Compared to a barter economy, using money increases efficiency by reducing:
answer
transaction costs.
question
Barter is the:
answer
direct exchange of goods and services.
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A direct exchange of fish for corn is an example of:
answer
barter
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The exchange of one good for another, without the use of money, is known as:
answer
barter
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Barter requires:
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a coincidence of wants
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In order for barter to occur, traders must have a:
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coincidence of wants
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For barter exchange to take place,
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there has to be a coincidence of wants
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What is the "store of value" function of money?
answer
The ability of money to hold value over time
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What is the "unit of account" function of money?
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A common measurement of the relative value of different goods and services
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What is the "medium of exchange" function of money?
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The function of money to be widely accepted I exchange for goods and services.
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The term "near monies" refers to which of the following?
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Savings and small time deposits, which (unlike currency and checkable deposits) are not immediately available as money in a transaction.
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Which of the following correctly describes the difference between commodity money and fiat money?
answer
Commodity money is either made out of a valuable commodity like silver or gold, or is redeemable for a valuable commodity. Fiat money is not
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Which of the following defines the "medium of exchange" function of money?
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Money that is widely accepted in exchange for goods and services
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Which of the following defines the "unit of account" function of money?
answer
A common measurement of the relative value of different goods and services
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Which of the following defines the "store of value" function of money?
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The ability of money to hold value over time
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In the United States, the purchasing power of money is determined by:
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its acceptability
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Money is:
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None of these:
valuable because it is backed by gold.
any items used in barter.
an illiquid asset.
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Which of the following provides the best explanation of why money is valuable?
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Money is valuable because it is scarce.
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Fiat money is money:
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accepted by law regardless of its intrinsic value.
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Are outstanding credit card balances counted as part of the money supply?
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No; money is an asset, while the credit card balances are a liability. Thus, they are not included in the money supply figures.
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Buying a cup of coffee with a dollar bill represents the use of money as a:
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medium of exchange
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The use of a dollar bill to buy a concert ticket represents the function of money as a:
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medium of exchange
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Comparing how many dollars it takes you to run your car each year to annual earnings on a job instead of keeping track of costs in terms of gallons of gasoline and quarts of oil represents the use of money as a:
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unit of account.
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Comparing how many dollars it takes to attend college each year to annual earnings on a job represents the use of money as a:
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unit of account
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The statement that Computech's profits totaled $500 million last year represents the use of money as a:
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unit of account
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Which of the following is not a store of value?
answer
Credit card
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Which of the following is the most liquid store of purchasing power?
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A dollar bill
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If every person is willing to accept money in payment, rather than goods and services, money serves as a:
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medium of exchange
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Which of the following items does not provide a store of value?
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Credit cards
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Which of the following is not a store of value?
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Credit card
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Which of the following is not an example of money used as a unit of account?
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Gasoline sells for $1.20 per gallon and oil is $5.00 per quart
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Anything can be money if it acts as a:
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a. unit of account.
b. store of value.
c. medium of exchange.
d. All of these must be correct.
(D is correct)
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The primary functions of money are:
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a medium of exchange, a unit of account, and a store of value
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Coins and dollar bills are money in the form of:
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currency
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If something is a medium of exchange, then it:
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is widely accepted as payment for purchases
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If something is a unit of account, then it:
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serves as a yardstick for measuring the relative value of other goods
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Credit cards are:
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not money
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Currency consists of:
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coins and paper money.
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The three functions of money are medium of exchange,
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measure of value, and store of value
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Though many assets can be used as a store of value, money is a particularly attractive method to store value because:
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it is the most liquid of all assets
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Which of the following assets is most liquid?
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Funds in a checking account
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Which of the following assets is the most liquid?
answer
Dollars
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Which of the following forms of money is the least liquid?
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Certificates of deposit
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Which of the following assets is the most liquid?
answer
Money
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The ease with which an asset can be converted into a medium of exchange is known as:
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liquidity.
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Which one of the following items would be the most liquid?
