Money, Banking, and the Federal Reserve System MCQ
Money, Banking, and the Federal Reserve System MCQ
1. Stagflation occurs when prices ______ and output ______.
Answer
Correct Answer:
Rise; falls
Note: This Question is unanswered, help us to find answer for this one
2. The quantity of money in an economy and the _____________________ are inextricably intertwined.
Answer
Correct Answer:
Quantity of credit for loans
Note: This Question is unanswered, help us to find answer for this one
3. Inflation is best understood as the rate at which __________.
Answer
Correct Answer:
Price for goods and services increase
Note: This Question is unanswered, help us to find answer for this one
4. A population that is growing logistically _____.
Answer
Correct Answer:
Grows fastest at an intermediate population density
Note: This Question is unanswered, help us to find answer for this one
5. The nyse hybrid market allows _____.
Answer
Correct Answer:
Brokers to send orders either to an electronic system or to a specialist
Note: This Question is unanswered, help us to find answer for this one
6. A problem for equity contracts is a particular type of ________ called the ________ problem.
Answer
Correct Answer:
Moral hazard; principal-agent
Note: This Question is unanswered, help us to find answer for this one
7. A central bank performs all of the following functions except ______.
Answer
Correct Answer:
It provides general banking services for businesses and individual citizensprovides general banking services for businesses and individual citizens
Note: This Question is unanswered, help us to find answer for this one
8. Which institution helps prevent runs on banks by promising to make good on the deposits of banks that have run into financial difficulty?
Answer
Correct Answer:
The Federal Deposit Insurance Corporation
Note: This Question is unanswered, help us to find answer for this one
9. What was one of the major causes of the bank failures of the 1930s?
Answer
Correct Answer:
Depositors hearing rumors of failures and converting their deposits to currency
Note: This Question is unanswered, help us to find answer for this one
10. Compared to the other options that the Federal Reserve has for affecting the money supply, ______ relatively unimportant.
Answer
Correct Answer:
The discount rate is
Note: This Question is unanswered, help us to find answer for this one
11. What would the Fed do if it wanted to decrease the money supply?
Answer
Correct Answer:
It would instruct the trading desk to sell government bonds.
Note: This Question is unanswered, help us to find answer for this one
12. Most of the key decisions made regarding the U.S. money supply are made ______.
Answer
Correct Answer:
By the Federal Open Market Committee
Note: This Question is unanswered, help us to find answer for this one
13. Which statement about the Federal Reserve Board of Governors is true?
Answer
Correct Answer:
Members of the Board of Governors are appointed by the U.S. president.
Note: This Question is unanswered, help us to find answer for this one
14. The multiple expansion effect relies on ______.
Answer
Correct Answer:
Borrowers spending the money they have borrowed
Note: This Question is unanswered, help us to find answer for this one
15. What does the money multiplier measure?
Answer
Correct Answer:
The potential amount of money generated by each dollar of bank reserves
Note: This Question is unanswered, help us to find answer for this one
16. Banks create more money by ______.
Answer
Correct Answer:
Making loans to borrowers
Note: This Question is unanswered, help us to find answer for this one
17. What does a bank use to make loans to borrowers?
Answer
Correct Answer:
Excess reserves
Note: This Question is unanswered, help us to find answer for this one
18. Which of the following is included in the M1 money definition?
Answer
Correct Answer:
Demand deposits
Note: This Question is unanswered, help us to find answer for this one
19. A broker pools depositor funds and invests in Treasury bills. The resulting accounts earn interest, and depositors are allowed to write checks against their individual accounts. This is an example of a ______.
Answer
Correct Answer:
Money market mutual fund
Note: This Question is unanswered, help us to find answer for this one
20. Fiat money is money that has been ______.
Answer
Correct Answer:
Established as a means of exchange by government declaration
Note: This Question is unanswered, help us to find answer for this one
21. Money’s function as a unit of account refers to its ______.
Answer
Correct Answer:
Ability to act as a precise measurement of value
Note: This Question is unanswered, help us to find answer for this one
22. What is the primary function of money?
Answer
Correct Answer:
To serve as a medium of exchange
Note: This Question is unanswered, help us to find answer for this one
23. Travellers check is ____ instruments easily convertible into currency
Answer
Correct Answer:
