BMF14

113. Henry Trudeau deposits $2000 in currency in the First Street Bank. Later that same day Jane Harris negotiates a loan for $5400 at the same bank. After these transactions, the supply of money has: A. increased by $2100. B. increased by $3300. C. increased by $5400. D. decreased by $3300.

C. increased by $5400.

157. Money is destroyed when: A. loans are made. B. checks written on one bank are deposited in another bank. C. loans are repaid. D. the net worth of the banking system declines.

C. loans are repaid

69. The Federal Open Market Committee (FOMC): A. provides advice on banking policy to the Fed. B. monitors regulatory banking laws for member banks. C. sets policy on the sale and purchase of government bonds by the Fed. D. follows the actions and operations of financial markets to keep them open and competitive.

C. sets policy on the sale and purchase of government bonds by the Fed.

93. When the receipts given by goldsmiths to depositors were used to make purchases: A. the gold standard was created. B. existing banking laws were violated. C. the receipts became in effect paper money. D. a fractional reserve banking system was created.

C. the receipts became in effect paper money.

15. All coins in circulation within the United States are: A. near monies. B. checkable deposits. C. token money. D. time deposits.

C. token money.

54. How many members can serve on the Board of Governors of the Federal Reserve System? A. 7 B. 9 C. 12 D. 14

A. 7

60. In which of the following U.S. cities is one of the 12 Federal Reserve Banks located? A. New York City B. Seattle C. Miami D. Denver

A. New York City

58. Which one of the following is true about the U.S. Federal Reserve System? A. There are 12 regional Federal Reserve Banks. B. The head of the U.S. Treasury also chairs the Federal Reserve Board. C. There are 14 members of the Federal Reserve Board. D. The Open Market Committee is smaller in size than the Federal Reserve Board.

A. There are 12 regional Federal Reserve Banks.

65. The seven members of the Board of Governors of the Federal Reserve System are: A. appointed by the president with the confirmation of the Senate. B. elected by Congress from a slate of nominees provided by the president. C. appointed by the Senate Finance Committee. D. appointed by the presidents of the 12 Federal Reserve Banks.

A. appointed by the president with the confirmation of the Senate.

76. The 12 Federal Reserve Banks can best be characterized as: A. central banks, banker's banks, and quasi-public banks. B. regional banks, public banks, and member banks. C. investment banks, banker's banks, and public banks. D. national banks, quasi-public banks, and investment banks

A. central banks, banker's banks, and quasi-public banks.

17. Checkable deposits are: A. debts of commercial banks and savings institutions. B. debts of the federal government and government agencies. C. credits of the federal government and government agencies. D. credits of commercial banks and savings institutions.

A. debts of commercial banks and savings institutions.

66. To say that the Federal Reserve Banks are quasi-public banks means that: A. they are privately owned but managed in the public interest. B. they deal only with banks of foreign nations and do not have direct business contact with U.S. banks. C. they deal only with commercial banks, and not the public. D. they are publicly owned but privately managed

A. they are privately owned but managed in the public interest.

38. A $70 price tag on a sweater in a department store window is an example of money functioning as a: A. unit of account. B. standard of deferred payments. C. store of value. D. medium of exchange.

A. unit of account

92. The goldsmith's ability to create money was based on the fact that: A. withdrawals of gold tended to exceed deposits of gold in any given time period. B. consumers and merchants preferred to use gold for transactions, rather than paper money. C. the goldsmith was required to keep 100 percent gold reserves. D. paper money in the form of gold receipts was rarely redeemed for gold.

D. paper money in the form of gold receipts was rarely redeemed for gold

63. An important routine function of the Federal Reserve Bank is to: A. supervise the liquidation of the assets of bankrupt state banks. B. help large commercial banks develop correspondent relationships with smaller commercial banks. C. advise commercial banks as to the most profitable ways of reinvesting profits. D. provide facilities by which commercial banks and thrift institutions may collect checks.

D. provide facilities by which commercial banks and thrift institutions may collect checks.

70. The Federal Open Market Committee (FOMC) of the Federal Reserve System is primarily for: A. maintaining cash reserves that can be used to settle international transactions. B. supervising banks to make sure markets are open to all and remain competitive. C. issuing currency and acting as the fiscal agent for the federal government. D. setting the Fed's monetary policy and directing the purchase and sale of government securities.