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Dollar bill
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The ease with which an asset can be converted into a medium of exchange is:
answer
liquidity
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What establishes the value of fiat money?
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Our collective trust and confidence that the central government, which decrees that money cannot be refused as payment for debt
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The characteristics that money should have include:
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scarcity, portability, and divisibility
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Gold is a perfect medium of exchange and measure of value because of its:
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divisibility, portability, and homogeneity
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The currency of the United States is:
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not backed by any precious metal
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Which of the following is a desirable property of money?
answer
Scarcity.
Portability.
Divisibility.
*All of these*
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Which of the following statements is false?
answer
Money serves as a measure of value only when it is backed by gold or silver
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Which of the following is not a component of the M1 money supply?
answer
Outstanding balances on credit cards
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In the United States, the money supply (M1) consists of:
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coins, paper currency, checkable deposits, and traveler's checks
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Which one of the following is the largest component of the money supply (M1) in the United States?
answer
Checkable deposits
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Which one of the following is part of the official money supply in the United States?
answer
Federal Reserve Notes
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Which of the following is not counted as part of M1?
answer
Passbook savings deposits
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M1 refers to:
answer
Currency held by the public plus checking account balances
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The M1 definition of the money supply includes:
answer
The M1 definition of the money supply includes
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M1 refers to:
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the most narrowly defined money supply definition.
currency held by the public plus checking account balances.
the smallest of the money-supply definitions.
*all of these*
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Which of the following items is included when computing M1?
answer
Coins in circulation.
Currency in circulation.
Checking accounting entries.
All of the above.
*None of the above*
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Which of the following items is included when computing M1?
answer
Checking accounting entries.
Currency in circulation.
*All of the above*
None of the above
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The M1 money supply is defined to be the sum of currency, traveler's checks, and:
answer
checkable deposits
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Which of the following statements is true?
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Money must be relatively "scarce" if it is to have value.
Money must be divisible and portable.
M1 is the narrowest definition of money.
*All of these*
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Which of the following is not part of M1?
answer
Credit cards
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By definition, M1 includes:
answer
checkable deposits
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M1 money includes all but which one of the following?
answer
Savings accounts
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The M1 definition of the money supply includes currency
answer
and checkable deposits
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The largest component of the M1 definition of the money supply is
answer
checkable deposits
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The M1 definition of the money supply includes:
answer
coins and currency in circulation and checkable deposits.
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Which of the following compose the M2 money supply?
answer
M1 plus savings deposits and small-denomination time deposits
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Economists who prefer a broader definition of money prefer the:
answer
M2 measure of the money supply to the M1 measure
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Which one of the following is part of the M2 definition of the money supply, but not part of M1?
answer
Small time deposits of less than $100,000
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Which definition of the money supply includes credit cards?
answer
None of these includes credit card balances...(M1, M2, M3)
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Which of the following is counted as part of M2?
answer
Currency.
Checkable deposits.
Money-market mutual funds.
*All of these*
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Which of the following is not considered part of M2?
answer
Large time deposits of more than $100,000
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Which of the following is considered part of M2?
answer
Savings deposits.
Money market mutual fund shares.
Small time deposits of less than $100,000.
*All of these*
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The money supply known as M2:
answer
includes savings accounts and small denomination time deposits
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M2 money includes all but which one of the following?
answer
Large denomination time deposits
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M2 money includes all but which one of the following?
answer
Large repurchase agreements
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M2 is equal to M1 plus:
answer
savings deposits and small time deposits of less than $100,000
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When M1 is expanded to M2, the money supply
answer
more than triples
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The difference between M1 and M2 is given by which of the following?
answer
M1 is made up of currency, traveler's checks, and money in checkable accounts, whereas M2 contains M1 plus savings deposits and time deposits
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Suppose you transfer $1,000 from your checking account to your savings account. How does this action affect the M1 and M2 money supplies?
answer
M1 falls by $1,000, and M2 is unchanged
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Which of the following is responsible for controlling the money supply in the United States?
answer
The Board of Governors of the Federal Reserve System.
