Question 1

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

Accepted Answer

A)   Securities firms
B)   Commercial banks
C)   Investment banks
D)   Manufacturing firmsE) A) and B)
F) B) and D)

Question 2

The main function of the Federal Reserve System is to:

Accepted Answer

A)   Serve as the fiscal agent for the Federal government
B)   Set reserve requirements of banks
C)   Clear checks from member banks
D)   Control the money supplyE) B) and D)
F) B) and C)

Question 3

When a banker records how many dollars each of his borrowers owes the bank, money is serving as a:

Accepted Answer

A)   Store of value
B)   Unit of account
C)   Medium of exchange
D)   Legal tenderE) C) and D)
F) B) and D)

Question 4

Use the following table to answer the question about the money supply given the following hypothetical data for an economy.  Refer to the table above. The size of the M1 money supply is:

Accepted Answer

A)   $1,940
B)   $2,080
C)   $2,220
D)   $2,730E) A) and B)
F) B) and C)

Question 5

Which of the following financial institutions pool deposits of customers and use the money to buy a portfolio of stocks or bonds or both?

Accepted Answer

A)   Thrifts
B)   Brokerage firms
C)   Mutual funds
D)   Investment banksE) A) and B)
F) C) and D)

Question 6

The Federal Reserve System consists of which of the following?

Accepted Answer

A)   Federal Open Market Committee and Office of Thrift Supervision
B)   Federal Deposit Insurance Corporation and Controller of the Currency
C)   U.S. Treasury Department and Bureau of Engraving and Printing
D)   Board of Governors and the 12 Federal Reserve BanksE) C) and D)
F) A) and B)

Question 7

The use of a debit card is most similar to:

Accepted Answer

A)   Paying with a check
B)   Using a stored-value card
C)   Using currency
D)   Obtaining a short-term loanE) A) and D)
F) A) and B)

Question 8

Checkable deposits are included in:

Accepted Answer

A)   M1 but not in M2
B)   M2 but not in M1
C)   both M1 and M2
D)   neither M1 nor M2E) None of the above
F) A) and D)

Question 9

The Wall Street Reform & Consumer Protection Act of 2010 has the following provisions, except:

Accepted Answer

A)   It gives broader authority to the Fed to regulate all large financial institutions
B)   It establishes a process for liquidating in an orderly way the assets of large, failing financial institutions
C)   It creates a Financial Stability Oversight Council to look out for systemic risk in the financial system
D)   It consolidates the operations of Wall Street, commercial banks, and other financial institutionsE) A) and C)
F) C) and D)

Question 10

The basic requirement for an item to function as money is that it be:

Accepted Answer

A)   Backed by precious metals-gold or silver
B)   Authorized as legal tender by the central government
C)   Generally accepted as a medium of exchange
D)   Some form of debt or creditE) A) and D)
F) B) and C)

Question 11

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

Accepted Answer

A)   Income
B)   Money
C)   Wages
D)   ProfitsE) B) and C)
F) A) and D)

Question 12

In 2012 and 2013, the U.S. Attorney General's office illustrated, in several major cases, a bias in favor of the goal of maintaining the stability of the financial system over:

Accepted Answer

A)   The prosecution of financial crimes
B)   Protecting the survival of large financial firms
C)   Promoting global competition in finance
D)   Privatizing the financial sectorE) B) and C)
F) B) and D)

Question 13

The Federal Reserve System of the U.S. is the country's:

Accepted Answer

A)   Financial adviser
B)   Comptroller or Accountant
C)   Central bank
D)   Deposit insurance providerE) A) and B)
F) A) and C)

Question 14

During the Financial Crisis of 2007-2008, Goldman Sachs, Morgan Stanley, and other financial firms with heavy exposure to the mortgage-related problems rushed to become bank holding companies in order to:

Accepted Answer

A)   Follow the order of the U.S. Treasury
B)   Obtain bail-out money from Congress
C)   Get massive loans from the Fed
D)   Acquire funds from the general publicE) B) and C)
F) A) and B)

Question 15

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:

Accepted Answer

A)   5 and 6
B)   4 and 6
C)   6 and 7
D)   1 and 4E) C) and D)
F) A) and B)

Question 16

Checkable deposits are:

