Question 1

The Federal Reserve System performs the following functions, except:

Accepted Answer

A)   Issuing the paper currency in the economy
B)   Providing banking services to the general public
C)   Providing financial services to the Federal government
D)   Lending money to banks and thriftsE) B) and C)
F) A) and D)

Question 2

Which definition(s)  of the money supply include(s)  only items which are directly and immediately usable as a medium of exchange?

Accepted Answer

A)   M1
B)   M2
C)   Neither M1 nor M2
D)   M1 and M2E) C) and D)
F) A) and C)

Question 3

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

Question 4

When paper money is designated as legal tender, it means that:

Accepted Answer

A)   It is printed by the government
B)   Its supply is controlled by the government
C)   It is a means of payment by law
D)   It will be accepted by the governmentE) A) and B)
F) A) and C)

Question 5

Which of the following items are included in money supply M2 but not M1?

Accepted Answer

A)   Federal Reserve notes
B)   Coins
C)   Savings deposits
D)   Checkable depositsE) C) and D)
F) A) and D)

Question 6

The Federal Reserve System is the institution that issues the U.S. paper currency or dollar bills.

Accepted Answer

A) True 
 B)False

Question 7

The so-called moral-hazard problem in financial management refers to the fact that managers will tend to take on more risk if they know that they are somehow insured against some or all of their losses.

Accepted Answer

A) True 
 B)False

Question 8

The Federal Open Market Committee (FOMC)  of the Federal Reserve System is primarily for:

Accepted Answer

A)   Maintaining cash reserves that can be used to settle international transactions
B)   Supervising banks to make sure that markets are open to all and remain competitive
C)   Issuing currency and acting as the fiscal agent for the Federal government
D)   Setting the Fed's monetary policy and directing the purchase and sale of government securitiesE) A) and B)
F) A) and C)

Question 9

The Federal Reserve Banks are owned by the:

Accepted Answer

A)   Federal government
B)   Board of Governors
C)   United States Treasury
D)   Member banksE) All of the above
F) B) and C)

Question 10

The twelve Federal Reserve Banks can best be characterized as:

Accepted Answer

A)   Central banks, banker's banks, and quasi-public banks
B)   Regional banks, public banks, and member banks
C)   Investment banks, banker's banks, and public banks
D)   National banks, quasi-public banks, and investment banksE) B) and C)
F) None of the above

Question 11

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 moneyE) A) and B)
F) C) and D)

Question 12

Refer to the table above. The value of the money included in M2 but not counted in M1 is:

Accepted Answer

A)   $1,457 billion
B)   $4,442 billion
C)   $2,886 billion
D)   $4,663 billionE) None of the above
F) B) and D)

Question 13

Members of the Federal Reserve Board of Governors are:

Accepted Answer

A)   Appointed by Congress to staggered 14-year terms
B)   Selected by the Federal Open Market Committee for 4-year terms
C)   Appointed by the President to staggered 14-year terms
D)   Selected by each of the Federal Reserve banks for 4-year termsE) B) and C)
F) None of the above

Question 14

As of February 2013, more than half of the money supply (M1)  was in the form of:

Accepted Answer

A)   Currency
B)   Checkable deposits
C)   Gold coins and bars
D)   Savings depositsE) A) and D)
F) B) and C)

Question 15

What "backs" the money supply of the U.S.?

Accepted Answer

A)   The U.S. government's ability to keep the value of money relatively stable
B)   The amount of gold the U.S. government has on deposit at its banks
C)   The fact that currency is issued by the Federal Reserve System
D)   The fact that the intrinsic value of coins in circulation is greater than their face valueE) A) and B)
F) C) and D)

Question 16

The bail-out money given to the car companies GM and Chrysler came from the Fed acting in its role as "lender of last resort".

Accepted Answer

A) True 
 B)False

Question 17

The Financial Crisis of 2007-2008 was triggered by problems in the dot.com sector of the economy.

Accepted Answer

A) True 
 B)False

Question 18

The Federal Open Market Committee (FOMC) regulates markets and enforces antitrust laws to keep markets open and competitive.

Accepted Answer

A) True 
 B)False

Question 19

The blurring of the lines separating the subsets of the financial industry started in the:

Accepted Answer

A)   1940s
B)   1960s
C)   1970s
D)   1990sE) B) and C)
F) A) and C)

Question 20

Economic studies conducted in industrially advanced countries suggest there is:

Accepted Answer

A)   A positive relationship between the degree of independence of the central bank and the size of the average annual rate of inflation
B)   An inverse relationship between the degree of independence of the central bank and the size of the average annual rate of inflation
C)   No relationship between the degree of independence of the central bank and the size of the average annual rate of inflation
D)   A positive relationship between the degree of independence of the central bank and the size of the central bankE) A) and D)
F) A) and B)

Exam 14: Money, Banking, and Financial Institutions

The Financial Crisis of 2007-2008 was triggered by problems in the dot.com sector of the economy.

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The use of a credit card is most similar to:

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When paper money is designated as legal tender, it means that:

Correct AnswerverifiedShow Answer

The blurring of the lines separating the subsets of the financial industry started in the:

Correct AnswerverifiedShow Answer

The Federal Reserve System is the institution that issues the U.S. paper currency or dollar bills.

Correct AnswerverifiedShow Answer

Economic studies conducted in industrially advanced countries suggest there is:

Correct AnswerverifiedShow Answer

The so-called moral-hazard problem in financial management refers to the fact that managers will tend to take on more risk if they know that they are somehow insured against some or all of their losses.

Correct AnswerverifiedShow Answer

The twelve Federal Reserve Banks can best be characterized as:

Correct AnswerverifiedShow Answer

The Federal Reserve System performs the following functions, except:

Correct AnswerverifiedShow Answer

The bail-out money given to the car companies GM and Chrysler came from the Fed acting in its role as "lender of last resort".

Correct AnswerverifiedShow Answer

As of February 2013, more than half of the money supply (M1) was in the form of:

Correct AnswerverifiedShow Answer

The Federal Open Market Committee (FOMC) regulates markets and enforces antitrust laws to keep markets open and competitive.

Correct AnswerverifiedShow Answer

Which definition(s) of the money supply include(s) only items which are directly and immediately usable as a medium of exchange?

Correct AnswerverifiedShow Answer

Which of the following items are included in money supply M2 but not M1?

Correct AnswerverifiedShow Answer

The Federal Open Market Committee (FOMC) of the Federal Reserve System is primarily for:

Correct AnswerverifiedShow Answer

Refer to the table above. The value of the money included in M2 but not counted in M1 is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What "backs" the money supply of the U.S.?

Correct AnswerverifiedShow Answer

The Federal Reserve Banks are owned by the:

Correct AnswerverifiedShow Answer

Members of the Federal Reserve Board of Governors are:

Correct AnswerverifiedShow Answer

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