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The conduct of monetary policy is the responsibility of:
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the Federal Reserve System
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What is the length of the term of the members of the Board of Governors of the Federal Reserve System?
answer
Fourteen years
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Decisions to buy or sell securities at the Fed are made by the:
answer
Federal Open Market Committee
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The Federal Reserve System was founded in
answer
1913
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Members of the Federal Reserve Board of Governors serve one nonrenewable term of:
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14 years
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The number of presidentially appointed members who sit on the Federal Reserve Board of Governors is:
answer
seven
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Decisions regarding purchases and sales of government securities by the Fed are made by the:
answer
Federal Open Market Committee
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Which of the following types of financial institutions is required to belong to the Federal Reserve System?
answer
National banks
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With respect to controlling the money supply, the law requires the Fed to take orders from:
answer
no one⎯the Fed is an independent agency
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The seven members of the Board of Governors serve 14-year terms to:
answer
reduce political influence
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Which of the following groups oversees and administers the Federal Reserve System?
answer
None of these, the Fed is an independent agency
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Which of the following is not part of the Federal Reserve System?
answer
Council of Economic Advisors
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The Fed:
answer
serves as the central bank for the United States
question
The Federal Reserve System:
answer
pursues an independent monetary policy which can conflict with the government's economic policy
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The Fed's principal decision-making body, which directs buying and selling U. S. government securities, is known as the:
answer
Federal Open Market Committee
question
The Fed is often considered the bankers' bank because it:
answer
holds bankers reserves, provides banks with currency and loans, and clears their checks
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Who owns the Fed?
answer
Member banks
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The main purpose of the Fed is to:
answer
maintain the proper functioning of our money system
question
In its function of controlling the money supply, the Fed does which one of the following?
answer
Controls the money supply.
Clears checks.
Regulates banks.
Holds gold belonging to foreign governments.
**All of these**
question
The central bank of the United States is the:
answer
Federal Reserve Banking System
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The Federal Reserve System is divided into:
answer
12 districts
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The Federal Reserve System is owned by:
answer
the banks that are members of the Federal Reserve System
question
The members of the Federal Reserve Board of Governors serve:
answer
14-year terms
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The Federal Reserve Board of Governors consists of:
answer
seven members nominated by the President and confirmed by the Senate
question
The Federal Reserve Board of Governors has:
answer
seven members who serve 14-year terms
question
Which of the following is in charge of the buying and selling of government securities by the Fed?
answer
The Federal Open Market Committee
question
Which of the following institutions is responsible for supervising the banking system of the United States?
answer
The Federal Reserve System
question
Which of the following is not one of the functions of the Federal Reserve?
answer
Printing currency
question
Which of the following is not a function of the Federal Reserve System?
answer
To print new money
question
The major protection against sudden mass attempt to withdraw cash from banks is the:
answer
deposit insurance provided by the FDIC
question
Which of the following is the most important protection against fears of bank collapse?
answer
The Federal Deposit Insurance Corporation
question
The Federal Deposit Insurance Corporation:
answer
insures all demand deposits up to $100,000
question
The government agency that provides insurance for all checkable deposits up to $100,000 in banks choosing its protection is the:
answer
Federal Deposit Insurance Corporation
question
The Federal Deposit Insurance Corporation (FDIC):
answer
was created to reduce the risk of banking by compensating depositors and keeping bank failures from spreading
question
The Monetary Control Act of 1980:
answer
required banks to make home loans.
eliminated many forms of competition among financial institutions.
created sharper distinctions among various financial institutions.
**none of these**
question
The Monetary Control Act of 1980 extended the Fed's authority to:
answer
impose required-reserve ratios on all depository institutions
question
The Monetary Control Act of 1980:
answer
allowed savings and loan associations to offer checking accounts.
allowed more institutions to offer checking account services.
created greater competition among various financial institutions.
