Chapter 14 Macro Economic exam – Flashcards
Unlock all answers in this set
Unlock answersquestion
If you place a part of your summer earnings in a savings account, you are using money primarily as a:
answer
store of value.
question
If you write a check on a bank to purchase a used Honda Civic, you are using money primarily as:
answer
a medium of exchange.
question
In the United States, the money supply (M1) includes:
answer
coins, paper currency, and checkable deposits.
question
Check able deposits are classified as money because:
answer
they can be readily used in purchasing goods and paying debts.
question
Currency (paper money plus coins) constitutes about:
answer
45 percent of the U.S. M1 money supply.
question
The largest component of the money supply (M1) is:
answer
checkable deposits.
question
Paper money (currency) in the United States is issued by the:
answer
Federal Reserve Banks.
question
The money supply is backed:
answer
by the government's ability to control the supply of money and therefore to keep its value relatively stable.
question
The Federal Reserve System was created in:
answer
1913.
question
The Federal Open Market Committee (FOMC) is made up of:
answer
the seven members of the Board of Governors of the Federal Reserve System along with the president of the New York Federal Reserve Bank and four other Federal Reserve Bank presidents on a rotating basis.
question
Which one of the following is true about the U.S. Federal Reserve System?
answer
There are 12 regional Federal Reserve Banks.
question
The Board of Governors of the Federal Reserve has ____ members.
answer
7
question
The seven members of the Board of Governors of the Federal Reserve System are:
answer
appointed by the president with the confirmation of the Senate.
question
The Federal Reserve System:
answer
is basically an independent agency.
question
Research for industrially advanced countries indicates that:
answer
the more independent the central bank, the lower the average annual rate of inflation.
question
"Subprime mortgage loans" refer to:
answer
high-interest-rate loans to home buyers with above-average credit risk.
question
What are "mortgage-backed securities"?
answer
Bonds backed by mortgage payments.
question
When banks bundled mortgage loans and sold the resulting mortgage-backed securities:
answer
they reduced direct exposure to mortgage default risk but were still exposed through loans to investors in mortgage-backed securities.
question
financial industry, "securitization" means
answer
bundling groups of loans, bonds, mortgages, and other financial debts into new securities.
question
Collateralized default swaps:
answer
insured holders of loan-backed securities in case the underlying loans were not repaid.
question
Which statements is true about the high rate of mortgage defaults that contributed to the financial crisis of 2007/ 2008?
answer
Prior to the rise in defaults, banks had become lax in their lending practices, resulting in a large number of bad loans.
question
Which of the following financial institutions declared bankruptcy as a result of the financial crisis of 2007 and 2008?
answer
Lehman Brothers
question
TARP, created in 2008, stands for:
answer
Troubled Asset Relief Program
question
the financial rescue provided by the TARP will encourage financial investors and firms to take on greater risks in the future. This is an example of:
answer
moral hazard.
