Money and Banking
ARSC 1432 Macroeconomics Co-Seminar
Review Questions
SPRING 2009
1) Money
a.
is more efficient than barter.
b.
makes trades easier.
c.
allows greater specialization.
d.
All of the above are correct.
ANSWER: d. All of the above are correct.
2) Paper money
a.
has no intrinsic value.
b.
is used in a barter economy.
c.
is valuable because it is generally accepted in trade.
d.
Both a and c are correct.
ANSWER: d. Both A and C are correct.
3) For an individual, money
a.
is a liability.
b.
is an asset.
c.
is not a form of wealth.
d.
None of the above is correct.
ANSWER: b. is an asset.
4) When bookkeepers use dollars to record income and expenses, they are using money as a
a.
unit of account.
b.
means of payment.
c.
store of value.
d.
medium of exchange.
ANSWER: a. unit of account.
5) Which of the following is a store of value?
a.
currency
b.
U.S. government bonds
c.
fine art
d.
All of the above are correct.
ANSWER: d. All of the above are correct
6) When you put money in a cookie jar, which function of money are you using?
a.
store of value
b.
medium of exchange
c.
unit of account
d.
None of the above is correct.
ANSWER: a. store of value
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7) Which of the following best illustrates the medium of exchange function of money?
a.
you pay for your textbooks with currency
b.
you mark prices of CDs at your music store in dollars
c.
you keep a jar of pennies
d.
None of the above is correct.
ANSWER: a. you pay for your textbooks with currency
8) Economists use the word “money” to refer to
a.
income generated by the production of goods and services.
b.
the value of all assets.
c.
the value of stocks and bonds.
d.
those assets regularly used to buy goods and services.
ANSWER: d. those assets regularly used to buy goods and services.
9) Liquidity refers to
a.
the suitability of an asset to serve as a store of value.
b.
a measurement of the intrinsic value of commodity money.
c.
the ease with which an asset is converted to the medium of exchange.
d.
None of the above refers to liquidity.
ANSWER: c. the ease with which an asset is converted to the medium of exchange.
10) Which list ranks assets from most to least liquid?
a.
currency, fine art, stocks
b.
currency, stocks, fine art
c.
fine art, currency, stocks
d.
fine art, stocks, currency
ANSWER: b. currency, stocks, fine art
11) Current U.S. currency is
a.
commodity money with intrinsic value.
b.
commodity money with no intrinsic value.
c.
fiat money with intrinsic value.
d.
fiat money with no intrinsic value.
ANSWER: d. fiat money with no intrinsic value.
12) Fiat currency
a.
is used as a medium of exchange.
b.
is equivalent to wealth.
c.
is backed by gold.
d.
Both b and c are correct.
ANSWER: a. is used as a medium of exchange.
13) Commodity money is
a.
backed by gold.
b.
more commonly used than fiat money.
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c.
money with intrinsic value.
d.
All of the above are correct.
ANSWER: c. money with intrinsic value.
14) Some economies used salt as money. For such economies salt
a.
had no intrinsic value.
b.
served as a medium of exchange.
c.
served as fiat money.
d.
Both b and c are correct.
ANSWER: b. served as a medium of exchange.
15) Fiat money
a.
performs all the functions of money except providing a medium of exchange.
b.
is worthless.
c.
has no intrinsic value.
d.
may not be used as legal tender.
ANSWER: c. has no intrinsic value.
16) U.S. dollars
a.
are commodity money.
b.
are fiat money.
c.
have no intrinsic value.
d.
Both b and c are correct.
ANSWER: d. Both b and c are correct.
17) Since the U.S. government has decreed that U.S. currency is legal tender,
a.
people are more likely to accept the dollar as a medium of exchange.
b.
the government must hold enough gold to redeem all currency.
c.
people may not make trades with anything else.
d.
All of the above are correct.
ANSWER: a. people are more likely to accept the dollar as a medium of exchange.
18) Money
a.
refers only to currency.
b.
has a powerful influence on economic variables.
c.
is controlled by the Federal Reserve.
d.
Both b and c are correct.
ANSWER: d. Both b and c are correct.
