chapter 18
Suppose Alfred got elected as a member of the Board of Governors of the Federal Reserve System. He will hold his post for a period of _____ years.
14
Zovi is told in an interview that he will be offered the job if he correctly states the term that a member of the Federal Reserve Board of Governors serves. Zovi will get the job if he says that the board members serve a _____ year term.
14
Members of the Federal Reserve Board of Governors serve one nonrenewable term of:
14 years.
Suppose you own a commercial bank in the United States. In case of a bank collapse, the demand deposits in your bank are insured for an amount up to:
250,000
The Federal Reserve Board of Governors is comprised of _____ members appointed by the president of the United States.
7
Which of the following is not an example of money used as a unit of account?
A housewife has a $5,000 credit card limit.
Which of the following is not a store of value?
Credit card
Which of the following is not part of M1?
Credit cards
Which of the following statements is true?
Economists prefer the M2 measure of money supply as a definition of money supply to the M1 measure.
The _____ was created to reduce the risk of banking by compensating depositors and keeping bank failures from spreading.
Federal Deposit Insurance Corporation
Decisions regarding purchases and sales of government securities by the Fed are made by the:
Federal Open Market Committee
Which of the following is a possible benefit of the nonrenewable 14 years term for the members of the Board of Governors?
It creates autonomy and insulates the Fed from short-term politics.
Which of the following is true of the Monetary Control Act of 1980?
It increased competition among financial institutions and gave the Fed greater control over nonmember banks.
Identify a property of money that makes it a valuable asset.
It is scarce
Which of the following is a possible drawback of the barter system of exchange?
It requires a coincidence of wants
The M2 definition of money supply consists of all but which one of the following?
Large time deposits of more than $100,000
Suppose you transfer $1,000 from your checking account to your savings account. How does this action affect the M1 and M2 money supplies?
M1 falls by $1,000 and M2 is unchanged.
The difference between M1 and M2 is given by which of the following?
M1 is made up of currency, and money in checkable accounts, whereas M2 contains M1 plus savings deposits and time deposits.
Define M2 money supply.
M2 is a broader measure of the money supply because it equals M1 plus near monies, which include savings deposits and small time deposits of less than $100,000.
The Fed's authority to impose required-reserve ratios on all depository institutions was extended by the:
Monetary Control Act of 1980.
Which of the following is a benefit of using money over barter as a medium of exchange?
Money reduces transaction costs and thereby increases transactions.
Which of the following is true with regard to the M1 money supply?
Outstanding balance on credit cards is not a part of the M1 money supply.
Which of the following is a component of M1 money supply?
Paper money
Which of the following statements is true?
The Council of Economic Advisors is not a part of the Federal Reserve System.
Which of the following is a reason for the Fed being known as a banker's bank?
The Fed is called a banker's bank because it holds bank reserves, provides currency and loans to the banks, and clears their checks.
Which of the following organizations in the United States is responsible for the conduct of monetary policy?
The Federal Reserve
Which of the following is true of the Federal Reserve System?
The Federal Reserve System is divided into 12 districts.
Which of the following is a major provision of the Monetary Control Act of 1980?
The act increased the authority of the Fed over nonmember depository institutions.
Which of the following is not a protection against bank collapse?
The gold and silver that backs Federal Reserve notes
Which of the following is a possible effect of the expansion of M1 to M2 on the money supply in an economy?
There is a threefold increase in the money supply in the economy.
The Federal Reserve System performs all but which one of the following functions?
To print new money
Which of the following is one of the functions of the Federal Reserve System?
To supervise the banking system of the United States
Suppose Leo purchases fodder for his cattle from Kevin in exchange for cabbage grown in his farm. We can conclude that Leo and Kevin live in a:
barter economy.
A direct exchange of fish for corn is an example of:
barter.
The M1 money supply includes coins, paper currency, traveler's check, and _____.
checkable deposits
The major share of the M1 money supply consists of _____.
checkable deposits
The board of governors of the Federal Reserve System is responsible for:
controlling the money supply in the United States.
The major protection against sudden mass attempts to withdraw cash from banks is the:
deposit insurance provided by the FDIC
The Federal Open Market Committee:
directs the buying and selling of U.S. government securities.
The money supply in the United States includes:
federal reserve notes.
Money that is accepted by law regardless of its intrinsic value is known as:
fiat money.
The use of a dollar bill to buy a concert ticket represents the use of money as a:
medium of exchange.
The _____ are the members of the Federal Reserve System
national banks
Small time deposits of less than $100,000 are:
part of M2 definition of money supply, but not of M1.
The number of presidentially appointed members who sit on the Federal Reserve Board of Governors is:
seven
Unit of account is the function of money:
that provides a common measurement of the relative value of goods and services.
The banks in the United States are protected against fear of a bank run by:
the Federal Deposit Insurance Corporation.
The Federal Reserve System:
was created by the Federal Reserve Act of 1913 to provide more safety to the U.S. banking system.
The Federal Deposit Insurance Corporation (FDIC):
was created to reduce the risk of banking by compensating depositors and keeping bank failures from spreading.