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Chapter Quiz
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1
Which of the following is included in the M-1 definition of the money supply?
A)currency
B)money market accounts
C)mutual funds
D)savings account deposits
2
Which of the following is not considered a standard for a useful form of money?
A)portability
B)stability
C)durability
D)precious metal
3
The Fed requires banks to hold funds against the deposits its customers have in their checking and savings accounts. The amount of funds the bank must hold is specified as a percentage of deposits known as the:
A)prime rate.
B)working capital requirement.
C)discount rate.
D)reserve requirement.
4
When the Fed buys U.S. government securities, the:
A)size of the federal deficit falls.
B)discount rate rises.
C)money supply increases.
D)banking system loses reserves.
5
The Federal Reserve fulfills its role as a "lender of last resort" when it loans funds to:
A)small businesses that are unable to obtain loans from other sources.
B)banks during banking emergencies.
C)major corporations that are on the verge of bankruptcy.
D)the federal government when deficits exceed borrowing limits set by Congress.
6
The technical name for a checking account is a:
A)free deposit.
B)variable annuity.
C)demand deposit.
D)certificate of deposit.
7
Juan banks at a commercial bank that is a member of the FDIC. This means that:
A)the bank guarantees it will pay the highest possible interest rate on his savings.
B)his money is insured by an independent agency of the federal government.
C)his money is automatically invested in securities issued by the federal government.
D)the bank is a member of a larger consortium of banks that will enable Juan to cash checks and obtain basic bank services in virtually any major city in the United States.
8
President George W. Bush's $700 billion bailout package is known as the:
A)Troubled Appropriations Recovery Program (TARP)
B)Troubled Assets Reinvestment Program (TARP)
C)Troubled Assets Relief Program (TARP)
D)Treasury Assistance Relief Program (TARP)
9
When a customer purchases an item with a debit card:
A)he or she is actually taking out a short-term loan and has 30 days to pay before any interest is charged.
B)the payment is actually made through an electronic clearinghouse which then sends the customer a bill.
C)the transaction is treated exactly like a purchase made with a credit card.
D)the funds are automatically transferred from the customer's account to the store's account.
10
Today, the World Bank makes most of its loans to:
A)the developed nations in Europe and Asia.
B)firms that want to participate in international trade but lack foreign exchange.
C)multinational corporations that have a strong credit rating in more than one country.
D)less-developed nations to improve productivity.





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