Question 1

Interest rates increase or decrease so that an equilibrium exists in the money market.

Accepted Answer

A) True 
 B)False

Question 2

Prior to the creation of the Federal Reserve System,the money supply

Accepted Answer

A)  Was very stable and highly valued
B)  Was comprised of currency printed by the Department of the Treasury
C)  Was produced by local banks and often traded at a discount
D)  Was available only to bank depositors
E)  Was comprised of gold

Question 3

The US has,over its history,had only one national bank,that is,a Bank of the United States.

Accepted Answer

A) True 
 B)False

Question 4

Money is "liquid" because

Accepted Answer

A)  It loses value with inflation
B)  Coins can be melted to use their metal to make goods
C)  It serves as a measure of value
D)  It does not have to be sold to buy goods and services
E)  It is a valuable asset

Question 5

The financial crisis that began in 2008 is a result of all of the following except

Accepted Answer

A)  The bursting of the dot.com bubble
B)  Problems in the residential real estate market
C)  Changes in accounting rules about asset valuation
D)  Large firms taking on assets whose value was not well determined
E)  Policies that allowed many unqualified homebuyers to receive mortgages that they could not pay

Question 6

Corporations raise funds in

Accepted Answer

A)  The money market
B)  The primary financial market
C)  The secondary financial market
D)  Both the primary and secondary financial markets
E)  None of the above

Question 7

Many large banks and Wall Street investment firms got into financial problems due to

Accepted Answer

A)  Investments in subprime mortgages
B)  Required payments on credit default swaps
C)  Failures of collateralized debt obligations resulting from home foreclosures
D)  Having to mark down a significant number of their assets due to the "mark to market" accounting requirement
E)  All of the above

Question 8

When a central bank wants to increase the money supply,it

Accepted Answer

A)  Sells bonds
B)  Buys bonds
C)  Sells good and services
D)  Buys goods and services
E)  Does none of the above

Question 9

Investment banks assist corporations in issuing stocks and bonds in the primary financial market.

Accepted Answer

A) True 
 B)False

Question 10

When a person buys a stock on a stock exchange they are participating in

Accepted Answer

A)  The money market
B)  The primary financial market
C)  The secondary financial market
D)  Both the primary and secondary financial markets
E)  None of the above

Question 11

The discount rate is the ratio of demand deposits to reserves that banks have to maintain.

Accepted Answer

A) True 
 B)False

Question 12

The Discount Rate charged by the Federal Reserve,is lower for more creditworthy banks.

Accepted Answer

A) True 
 B)False

Question 13

The basic money supply is

Accepted Answer

A)  Composed of small denomination time deposits plus coin and currency held by the nonbank public
B)  Composed of assets that are completely liquid and easily accessible
C)  Our broadest measure of money
D)  Simply the coins and currency held by the nonbank public
E)  None of the above

Question 14

When you use dollar bills to pay for a purchase at a store,money is serving which function?

Accepted Answer

A)  A medium of exchange
B)  A measure of value
C)  A store of value
D)  A barter facilitator
E)  All of the above

Question 15

The Open Market Committee of the Federal Reserve System meets regularly to determine the Required Reserve Ratio.

Accepted Answer

A) True 
 B)False

Question 16

Suppose the legal reserve requirement is 0.20,and a bank has excess reserves of $1,000,000.The ultimate increase in the money supply will be

Accepted Answer

A)  $2,000,000
B)  $200,000
C)  $800,000
D)  $5,000,000
E)  $500,000

Question 17

Commercial banks are financial intermediaries but insurance companies are not.

Accepted Answer

A) True 
 B)False

Question 18

Throughout the history of the U.S.,until the creation of the Federal Reserve System in 1913,the monetary system was

Accepted Answer

A)  Characterized by a series of panics and periods of instability
B)  Under the control of the Second Bank of the United States
C)  The product of the work of President Andrew Jackson
D)  Based upon the English system
E)  Under the supervision of the US Mint

Question 19

Policy actions that affect changes in the growth rate of the money supply to keep interest rates at levels that promote economic stability and growth are called "fine tuning" policies.

Accepted Answer

A) True 
 B)False

Question 20

A subprime mortgage is a mortgage issued to a highly qualified borrower at reduced interest rates.

Accepted Answer

A) True 
 B)False

Exam 12: Money,Banking and the Financial System: Old Problems With New Twists

A subprime mortgage is a mortgage issued to a highly qualified borrower at reduced interest rates.

Correct AnswerverifiedShow Answer

Suppose the legal reserve requirement is 0.20,and a bank has excess reserves of $1,000,000.The ultimate increase in the money supply will be

Correct AnswerverifiedShow Answer

The discount rate is the ratio of demand deposits to reserves that banks have to maintain.

Correct AnswerverifiedShow Answer

The financial crisis that began in 2008 is a result of all of the following except

Correct AnswerverifiedShow Answer

Policy actions that affect changes in the growth rate of the money supply to keep interest rates at levels that promote economic stability and growth are called "fine tuning" policies.

Correct AnswerverifiedShow Answer

The Discount Rate charged by the Federal Reserve,is lower for more creditworthy banks.

Correct AnswerverifiedShow Answer

Throughout the history of the U.S.,until the creation of the Federal Reserve System in 1913,the monetary system was

Correct AnswerverifiedShow Answer

Commercial banks are financial intermediaries but insurance companies are not.

Correct AnswerverifiedShow Answer

Money is "liquid" because

Correct AnswerverifiedShow Answer

The US has,over its history,had only one national bank,that is,a Bank of the United States.

Correct AnswerverifiedShow Answer

When a central bank wants to increase the money supply,it

Correct AnswerverifiedShow Answer

Prior to the creation of the Federal Reserve System,the money supply

Correct AnswerverifiedShow Answer

Investment banks assist corporations in issuing stocks and bonds in the primary financial market.

Correct AnswerverifiedShow Answer

The Open Market Committee of the Federal Reserve System meets regularly to determine the Required Reserve Ratio.

Correct AnswerverifiedShow Answer

Many large banks and Wall Street investment firms got into financial problems due to

Correct AnswerverifiedShow Answer

The basic money supply is

Correct AnswerverifiedShow Answer

When a person buys a stock on a stock exchange they are participating in

Correct AnswerverifiedShow Answer

Corporations raise funds in

Correct AnswerverifiedShow Answer

Interest rates increase or decrease so that an equilibrium exists in the money market.

Correct AnswerverifiedShow Answer

When you use dollar bills to pay for a purchase at a store,money is serving which function?

Correct AnswerverifiedShow Answer

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