D. setting the Fed's monetary policy and directing the purchase and sale of government securities.

DATA:

What is the score for 2017? The infrastructure score for American in 2017 is a D+. How much needs to be spent? $2.0 trillion needs to be spent to close the ten-year investment gap. It is suggested that the investment from all levels of government and private sector increase from 2.5% to 3.5% of U.S. GDP by 2025 to make up for this gap. Which are the worst/best scoring infrastructure categories for the nation? The best scoring infrastructure categories were: • Rail (B) • Bridges (C+) • Ports (C+) • Solid Waste (C+) The worst scoring infrastructure categories were: • Transit (D-) • Aviation (D) • Dams (D) • Drinking Water (D) • Inland Waterways (D) • Levees (D) • Roads (D) How does Pennsylvania compare? Pennsylvania scored a C-, according to the 2014 infrastructure report. Its worst categories were roads (D-) and wastewater (D-). Its best category was freight rail (B).

78. How many Federal Reserve Banks are there? A. 1 B. 6 C. 12 D. 24

C. 12

127. If the reserve ratio is 15 percent and commercial bankers decide to hold additional excess reserves equal to 5 percent of any newly acquired checkable deposits, then the relevant monetary multiplier for the banking system will be: A. 3½. B. 4. C. 5. D. 10.

C. 5.

77. The most important of the Federal Reserve district banks is the: A. Boston bank. B. Chicago bank. C. New York bank. D. San Francisco bank

C. New York bank.

59. In which of the following U.S. cities is one of the 12 Federal Reserve Banks located? A. Miami B. New Orleans C. San Francisco D. Denver

C. San Francisco

64. Which of the following statements best describes the 12 Federal Reserve Banks? A. They are privately owned and privately controlled central banks whose basic goal is to provide an ample and orderly market for U.S. Treasury securities. B. They are privately owned and publicly controlled central banks whose basic function is to minimize the risks in commercial banking in order to make it a reasonably profitable industry. C. They are privately owned and publicly controlled central banks whose basic goal is to control the money supply and interest rates in promoting the general economic welfare. D. They are privately owned and publicly controlled central banks whose basic goal is to earn profits for their owners.

C. They are privately owned and publicly controlled central banks whose basic goal is to control the money supply and interest rates in promoting the general economic welfare.

49. Checkable deposits are money because they are: A. legal tender. B. fiat money. C. acceptable in exchange. D. token money.

C. acceptable in exchange.

72. Members of the Federal Reserve Board of Governors are: A. appointed by Congress to staggered 14-year terms. B. selected by the Federal Open Market Committee for 4-year terms. C. appointed by the president to staggered 14-year terms. D. selected by each of the Federal Reserve Banks for 4-year terms.

C. appointed by the president to staggered 14-year terms.

98. Bank net worth is the: A. measure of the profitability of the bank. B. value of the bank's vault cash and loan portfolio. C. claims of the owners of the bank against bank assets. D. claims of the nonowners of the bank against bank assets.

C. claims of the owners of the bank against bank assets.

158. Banks destroy money when they: A. buy government bonds. B. accept deposits of cash into checkable accounts. C. fail to reissue loans that are paid off. D. clear checks against another bank.

C. fail to reissue loans that are paid off

137. Answer the next question based on the following consolidated balance sheet for the commercial banking system. Assume the required reserve ratio is 12 percent. All figures are in billions of dollars. Refer to the above data. The claims of owners in the commercial banking system are equal to: A. $60 billion. B. $100 billion. C. $135 billion. D. $150 billion

C. $135 billion.

89. What is the current level of FDIC deposit insurance per account as of 2012? A. $50,000 B. $100,000 C. $250,000 D. $500,000

C. $250,000

30. Refer to the above table. The size of the M2 money supply is: A. $2054 billion. B. $2696 billion. C. $5899 billion. D. $6792 billion.

C. $5899 billion

85. In the United States, credit cards account for about what percentage of the dollar volume of transactions for goods and services? A. 10 percent B. 25 percent C. 40 percent D. 65 percent

B. 25 percent

160. Which factors contributed to a further reduction in the money supply in addition to the withdrawal of currency from banks during the 1930-1933 bank panic? A. Bank purchases of government bonds to meet liquidity demands. B. Bank sales of government bonds to meet liquidity demands. C. An increase in the required reserve ratio. D. A decrease in the required reserve ratio.

B. Bank sales of government bonds to meet liquidity demands.

126. If D equals the maximum amount of new demand-deposit money that can be created by the banking system on the basis of any given amount of excess reserves, E equals the amount of excess reserves, and m is the monetary multiplier, then: A. m = E/D. B. D = E × m. C. D = E - 1/m. D. D = m/E.

B. D = E × m.

88. What does TARP stand for? A. Toxic Asset Rescue Program. B. Troubled Asset Relief Program. C. Tarnished Asset Revenue Program. D. Tinged Asset Reimbursement Program

B. Troubled Asset Relief Program.

100. A bank has $2 million in checkable deposits. In the bank's balance sheet, this would be an example of: A. an asset. B. a liability. C. net worth. D. capital stock.