19) Checking accounts include
a.
currency.
b.
demand deposits.
c.
savings accounts.
d.
None of the above is a checking account.
ANSWER: b. demand deposits
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20) The agency responsible for regulating the money supply in the United States is
a.
b.
c.
d.
ANSWER: c.
the Comptroller of the Currency.
the U.S. Treasury.
the Federal Reserve.
the U.S. Bank.
the Federal Reserve.
21) The Federal Reserve does all except which of the following?
a.
make loans to individuals
b.
control the supply of money
c.
control the value of money
d.
regulate the banking system
ANSWER: a. make loans to individuals.
22) Members of the Board of Governors
a.
and the presidents of the Federal Reserve regional banks are appointed by the U.S.
president.
b.
and the presidents of the Federal Reserve regional banks are appointed by the banks’
boards of directors.
c.
are appointed by the U.S. president while presidents of the Federal Reserve regional
banks are appointed by the banks’ boards of directors.
d.
are appointed by the banks’ boards of directors while the presidents of the Federal
Reserve regional banks are appointed by the U.S. president.
ANSWER: c. are appointed by the U.S. president while presidents of the Federal Reserve regional
banks are appointed by the banks’ board of directors.
23) The New York Federal Reserve Bank
a.
President always gets to vote at the FOMC meetings.
b.
conducts open market transactions.
c.
is located in the traditional financial center of the United States.
d.
All of the above are correct.
ANSWER: d. All of the above are correct.
24) The Board of Governors
a.
is currently chaired by Ben Bernanke.
b.
are appointed by the president and confirmed by the Senate.
c.
has seven members.
d.
All of the above are correct.
ANSWER: d. All of the above are correct.
25) Which of the following is correct?
a.
The Federal Reserve has 14 regional banks. The Board of Governors has 12 members
who serve 7 year terms.
b.
The Federal Reserve has 12 regional banks. The Board of Governors has 7 members
who serve 14-year terms.
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c.
The Federal Reserve has 12 regional banks. The Board of Governors has 14 members
who serve 7-year terms.
d.
None of the above is correct.
ANSWER: b. The Federal Reserve has 12 regional banks. The Board of Governors has 7 members
who serve 14-year terms.
26) Which of the following statements about the Federal Reserve is incorrect?
a.
The Federal Open Market Committee makes monetary policy.
b.
All members of the Board of Governors sit on the Federal Open Market Committee.
c.
The members of the Board of Governors are also presidents of the Federal Reserve’s
regional banks.
d.
The Federal Reserve regulates banks.
ANSWER: c. The members of the Board of Governors are also presidents of the Federal Reserve’s
regional banks.
27) The Fed is run by the
a.
President of the United States.
b.
Federal Open Market Committee.
c.
Board of Governors.
d.
House Banking Committee.
ANSWER: c. Board of Governors.
28) Which of the following has a four-year term?
a.
the members of the Board of Governors
b.
the Chair of the Board of Governors
c.
the members of the FOMC
d.
Both a and b are correct.
ANSWER: b. the Chair of the board of Governors
29) The twelve regional Federal Reserve Banks
a.
may not make loans to banks in their districts.
b.
regulate banks in their districts.
c.
send representatives to the FOMC and have a majority vote.
d.
All of the above are correct.
ANSWER: b. regulate banks in their districts.
30) The Fed does all except which of the following?
a.
conduct monetary policy
b.
convert Federal Reserve Notes into gold
c.
act as a lender of last resort
d.
regulate banks
e.
The Fed does all of the above.
ANSWER: b. convert Federal Reserve Notes into gold
31) The Federal Open Market Committee is made up of
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a.
the 12 presidents of the Federal Reserve Regional banks, and the Chair of the Board of
Governors.
b.
the 12 presidents of the Federal Reserve Regional banks, and the 7 members of the
Board of Governors.
c.
7 of the 12 presidents of the Federal Reserve Regional banks, and the 5 members of the
Board of Governors.
d.
5 of the 12 presidents of the Federal Reserve Regional banks, and the 7 members of the
Board of Governors.
ANSWER: d. 5 of the 12 presidents of the Federal Reserve Regional banks, and the 7 members of the
Board of Governors.
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