Question 1

Inflation occurs in an economy with too little money chasing too many goods.

Accepted Answer

A) True 
 B)False

Question 2

When the Federal Reserve wants to increase the money supply, they decrease the reserve requirement.

Accepted Answer

A) True 
 B)False

Question 3

As a relatively poor nation, Forlornia wants to obtain funds for a project to improve the availability of water and electricity. Forlornia should contact the International Monetary Fund.

Accepted Answer

A) True 
 B)False

Question 4

Commercial banks, savings and loan associations, and credit unions

Accepted Answer

A)   specialize solely in loaning money for home mortgages.
B)   operate as nonprofit organizations.
C)   deposit their excess funds with the U.S. Treasury.
D)   accept deposits and make loans.E) None of the above
F) B) and C)

Question 5

The technical name for a savings account is a

Accepted Answer

A)   time deposit.
B)   demand deposit.
C)   deferred account.
D)   retained income account.E) C) and D)
F) All of the above

Question 6

By reducing the reserve requirement, the Fed intends to increase the money supply.

Accepted Answer

A) True 
 B)False

Question 7

A significant decrease in the money supply tends to

Accepted Answer

A)   reduce the supply of gold held by the federal government.
B)   create shortages that would cause prices of goods and services to rise.
C)   send the economy into a recession.
D)   reduce the size of the federal government's deficit.E) A) and D)
F) B) and C)

Question 8

The size and strength of the U.S. economy insulates U.S. businesses from the economic problems of other countries.

Accepted Answer

A) True 
 B)False

Question 9

When Natalia exchanges her famous chocolate chip cookies for the lawn care services of her neighbor, she engages in a barter transaction.

Accepted Answer

A) True 
 B)False

Question 10

Prior to the Civil War, the United States had two unsuccessful attempts at a central bank.

Accepted Answer

A) True 
 B)False

Question 11

The U.S. government is concerned about inflationary pressures that seem to be building within the nation. Restricting the growth of money supply provides an effective strategy to reduce these inflationary pressures.

Accepted Answer

A) True 
 B)False

Question 12

When the Fed sells U.S. government securities, the U.S. money supply increases.

Accepted Answer

A) True 
 B)False

Question 13

The Fed Chairman is in control of

Accepted Answer

A)   the world's money supply.
B)   the U.S. money supply.
C)   fiscal policy.
D)   the IMF.E) A) and D)
F) A) and B)

Question 14

The reserve requirement represents the Fed's most powerful tool for conducting monetary policy.

Accepted Answer

A) True 
 B)False

Question 15

The Federal Reserve consists of seven Federal Reserve districts.

Accepted Answer

A) True 
 B)False

Question 16

________ occurs when goods are traded directly for other goods.

Accepted Answer

A)   Barter
B)   Direct exchange
C)   Direct marketing
D)   CreditE) None of the above
F) All of the above

Question 17

Which of the following is included in the M-2 definition of the money supply but NOT in the M-1 definition?

Accepted Answer

A)   currency
B)   checking account deposits
C)   traveler's checks
D)   savings account depositsE) B) and D)
F) All of the above

Question 18

In an electronic funds transfer (EFT) system, the information of a transaction is communicated from one computer to another.

Accepted Answer

A) True 
 B)False

Question 19

The M-1 definition of the money supply includes travelers' checks.

Accepted Answer

A) True 
 B)False

Question 20

If the Fed increases interest rates in the U.S. relative to other nations,

Accepted Answer

A)   foreign investors are likely to transfer funds to U.S. investments.
B)   foreign investors are likely to reduce their investment in U.S. securities.
C)   foreign governments will likely reduce their interest rates further, to remain complementary to what the U.S. is doing.
D)   foreign investors will see this as a sign of a looming recession and redirect their funds to time deposits.E) None of the above
F) C) and D)

Exam 20: Money, Financial Institutions, and the Federal Reserve

Prior to the Civil War, the United States had two unsuccessful attempts at a central bank.

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The technical name for a savings account is a

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The M-1 definition of the money supply includes travelers' checks.

Correct AnswerverifiedShow Answer

A significant decrease in the money supply tends to

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When the Fed sells U.S. government securities, the U.S. money supply increases.

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Commercial banks, savings and loan associations, and credit unions

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The Fed Chairman is in control of

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If the Fed increases interest rates in the U.S. relative to other nations,

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As a relatively poor nation, Forlornia wants to obtain funds for a project to improve the availability of water and electricity. Forlornia should contact the International Monetary Fund.

Correct AnswerverifiedShow Answer

In an electronic funds transfer (EFT) system, the information of a transaction is communicated from one computer to another.

Correct AnswerverifiedShow Answer

When the Federal Reserve wants to increase the money supply, they decrease the reserve requirement.

Correct AnswerverifiedShow Answer

Which of the following is included in the M-2 definition of the money supply but NOT in the M-1 definition?

Correct AnswerverifiedShow Answer

By reducing the reserve requirement, the Fed intends to increase the money supply.

Correct AnswerverifiedShow Answer

The reserve requirement represents the Fed's most powerful tool for conducting monetary policy.

Correct AnswerverifiedShow Answer

Inflation occurs in an economy with too little money chasing too many goods.

Correct AnswerverifiedShow Answer

________ occurs when goods are traded directly for other goods.

Correct AnswerverifiedShow Answer

The Federal Reserve consists of seven Federal Reserve districts.

Correct AnswerverifiedShow Answer

The size and strength of the U.S. economy insulates U.S. businesses from the economic problems of other countries.

Correct AnswerverifiedShow Answer

The U.S. government is concerned about inflationary pressures that seem to be building within the nation. Restricting the growth of money supply provides an effective strategy to reduce these inflationary pressures.

Correct AnswerverifiedShow Answer

When Natalia exchanges her famous chocolate chip cookies for the lawn care services of her neighbor, she engages in a barter transaction.

Correct AnswerverifiedShow Answer

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