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| 1 | |
Money is |
| | A) | the same as income. |
| | B) | all financial assets. |
| | C) | any asset used to make purchases. |
| | D) | the sum of assets minus debts. |
| | E) | the market value of all final goods and services produced in a country in a year. |
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| 2 | |
The two main responsibilities of the Federal Reserve System are to _____ and to ______. |
| | A) | apprehend counterfeiters; regulate the stock market |
| | B) | enable banks to make affordable mortgages; control the exchange rate of the U.S. dollar |
| | C) | insure bank deposits; print currency |
| | D) | conduct monetary policy; oversee financial markets |
| | E) | collect taxes; pay the government's expenses |
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| 3 | |
Deposit insurance is system in which the government guarantees that: |
| | A) | depositors will not lose any money even if their bank goes bankrupt. |
| | B) | people can have deposits at commercial banks. |
| | C) | commercial banks will not go bankrupt. |
| | D) | depositors of commercial banks can obtain low-cost life insurance. |
| | E) | commercial banks will not lose any deposits. |
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| 4 | |
If the Federal Reserve wants to decrease the money supply, it should: |
| | A) | decrease the interest rate. |
| | B) | increase the interest rate. |
| | C) | conduct open-market purchases |
| | D) | conduct open-market sales. |
| | E) | shred more currency. |
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| 5 | |
In Econland all $5,000 in currency is held by banks as reserves. The public does not hold any currency. If the banks' desired reserve/deposit ratio is 20%, the money supply in Econland equals: |
| | A) | $1,000 |
| | B) | $5,000 |
| | C) | $6,000 |
| | D) | $25,000 |
| | E) | $100,000 |
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| 6 | |
When money is used as an asset that serves as a means of holding wealth, money is used as a: |
| | A) | medium of exchange. |
| | B) | unit of account. |
| | C) | store of wealth. |
| | D) | means of barter. |
| | E) | double coincidence of wants. |
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| 7 | |
In the U.S., the M1 definition of money includes: |
| | A) | currency only. |
| | B) | balances in checking accounts only. |
| | C) | balances in savings deposits only. |
| | D) | currency and balances in checking accounts. |
| | E) | currency, balances in checking accounts, and balances in savings deposits. |
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| 8 | |
Cash and similar items held by commercial banks for the purposes of meeting depositor withdrawals and payments are called: |
| | A) | deposit insurance. |
| | B) | M1. |
| | C) | M2. |
| | D) | bank reserves. |
| | E) | open market accounts. |
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| 9 | |
Velocity is a measure of the speed at which: |
| | A) | inflation increases. |
| | B) | productivity increases. |
| | C) | population grows. |
| | D) | money circulates. |
| | E) | production accelerates. |
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| 10 | |
The quantity equation states that: |
| | A) | money times velocity equals nominal GDP. |
| | B) | money times velocity equals real GDP. |
| | C) | money times prices equals nominal GDP. |
| | D) | money times prices equals real GDP. |
| | E) | velocity times prices equals nominal GDP. |
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