking, and the Federal Reserve System

Open-market operations occur when the Federal Reserve:

Correct AnswerverifiedShow Answer

Which of the following assets is money?

Correct AnswerverifiedShow Answer

Many S&Ls failed in the late 1970s and early 1980s when they lost most of their depositors to Fannie Mae and Freddie Mac.

Correct AnswerverifiedShow Answer

In return for injecting capital into banks, the U.S. government received:

Correct AnswerverifiedShow Answer

The largest monetary aggregate is:

Correct AnswerverifiedShow Answer

The Wall Street Reform and Consumer Protection Act, also called Dodd-Frank, was passed in the 1930s to correct the problems that led to the Great Depression.

Correct AnswerverifiedShow Answer

The purpose of Regulation Q was to:

Correct AnswerverifiedShow Answer

The Reconstruction Finance Corporation:

Correct AnswerverifiedShow Answer

The federal funds rate is determined by the demand and supply for bank reserves, both of which are strongly influenced by the Federal Reserve.

Correct AnswerverifiedShow Answer

Fiat money:

Correct AnswerverifiedShow Answer

Commodity-backed money's value is guaranteed by a promise that it can be converted to a useful good.

Correct AnswerverifiedShow Answer

If a bank has deposits of $100,000, loans of $75,000, cash on hand of $10,000, and $15,000 on deposit at the Federal Reserve, then its reserve ratio is:

Correct AnswerverifiedShow Answer

High inflation rates in the 1970s were harmful to S&Ls because they decreased the value of the thrifts' long-term mortgages.

Correct AnswerverifiedShow Answer

A private investment partnership open only to wealthy individuals and institutions is a(n) :

Correct AnswerverifiedShow Answer

The discount window is the branch of the Federal Reserve that monitors banks to be sure that they are meeting reserve and capital requirements.

Correct AnswerverifiedShow Answer

At the end of each business day, the Federal Reserve requires banks to hold reserves equal to 10% of their checkable deposits.

Correct AnswerverifiedShow Answer

When a bank lends excess reserves to a customer:

Correct AnswerverifiedShow Answer

The double coincidence of wants problem can be solved by:

Correct AnswerverifiedShow Answer

Money is unique because it is the only asset that can be used as a store of value.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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