question

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

answer

TRUE

question

When there is inflation in the economy, it implies that the:

answer

Price index is rising and the purchasing power of money is falling

question

What function is money serving when you deposit money in a savings account?

answer

A store of value

question

Which of the following functions of money enables society to gain the benefits of geographic and labor specialization?

answer

Medium of exchange

question

Currency and checkable deposits are:

answer

The major components of money supply M1

question

The consolidation in the financial industry into fewer and larger firms:

answer

Progressed further in the Financial Crisis of 2007-2008

question

Checkable deposits are included in:

answer

both M1 and M2

question

The following programs were part of the Fed's \"lender of last resort\" efforts in response to the Financial Crisis of 2007-2008, except:

answer

TARP (Troubled Asset Relief Program)

question

Which one of the following is considered to be a stock rather than a flow?

answer

Money

question

Economic studies conducted in industrially advanced countries suggest there is:

answer

An inverse relationship between the degree of independence of the central bank and the size of the average annual rate of inflation

question

The Federal Open Market Committee (FOMC):

answer

Sets policy on the sale and purchase of government bonds by the Fed

question

When a bank's loans are written off, it means that the bank's:

answer

Reserves shrink, whereas its debt remains the same

question

Members of the Federal Reserve Board of Governors are:

answer

Appointed by the President to staggered 14-year terms

question

Store gift cards and university meal cards are perfect examples of debit cards.

answer

FALSE

question

How many Federal Reserve Banks are there?

answer

12

question

Paper money or currency in the U.S. is essentially:

answer

A debt of a government agency

question

Money in the U.S. are essentially debts of:

answer

The government and the banks

question

Generally speaking, the greater the amount of assets people hold in the form of near-monies, the:

answer

Greater is their willingness to spend out of their money incomes

question

When the Fed acts as a \"lender of last resort\", like it did in the financial crisis of 2007-2008, it is performing its role of:

answer

Being the bankers' bank

question

Joe Rogers deposits $200 in currency in his checking account at a bank. This deposit is treated as:

answer

No change in the money supply because the $200 in currency has been converted to a $200 increase in checkable deposits

question

The so-called stored-value cards include the following, except:

answer

Debit cards

question

Which of the following was not one of the three largest U.S. banks in 2009?

answer

Citibank

question

The M1 money supply is composed of:

answer

Checkable deposits and currency in circulation

question

The Federal backing for money in the United States comes from:

answer

Controlling the money supply in order to keep the value of money relatively stable over time

question

Checkable deposits are money because they are:

answer

Acceptable as payment

question

Money functions as a store of value if it allows you to:

answer

Delay purchases until you want the goods

question

One major advantage of credit cards used for transactions is that they:

answer

Allow consumers to coordinate timing and payment for purchases

question

The following financial institutions traditionally accept deposits from savers, except:

answer

Investment banks

question

The Federal Reserve System performs the following functions, except:

answer

Providing banking services to the general public

question

Securitization, the process of forming new securities by bundling or slicing up groups of securities like mortgages and bonds, is:

answer

A way of reducing risk though diversification

question

The \"bail-out\" money that went to giant financial institutions like Citibank and Goldman Sachs, along with General Motors and Chrysler, came from the

answer

Troubled Assets Relief Program

question

Subprime mortgages, which played a central role in the Financial Crisis of 2007-2008, had been strongly encouraged and supported by the government before the crisis.

answer

TRUE

question

The major wave of defaults on home mortgages in 2007 destabilized:

answer

Banks including those that made the loans indirectly

question

The Federal Reserve System consists of which of the following?

answer

Board of Governors and the 12 Federal Reserve Banks

question

People can generally get the following items at their commercial banks, except:

answer

Money market mutual funds

question

Money eliminates the need for a coincidence of wants in trading primarily through its role as a:

answer

Medium of exchange

question

Which of the following \"backs\" the value of money in the United States?

answer

The acceptability of it as a medium of exchange

question

Holding the money deposits of businesses and households and making loans to the public are the basic functions of:

answer

Commercial banks and thrift institutions

question

As of January 2010, slightly more than half of the money supply (M1) was in the form of:

answer

Currency

question

The so-called mortgage-backed securities are all of the following, except:

answer

Their use was strongly discouraged by the Federal government

question

Use the following list to answer the question about the money supply Items. 1. Money market mutual funds held by individuals 2. Savings deposits, including money market deposit accounts 3. Money market mutual funds held by businesses 4. Currency held by the public 5. Small time deposits 6. Checkable deposits Refer to the list above. The M1 money supply is composed of items:

answer

4 and 6

question

The use of a credit card is most similar to:

answer

Obtaining a short-term loan

question

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\".

answer

FALSE

question

The Financial Crisis of 2007-2008 halted the consolidation in the U.S. financial industry that had caused a declining number but increasing size of firms in the industry prior to the crisis.

answer

FALSE

question

The twelve Federal Reserve Banks can best be characterized as:

answer

Central banks, banker's banks, and quasi-public banks

question

Traditionally, the Federal Reserve can give emergency loans only to:

answer

Commercial banks

question

When a consumer wants to compare the price of one product with another, money is primarily functioning as a:

answer

Unit of account

question

A few years prior to the Financial Crisis of 2007-2008, many people were getting approved for mortgage loans even without proper documentation or credit checks.

answer

TRUE

question

The Great Recession was the main cause of the Financial Crisis of 2007-2008.

answer

FALSE

question

Money supply M1 does not include the currency held by:

answer

Commercial banks

question

When was the Federal Reserve System established?

answer

1913

question

Which of the following would be considered to be the most liquid?

answer

Checkable deposits

question

The so-called moral hazard problem refers to one's tendency to:

answer

Take on greater risk if one is at least partly insured against losses

question

The Fed traditionally can grant loans to commercial banks, but not to investments banks and securities firms.

answer

TRUE

question

The general public can open deposit accounts at their district's Federal Reserve Bank.

answer

FALSE

question

Insurance companies are a major category of financial institutions.

answer

TRUE

question

The main function of the Federal Reserve System is to.

answer

Control the money supply

question

Use the following list to answer the question about the money supply Items. 1. Money market mutual funds held by individuals 2. Savings deposits, including money market deposit accounts 3. Money market mutual funds held by businesses 4. Currency held by the public 5. Small time deposits 6. Checkable deposits Refer to the above table. Which items are included in the M2 money supply, but not the M1 money supply?

answer

1, 2, and 5

ECO 2013 Ch. 31

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