B. a liability.

16. Coins and paper money are: A. debts of commercial banks and savings institutions. B. debts of the federal government and government agencies. C. credits of the federal government and government agencies. D. credits of commercial banks and savings institutions.

B. debts of the federal government and government agencies.

68. The Federal Reserve System: A. has the same status as the Supreme Court. B. is basically an independent agency. C. has the status of a congressional committee. D. is an agency of the executive branch of the federal government.

B. is basically an independent agency.

39. Stock market price quotations best exemplify money serving as a: A. store of value. B. unit of account. C. medium of exchange. D. index of satisfaction.

B. unit of account.

111. A bank has excess reserves of $5000 and deposit liabilities of $50,000 when the required reserve ratio is 20 percent. If the reserve ratio is raised to 25 percent, this bank can lend a maximum of: A. $1000. B. $1500. C. $2000. D. $2500.

D. $2500.

130. Answer the next question based on the following balance sheet for the First National Bank. Assume the reserve ratio is 15 percent. Refer to the above data. This commercial bank has excess reserves of: A. $15,000. B. $18,000. C. $27,000. D. $32,000.

D. $32,000.

118. Use the following balance sheet for the ABC National Bank in answering the next question. Assume the required reserve ratio is 20 percent. Refer to the above data. This commercial bank has excess reserves of: A. $0. B. $3000. C. $12,000. D. $5000.

D. $5000.

129. Suppose a commercial banking system has $100,000 of outstanding checkable deposits and actual reserves of $35,000. If the reserve ratio is 20 percent, the banking system can expand the supply of money by the maximum amount of: A. $122,000. B. $175,000. C. $300,000. D. $75,000.

D. $75,000.

55. How long is the term of office for members appointed to serve on the Board of Governors of the Federal Reserve System? A. 2 years B. 4 years C. 7 years D. 14 years

D. 14 years

83. Approximately how many commercial banks are there in the United States as of 2012? A. 21,000 B. 14,200 C. 10,800 D. 7300

D. 7300

87. Which of the following were factors in the financial crisis of 2007-2008? A. Mortgage default crisis. B. Securitization. C. Subprime mortgage loans. D. All of these.

D. All of these.

53. The Federal Reserve System consists of which of the following? A. Federal Open Market Committee and Office of Thrift Supervision. B. Federal Deposit Insurance Corporation and Controller of the Currency. C. U.S. Treasury Department and Bureau of Engraving and Printing. D. Board of Governors and the 12 Federal Reserve Banks.

D. Board of Governors and the 12 Federal Reserve Banks.

102. Which are liabilities to a bank? A. Capital stock and reserves. B. Property and capital stock. C. Vault cash and demand deposits. D. Capital stock and demand deposits.

D. Capital stock and demand deposits.

73. What is the main body assisting the Board of Governors of the Federal Reserve System in determining monetary policy? A. U.S. Treasury. B. U.S. Congress. C. Federal Advisory Council. D. Federal Open Market Committee.

D. Federal Open Market Committee.

25. Paper money in the United States comes in the form of: A. U.S. Treasury bills. B. U.S. Treasury bonds. C. federal legal tender. D. Federal Reserve Notes.

D. Federal Reserve Notes.

57. Which one of the following is true about the U.S. Federal Reserve System? A. The head of the U.S. Treasury also chairs the Federal Reserve Board. B. There are 10 regional Federal Reserve Banks. C. There are 14 members of the Federal Reserve Board. D. The Federal Open Market Committee (FOMC) has more members than does the Federal Reserve Board of Governors.

D. The Federal Open Market Committee (FOMC) has more members than does the Federal Reserve Board of Governors.

47. Checkable deposits are: A. near-money. B. token money. C. legal tender. D. a medium of exchange

D. a medium of exchange

21. The M1 money supply is composed of: A. money market mutual funds held by individuals. B. money market mutual funds held by businesses. C. savings deposits and time deposits. D. checkable deposits and currency

D. checkable deposits and currency

13. One of the principal defects of commodity money is that its worth as a: A. medium of exchange may exceed its worth as a standard of account, causing it to cease being useful as money. B. unit of account may exceed its worth as a store of value, causing it to cease being useful as money. C. medium of exchange may exceed its worth as a store of value, causing it to cease being useful as money. D. commodity may exceed its worth as money, causing it to cease functioning as a medium of exchange.

D. commodity may exceed its worth as money, causing it to cease functioning as a medium of exchange.

97. The fractional reserve system of banking started when goldsmiths began: A. accepting deposits of gold for safe storage. B. charging people who deposited their gold. C. using deposited gold to produce products for sale to others. D. issuing paper receipts in excess of the amount of gold held.

D. issuing paper receipts in excess of the amount of gold held.

52. The Federal Reserve Banks are owned by the: A. federal government. B. Board of Governors. C. U.S. Treasury. D. member banks.

D. member banks.