**all of the above**
question
The Monetary Control Act of 1980:
answer
extended the Fed's authority to impose required-reserve ratios on all depository institutions
question
Which of the following laws increased competition among financial institutions and gave the Fed greater control over nonmember banks?
answer
The Monetary Control Act.
question
The Monetary Control Act of 1980:
answer
created less competition among various financial institutions.
allowed fewer institutions to offer checking account services.
restricted savings and loan associations to long-term loans.
all of the above.
**none of the above**
question
An economy using money is more efficient that a barter economy because the use of money reduces the time spent searching for trading partners with a coincidence of wants and therefore more time can be spent producing goods and services.
answer
True
question
Barter is a system of exchange that does not depend on a coincidence of wants.
answer
False
question
Money eliminates the need to barter.
answer
True
question
Credit cards are money because they serve the three functions of money.
answer
False
question
Checkable deposits are not classified as money because they fail to provide a store of value.
answer
False
question
By functioning as a unit of account, money provides a common measurement of the relative value of goods and services.
answer
True
question
Any item can successfully serve as money.
answer
False
question
Money is said to be liquid because it is immediately available to spend for goods.
answer
True
question
M1 includes savings accounts.
answer
False
question
M1 is actually a smaller amount than M2.
answer
True
question
In the United States, currency in circulation is the largest component of the M1 money supply.
answer
False
question
Unused lines of credit on credit cards are part of M2.
answer
False
question
M2 is actually a smaller amount than M1.
answer
False
question
The Federal Reserve's primary function is to control the money supply.
answer
True
question
The Federal Reserve System is a branch of the Treasury Department.
answer
False
question
The Federal Reserve System was created by act of Congress in 1931 in an effort to end a wave of bank failures brought on by the Great Depression.
answer
False
question
The Federal Reserve System was created by an act of Congress in 1933 in an effort to end a wave of bank failures brought on the Great Depression.
answer
False
question
A majority of the commercial banks in the United States are not members of the Fed.
answer
True
question
Although the chairman of its Board of Governors is appointed by the Treasury Department, the Fed operates with considerable independence from the executive branch of the government.
answer
False
question
Most commercial banks belong to the Federal Reserve System.
answer
False
question
The Federal Funds Committee executes the purchases and sales of government securities decisions of the Federal Reserve.
answer
False
question
Although it has considerable political independence, the Fed is legally a branch of the U.S. Treasury Department.
answer
False
question
The Federal Reserve's most important function is to change the money supply in order to smooth out the business cycle.
answer
True
question
The Federal Reserve System is run by the President of the United States.
answer
False
question
The President and the Congress jointly determine the nation's monetary policies, and the Fed is required by law to implement those policies.
answer
False
question
A majority of the commercial banks in the United States are members of the Fed.
answer
False
question
The chairman of its Board of Governors is appointed by the president; the Fed operates without independence from the executive branch of the government.
answer
False
question
All banks are required to join the Fed.
answer
False
question
The Fed's responsibilities include controlling the money supply, clearing checks, and supervising and regulating banks.
answer
True
question
157. What is money? What are the three definitions of money in the United States?
answer
Money is anything that serves as a medium of exchange, store of value and unit of account. The three definitions of the money supply in the United States are M1, M2 and M3.
question
Who runs the Federal Reserve System? Describe the organizational structure of the Fed.
answer
The Fed is run by the Board of Governors. There are 7 members of the Board of Governors, each appointed by the President of the United States with the confirmation of the U.S. Senate for 14 year terms. The Board of Governors are aided in their policy making by the Federal Advisory Council which consists of 12 prominent bankers, each appointed by the Presidents of the 12 Federal Reserve Banks located around the country. The Fed's chief policy-making body is the Open Market Committee which consists of the 7 Board of Governors plus 5 Federal Reserve District bank presidents.
question
Describe the functions of the Federal Reserve System.
answer
The Fed's functions include (1) controlling the money supply, (2) clearing checks, (3) supervising and regulating banks, (4) maintaining and circulating currency, (5) protecting consumers, and (6) maintaining federal government checking accounts and gold reserves.
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