Transaction
Note: This Question is unanswered, help us to find answer for this one
24. In which deposits that can be easily converted to currency or used to buy goods and services directly ?
Answer
Correct Answer:
Transaction
Note: This Question is unanswered, help us to find answer for this one
25. Highly liquid, interest-paying assets held by the bank is called
Answer
Correct Answer:
Secondary reserves
Note: This Question is unanswered, help us to find answer for this one
26. Serving and loan associations are financial institutions organized as cooperative associations that hold demand deposits and savings of members in the form of dividend- bearing shares and make loans, especially home mortgage loans
Answer
Correct Answer:
True
Note: This Question is unanswered, help us to find answer for this one
27. Holdings of assets at the bank or at the Federal Reserve Bank as mandated by the Fed is known as
Answer
Correct Answer:
Preserve requirements
Note: This Question is unanswered, help us to find answer for this one
28. Required reserve ratio is percentage of ____ that a bank must hold at the Federal Reserve Bank or in bank vaults
Answer
Correct Answer:
Deposits
Note: This Question is unanswered, help us to find answer for this one
29. Purchase and sale of U.S. government bonds by the Federal Reserve System is ___ market operations
Answer
Correct Answer:
Open
Note: This Question is unanswered, help us to find answer for this one
30. Funds that cannot be used for payment directly but must be converted into currency for general use are non transaction deposits
Answer
Correct Answer:
True
Note: This Question is unanswered, help us to find answer for this one
31. Nontransaction deposits that are not money but can be quickly converted into money is called
Answer
Correct Answer:
Near money
Note: This Question is unanswered, help us to find answer for this one
32. A measure of the potential amount of money that the banking system generates with each dollar of reserves is money multiplier
Answer
Correct Answer:
True
Note: This Question is unanswered, help us to find answer for this one
33. Money market mutual funds is interest-earning accounts provided by brokers that pool funds into such investments as ____ bills
Answer
Correct Answer:
Treasury
Note: This Question is unanswered, help us to find answer for this one
34. Anything generally accepted in exchange for goods or services is called
Answer
Correct Answer:
Money
Note: This Question is unanswered, help us to find answer for this one
35. Medium of exchange is the primary function of money, which is to facilitate transactions and ____ transaction costs
Answer
Correct Answer:
Lower
Note: This Question is unanswered, help us to find answer for this one
36. The attribute of money that makes it easier to borrow and to repay loans is called means of deferred payment
Answer
Correct Answer:
True
Note: This Question is unanswered, help us to find answer for this one
37. A broader definition of money that includes M1 plus savings deposits, time deposits, and noninstitutional money market mutual fund shares is called
Answer
Correct Answer:
M2
Note: This Question is unanswered, help us to find answer for this one
38. The narrowest definition of money; includes coins, currency, demand deposits, other checkable deposits, and traveler’s checks is called
Answer
Correct Answer:
M1
Note: This Question is unanswered, help us to find answer for this one
39. The ease with which one asset can be converted into another asset or into goods and services is known as
Answer
Correct Answer:
Liquidity
Note: This Question is unanswered, help us to find answer for this one
40. Coins and paper officially declared to be acceptable for the settlement of financial debts is called
Answer
Correct Answer:
Legal tender
Note: This Question is unanswered, help us to find answer for this one
41. Gresham's law principle that “cheap money drives out dear money”; given an alternative, people prefer to spend less valuable money
Answer
Correct Answer:
True
Note: This Question is unanswered, help us to find answer for this one
42. Gold standard is defining the dollar as equivalent to a set value of a quantity of gold, allowing direct convertibility from currency to gold
Answer
Correct Answer:
True
Note: This Question is unanswered, help us to find answer for this one
43. In which reserve system that requires banks to hold reserves equal to some fraction of their checkable deposits
Answer
Correct Answer:
Fractional
Note: This Question is unanswered, help us to find answer for this one
44. A means of exchange established by government declaration is known as
Answer
Correct Answer:
Fiat money
Note: This Question is unanswered, help us to find answer for this one
45. Federal funds market in which banks provide short-term loans to other banks that need cash to meet reserve requirements
Answer
Correct Answer:
True
Note: This Question is unanswered, help us to find answer for this one
46. ____ reserve levels held above that required by the Fed
Answer
Correct Answer:
Excess
Note: This Question is unanswered, help us to find answer for this one
47. Interest rate that the Fed charges commercial banks for the loans it extends to them is known as
Answer
Correct Answer:
Discount rate
Note: This Question is unanswered, help us to find answer for this one
48. Balances in bank accounts that depositors can access on demand is called
Answer
Correct Answer:
Demand deposits
Note: This Question is unanswered, help us to find answer for this one
49. Coins and/or paper created to facilitate the trade of goods and services and the payment of debts is called
Answer
Correct Answer:
Currency
Note: This Question is unanswered, help us to find answer for this one
50. Credit unions are financial cooperatives made up of depositors with a common affiliation
Answer
Correct Answer:
True
Note: This Question is unanswered, help us to find answer for this one
51. Commercial banks are financial institutions organized to handle everyday financial transactions of businesses and households through demand deposit accounts and savings accounts and by making short-term commercial and consumer loans.
Answer
Correct Answer:
True
Note: This Question is unanswered, help us to find answer for this one
52. Barter is ____ exchange of goods and services without the use of money
Answer
Correct Answer:
Direct
Note: This Question is unanswered, help us to find answer for this one
53. In which sheet the financial record that indicates the balance between a bank’s assets and its liabilities plus capital ?
Answer
Correct Answer:
Balance
Note: This Question is unanswered, help us to find answer for this one
