Question 1

The Monetary Control Act of 1980 extended the Fed's authority to:

Accepted Answer

A)  impose required-reserve ratios on all depository institutions.
B)  control the discount rate.
C)  control the federal funds rate.
D)  all of these.E) None of the above
F) B) and D)

Question 2

Suppose you transfer $1,000 from your checking account to your savings account. How does this action affect the M1 and M2 money supplies?

Accepted Answer

A)  M1 and M2 are both unchanged.
B)  M1 falls by $1,000, and M2 rises by $1,000.
C)  M1 is unchanged, and M2 rises by $1,000.
D)  M1 falls by $1,000, and M2 is unchanged.E) A) and B)
F) C) and D)

Question 3

Which of the following laws increased competition among financial institutions and gave the Fed greater control over nonmember banks?

Accepted Answer

A)  The Federal Reserve Act.
B)  The Equal Credit Opportunity Act.
C)  The Monetary Control Act.
D)  The Thrift Bailout Bill.E) All of the above
F) B) and C)

Question 4

Currency consists of:

Accepted Answer

A)  coins and Eurodollars.
B)  paper money and checks.
C)  coins and paper money.
D)  paper money and Eurodollars.
E)  coins and checks.F) A) and D)
G) B) and D)

Question 5

If something is a medium of exchange, then it:

Accepted Answer

A)  serves as a yardstick for measuring the value of other goods.
B)  is a means of holding wealth for the future.
C)  has an absolute value in gold.
D)  is widely accepted as payment for purchases.E) B) and D)
F) C) and D) D

Question 6

Money is:

Accepted Answer

A)  valuable because it is backed by gold.
B)  any items used in barter.
C)  an illiquid asset.
D)  none of these.E) B) and D)
F) B) and C)

Question 7

Which definition of the money supply includes credit cards?

Accepted Answer

A)  M1.
B)  M2.
C)  M3.
D)  None of these includes credit card balances.E) A) and C)
F) A) and B)

Question 8

The characteristics that money should have include:

Accepted Answer

A)  portability, durability, and flexibility.
B)  durability, flexibility and stability.
C)  durability, portability, and non-homogeneity.
D)  scarcity, portability, and divisibility.
E)  portability, homogeneity, and flexibility.F) A) and B)
G) None of the above

Question 9

M1 refers to:

Accepted Answer

A)  the most narrowly defined money supply definition.
B)  currency held by the public plus checking account balances.
C)  the smallest of the money-supply definitions.
D)  all of these.E) All of the above
F) A) and B)

Question 10

A majority of the commercial banks in the United States are not members of the Fed.

Accepted Answer

A) True 
 B)False  True

Question 11

Which of the following defines the "unit of account" function of money?

Accepted Answer

A)  A common measurement of the relative value of different goods and services.
B)  The ability of money to hold value over time.
C)  The materials used to manufacture money are of medium grade or quality, so that people will not hoard money for its commodity value.
D)  Money is widely accepted in exchange for goods and services.E) C) and D)
F) B) and C)

Question 12

The three functions of money are medium of exchange,

Accepted Answer

A)  measure of value, and standard of value.
B)  measure of value, and store of value.
C)  standard of value, and store of value
D)  medium of value, and store of value.
E)  measure of value, and deferred value.F) A) and D)
G) C) and D)

Question 13

Buying a cup of coffee with a dollar bill represents the use of money as a:

Accepted Answer

A)  medium of exchange.
B)  unit of account.
C)  store of value.
D)  all of these.E) A) and B)
F) None of the above

Question 14

Which of the following is counted as part of M2?

Accepted Answer

A)  Currency.
B)  Checkable deposits.
C)  Money-market mutual funds.
D)  All of these.E) B) and C)
F) A) and D)

Question 15

Fiat money is money:

Accepted Answer

A)  accepted by law regardless of its intrinsic value.
B)  that is not included as part of the M1 money supply.
C)  that is backed by gold or silver held on reserve by the government.
D)  such as coins that are made from metal.E) C) and D)
F) A) and B)

Question 16

Describe the functions of the Federal Reserve System.

Accepted Answer

The Fed's functions include 
(1)controlling the money supply
(2)clearing checks
(3)supervising and regulating banks (4)maintaining and circulating currency, (5)protecting consumers
(6)maintaining federal government checking accounts and gold reserves.

Question 17

Which of the following is not an example of money used as a unit of account?

Accepted Answer

A)  A British pound is worth $3.00.
B)  Auto repairs were $3,000 last year.
C)  Business travel totaled 12,000 miles.
D)  Gasoline sells for $1.20 per gallon and oil is $5.00 per quart.E) A) and D)
F) B) and D)

Question 18

The Monetary Control Act of 1980:

Accepted Answer

A)  allowed savings and loan associations to offer checking accounts.
B)  allowed more institutions to offer checking account services.
C)  created greater competition among various financial institutions.
D)  all of the above.
E)  none of the above.F) A) and E)
G) A) and C)

Question 19

The Federal Reserve System is owned by:

Accepted Answer

A)  federal government agencies such as the Treasury.
B)  the Congress of the United States.
C)  the banks that are members of the Federal Reserve System.
D)  anyone who buys stock over the counter.
E)  people who have deposits in member banks.F) A) and B)
G) C) and D)

Question 20

The M1 money supply is defined to be the sum of currency, traveler's checks, and:

Accepted Answer

A)  checkable deposits.
B)  Treasury bonds.
C)  savings accounts.
D)  large time deposits.E) A) and B)
F) A) and C)

Exam 14: Money and the Federal Reserve System

The Monetary Control Act of 1980 extended the Fed's authority to:

Correct AnswerverifiedShow Answer

Suppose you transfer $1,000 from your checking account to your savings account. How does this action affect the M1 and M2 money supplies?

Correct AnswerverifiedShow Answer

Which of the following laws increased competition among financial institutions and gave the Fed greater control over nonmember banks?

Correct AnswerverifiedShow Answer

Currency consists of:

Correct AnswerverifiedShow Answer

If something is a medium of exchange, then it:

Correct AnswerverifiedD

Money is:

Correct AnswerverifiedShow Answer

Which definition of the money supply includes credit cards?

Correct AnswerverifiedShow Answer

The characteristics that money should have include:

Correct AnswerverifiedShow Answer

M1 refers to:

Correct AnswerverifiedShow Answer

A majority of the commercial banks in the United States are not members of the Fed.

Correct AnswerverifiedTrue

Which of the following defines the "unit of account" function of money?

Correct AnswerverifiedShow Answer

The three functions of money are medium of exchange,

Correct AnswerverifiedShow Answer

Buying a cup of coffee with a dollar bill represents the use of money as a:

Correct AnswerverifiedShow Answer

Which of the following is counted as part of M2?

Correct AnswerverifiedShow Answer

Fiat money is money:

Correct AnswerverifiedShow Answer

Describe the functions of the Federal Reserve System.

Correct AnswerverifiedThe Fed's functions include (1)controlling the money supply (2)clearing checks (3)supervising and regulating banks (4)maintaining and circulating currency, (5)protecting consumers (6)maintaining federal government checking accounts and gold reserves.

Which of the following is not an example of money used as a unit of account?

Correct AnswerverifiedShow Answer

The Monetary Control Act of 1980:

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The Federal Reserve System is owned by:

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The M1 money supply is defined to be the sum of currency, traveler's checks, and:

Correct AnswerverifiedShow Answer

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D

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True

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The Fed's functions include (1)controlling the money supply (2)clearing checks (3)supervising and regulating banks (4)maintaining and circulating currency, (5)protecting consumers (6)maintaining federal government checking accounts and gold reserves.

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