|1. Money functions as:
A. a store of value.
B. a unit of account.
C. a medium of exchange.
D. all of these.
2. If you are estimating your total expenses for school next semester, you are using money primarily as:
A. a medium of exchange.
B. a store of value.
C. a unit of account.
D. an economic investment.
3. In the United States, the money supply (M1) is comprised of:
A. coins, paper currency, and checkable deposits.
B. currency, checkable deposits, and U.S. Treasury bonds.
C. coins, paper currency, checkable deposits, and credit balances with brokers.
D. paper currency, coins, gold certificates, and time deposits.
4. The money supply is backed:
A. by the government’s ability to control the supply of money and therefore to keep its value relatively stable.
B. by government bonds.
C. dollar-for-dollar with gold and silver.
D. dollar-for-dollar with gold bullion (i.e. gold bars).
5. The M2 money supply includes:
A. stock certificates.
B. currency in bank vaults.
C. the cash value of life insurance policies.
D. individual shares in money market mutual funds.
6. The purchasing power of money and the price level vary:
B. directly during recessions, but inversely during inflations.
C. directly, but not proportionately.
D. directly and proportionately.
7. During period of rapid inflation, money may cease to work as a medium of exchange:
A. unless it has been designated legal tender.
B. unless it is backed by gold.
C. it is too scarce for everyone to have enough for transactions.
D. because people and businesses will not want to accept it in transactions.
8. In the U.S. economy the money supply is controlled by the:
A. U.S. Treasury.
B. Federal Reserve System.
C. Senate Committee on Banking and Finance.
9. The Federal Open Market Committee (FOMC) is made up of:
A. the chair of the Board of Governors along with the 12 presidents of the Federal Reserve Banks.
B. the seven members of the Board of Governors along with the president of the New York Federal Reserve Bank.
C. the seven members of the Board of Governors of the Federal Reserve System along with the three members of the Council of Economic Advisers.
D. the seven member of the Board of Governors of the Federal Reserve System along with the president of the New York Federal Reserve Bank and four other Federal Reserve Banks presidents on a rotating basis.
10. 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 Board of Governors.
C. There are 14 members of the Board of Governors.
D. The Open Market Committee is smaller in size than the Board of Governors.
11. The Board of Governors of the Federal Reserve has ____ members.
12. 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.
13. 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 may collect and clear checks.
14. The use of U.S. dollars in foreign countries:
A. is illegal under international law.
B. helps foreign buyers and sellers overcome problems with their domestic currencies.
C. varies directly (positively) with U.S. interest rates.
D. is less in volume than the use of foreign currencies in the United States.
15. Which of the following causes the Federal Reserve System to be independent from the U.S. federal government?
A. the U.S. government can completely audit the Federal Reserve.
B. the terms for the Board of Governors is staggered, preventing a President to appoint a new board.
C. the Federal Reserve receives funding from the U.S. federal government.
D. the Board of Governors has to include the secretary from the U.S. Treasury.