Accepted Answer

A)   Debts of commercial banks and savings institutions
B)   Debts of the Federal government and government agencies
C)   Assets of the Federal government and government agencies
D)   Assets of commercial banks and savings institutionsE) None of the above
F) B) and C)

Question 17

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

Accepted Answer

A)   Reserves are reduced, while its debt increases
B)   Reserves rise along with its debt
C)   Reserves fall along with its debt
D)   Reserves shrink, whereas its debt remains the sameE) A) and D)
F) None of the above

Question 18

The so-called too-big-to-fail policy has two conflicting sides: on one hand there's the moral hazard problem that it creates, but in the other hand the Fed must:

Accepted Answer

A)   Protect the stability of the banking system
B)   Promote competition among banks
C)   Ensure the employment of people in financial services
D)   Control the money supplyE) All of the above
F) C) and D)

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

The value (or purchasing power) of money increases when the price level increases.

Accepted Answer

A) True 
 B)False

Exam 14: Money, Banking, and Financial Institutions

Checkable deposits are:

Correct Answer
verified

The Federal Reserve System of the U.S. is the country's:

Correct Answer
verified

The use of a debit card is most similar to:

Correct Answer
verified

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

Correct Answer
verified

In 2012 and 2013, the U.S. Attorney General's office illustrated, in several major cases, a bias in favor of the goal of maintaining the stability of the financial system over:

Correct Answer
verified

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

Correct Answer
verified

The Wall Street Reform & Consumer Protection Act of 2010 has the following provisions, except:

Correct Answer
verified

The value (or purchasing power) of money increases when the price level increases.

Correct Answer
verified

The so-called too-big-to-fail policy has two conflicting sides: on one hand there's the moral hazard problem that it creates, but in the other hand the Fed must:

Correct Answer
verified

The main function of the Federal Reserve System is to:

Correct Answer
verified

Checkable deposits are included in:

Correct Answer
verified

During the Financial Crisis of 2007-2008, Goldman Sachs, Morgan Stanley, and other financial firms with heavy exposure to the mortgage-related problems rushed to become bank holding companies in order to:

Correct Answer
verified

The basic requirement for an item to function as money is that it be:

Correct Answer
verified

Which of the following financial institutions pool deposits of customers and use the money to buy a portfolio of stocks or bonds or both?

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Use the following table to answer the question about the money supply given the following hypothetical data for an economy. Refer to the table above. The size of the M1 money supply is:

Correct Answer
verified

When a banker records how many dollars each of his borrowers owes the bank, money is serving as a:

Correct Answer
verified

The Federal Reserve System consists of which of the following?

Correct Answer
verified

Exam 14: Money, Banking, and Financial Institutions

Checkable deposits are:

Correct AnswerverifiedShow Answer

The Federal Reserve System of the U.S. is the country's:

Correct AnswerverifiedShow Answer

The use of a debit card is most similar to:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In 2012 and 2013, the U.S. Attorney General's office illustrated, in several major cases, a bias in favor of the goal of maintaining the stability of the financial system over:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Wall Street Reform & Consumer Protection Act of 2010 has the following provisions, except:

Correct AnswerverifiedShow Answer

The value (or purchasing power) of money increases when the price level increases.

Correct AnswerverifiedShow Answer

The so-called too-big-to-fail policy has two conflicting sides: on one hand there's the moral hazard problem that it creates, but in the other hand the Fed must:

Correct AnswerverifiedShow Answer

The main function of the Federal Reserve System is to:

Correct AnswerverifiedShow Answer

Checkable deposits are included in:

Correct AnswerverifiedShow Answer

During the Financial Crisis of 2007-2008, Goldman Sachs, Morgan Stanley, and other financial firms with heavy exposure to the mortgage-related problems rushed to become bank holding companies in order to:

Correct AnswerverifiedShow Answer

The basic requirement for an item to function as money is that it be:

Correct AnswerverifiedShow Answer

Which of the following financial institutions pool deposits of customers and use the money to buy a portfolio of stocks or bonds or both?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Use the following table to answer the question about the money supply given the following hypothetical data for an economy. Refer to the table above. The size of the M1 money supply is:

Correct AnswerverifiedShow Answer

When a banker records how many dollars each of his borrowers owes the bank, money is serving as a:

Correct AnswerverifiedShow Answer

The Federal Reserve System consists of which of the following?

Correct AnswerverifiedShow Answer

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