Reference no: EM13199654
1. The greater the number of different goods available in an economy,
A) the less likely it is that a double coincidence of wants will exist, and the less likely it is that monetary exchange will develop
B) the less likely it is that a double coincidence of wants will exist, and the more likely it is that monetary exchange will develop
C) the more likely it is that a double coincidence of wants will exist, and the less likely it is that monetary exchange will develop
D) the more likely it is that a double coincidence of wants will exist, and the more likely it is that monetary exchange will develop
E) the more likely it is that individuals are producing only goods they want to consume
2. Commodity money is something
A) that has no intrinsic value
B) that has an intrinsic value
C) that is based on a valuable metal
D) whose value never changes
E) whose value changes frequently
3. Inflation is impossible in a commodity money system.
A) True
B) False
4. Gresham's Law states that people
A) sell goods for money but prefer to buy goods with other goods
B) buy and sell goods with money
C) spend some money and hoard some money
D) spend lower-quality money and hoard higher-quality money
E) spend higher-quality money and hoard lower-quality money
5. If the cost of producing coins is lower than the face value of the coins, then the government receives revenue called
A) token money, and produces token coins
B) seigniorage, and produces fiat money
C) token money, and produces fiat money
D) seigniorage, and produces token coins
E) token money, and produces seignior coins
6. Which of the following have, at one time or another, been part of the U.S. money supply?
A) seashells
B) platinum coins
C) token money
D) legal tender
E) private bank notes
7. Fiat money is backed by
A) gold or silver
B) fractional reserves
C) the promise of a bank to redeem it upon presentation
D) the commodity in which it is denominated
E) nothing
8. The distinction between depository institutions and other financial institutions is that
A) only depository institutions seek to maximize profit
B) only depository institutions don't seek to maximize profit
C) depository institutions do not make loans
D) only depository institutions make loans
E) only depository institutions receive funds through customer deposits
9. In the United States, only Federal Reserve Banks can issue paper currency but their power to do so is virtually unlimited.
A) True
B) False
10. All of the following are goals of the Fed except one. Which is the exception?
A) a high level of employment
B) stability in interest rates
C) rising prices (to encourage production)
D) stability in financial markets
E) stability in foreign-exchange markets
11. The Board of Governors
A) composes a minority of the FOMC
B) consists of twelve presidential appointees
C) was authorized to set reserve requirements by the Bank Acts of 1933 and 1935
D) serve four year terms
E) are elected by the member banks which own the Federal Reserve
12. The Board of Governors
A) are elected by the House of Representatives to seven-year terms
B) are appointed for life by the President of the United States
C) are directly responsible to the Secretary of Treasury and the Comptroller's office
D) was disbanded by Roosevelt in the 1930s
E) consist of seven members appointed to 14-year terms by the president
13. All of the following occurred under the restructuring of the Fed in the 1930s, except one. Which is the exception?
A) the FOMC was created to conduct open-market operations
B) the Board of Governors was given the power to change member bank reserve requirements
C) the Fed's power was centralized to give it greater monetary control
D) the Fed was expanded to include all depository institutions as members
E) the Fed could buy and sell securities
14. One purpose of interest-rate ceilings was to
A) establish a ceiling on bank profits
B) establish a floor on bank profits
C) encourage competition in other areas
D) eliminate the need for the FDIC
E) reduce the chance of bank failures
15. In the 1970s, U.S. consumers transferred their deposits from accounts in banks and thrifts to money market mutual funds because money market mutual funds
A) were more liquid
B) were less risky
C) paid higher interest rates
D) were guaranteed for a larger amount
E) were more liquid and paid higher interest rates
16. The U.S. has more banks per capita than most other countries primarily because it
A) has more people
B) has a more prosperous economy
C) had restricted branch banking
D) continues to prohibit bank holding companies
E) discourages automatic teller machines (ATMs)
17. Money market mutual funds
A) offer higher rates of interest than bank checking accounts but lack check writing privileges
B) offer higher rates of interest than bank checking accounts and also offer check writing privileges
C) usually pay lower rates of interest than bank checking accounts
D) were originally developed and offered by banks to their customers
E) usually do not offer any check writing privileges
18. Insurance that protects individuals from the loss of their bank deposits
A) makes bank officials especially careful about the loans and investments they make
B) makes it virtually impossible for a bank to fail
C) is so costly that few banks can afford it
D) makes depositors less concerned about the safety of their money than the interest rate it is earning
E) was introduced as a direct result of the financial problems of the 1970s and 1980s
19. During the 1980s,
A) better bank management resulted in the most stable U.S. banking system since the Great Depression
B) more U.S. banks failed than in any period since the Great Depression
C) U.S. banks became more conservative in the type of assets they held
D) economic conditions contributed to the stability of U.S. banks
E) there were no U.S. bank failures for the first time in U.S. history
20. The tendency of bankers to take unwarranted risks in making loans because deposits were insured is an example of what is referred to as a
A) golf course hazard
B) weather hazard
C) moral hazard
D) hazard pay
E) duke of hazard