MCQ Questions
Q.1.
Money Multiplier
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    Amount of money the banking system generates with each dollar of reserves
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    Fraction of deposits that banks hold as reserves, total reserves as a percentage of total deposits
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    An institution that oversees the banking system and regulates the money supply
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    An item people can use to transfer purchasing power from the present to the future, durable
Q.2.
What happens if the Fed sells government bonds to banks?
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    Bank reserves decrease and so does the money supply
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    both 100-percent-reserve banking and fractional-reserve banking.
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    commodity money has intrinsic value but fiat money does not.
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    Loans, reserves, securities
Q.3.
Currency
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    Exchange of one good or service for other goods and services
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    Takes the form of a commodity with intrinsic value
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    The paper bills and coins in the hands of the public
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    the rate at which the Fed lends to banks.
Q.4.
Demand Deposits
  • 0%
    An item buyers give to sellers when they want to purchase goods and services, divisible
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    An institution that oversees the banking system and regulates the money supply
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    The yardstick people use to post prices and record debts, portable
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    Balances in bank accounts that depositors can access on demand by writing a check
Q.5.
What is achieved by monetary policy?
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    Price stability and economic growth
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    All of the above are correct.
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    credit cards but not debit cards
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    =change in bank reserves X money multiplier
Q.6.
What happens to reserves when the Fed makes loans to banks
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    It increases
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    Economic growth
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    Bank reserves decrease and so does the money supply
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    increases.
Q.7.
Double coincidence of wants
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    Unlikely occurrence that two people each have a good the other wants-- waste of resources
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    An item people can use to transfer purchasing power from the present to the future, durable
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    Regulations on the minimum amount of reserves that banks must hold against deposits, controlled by the Fed
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    1. Trade would require barter2. Every transaction would require a double coincidence of wants
Q.8.
Capital Requirement
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    An item buyers give to sellers when they want to purchase goods and services, divisible
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    Fraction of deposits that banks hold as reserves, total reserves as a percentage of total deposits
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    Minimum percent of deposits that banks must keep as reserves
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    A government regulation that specifies a minimum amount of capital, intended to ensure banks will be able to pay off depositors and debts
Q.9.
Reserve ratio (R)
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    Fraction of deposits that banks hold as reserves, total reserves as a percentage of total deposits
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    An institution that oversees the banking system and regulates the money supply
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    Resources a bank obtains by issuing equity to its owners
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    Minimum percent of deposits that banks must keep as reserves
Q.10.
Examples of fiat money
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    Located around the U.S.
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    U.S. dollar
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    1. Commodity money2. Fiat money
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    Purchase and sale of US government bonds by the Fed
Q.11.
3 Functions of Money
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    commodity money has intrinsic value but fiat money does not.
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    1. Medium of Exchange2. Unit of Account3. Store of Value
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    Ratio of assets to bank capital, total assets/bank capital
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    1. Commodity money2. Fiat money
Q.12.
What is included in liabilities (owe)
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    Price stability and economic growth
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    Deposits, Debt, Equity (capital)
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    credit cards but not debit cards
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    Loans, reserves, securities
Q.13.
Unit of Account
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    the most liquid asset but an imperfect store of value.
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    The paper bills and coins in the hands of the public
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    Resources a bank obtains by issuing equity to its owners
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    The yardstick people use to post prices and record debts, portable
Q.14.
Leverage Ratio
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    An institution that oversees the banking system and regulates the money supply
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    Quantity of money available in the economy
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    Fraction of deposits that banks hold as reserves, total reserves as a percentage of total deposits
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    Ratio of assets to bank capital, total assets/bank capital
Q.15.
Examples of Commodity money
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    Gold coins, cigarettes
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    Term Auction Facility
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    1. Commodity money2. Fiat money
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    Loans, reserves, securities
Q.16.
Barter
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    1. M12. Saving deposits3. Small time deposits4. Money market mutual funds
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    The paper bills and coins in the hands of the public
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    Exchange of one good or service for other goods and services
  • 0%
    Purchase and sale of US government bonds by the Fed
Q.17.
Federal Reserve (the Fed)
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    Regulations on the minimum amount of reserves that banks must hold against deposits, controlled by the Fed
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    1. Commodity money2. Fiat money
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    The central bank of the U.S.
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    makes trade easier.
Q.18.
Fiscal Policies
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    Carried out by the government and adjusted taxes and government spending
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    The yardstick people use to post prices and record debts, portable
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    An institution that oversees the banking system and regulates the money supply
  • 0%
    Fraction of deposits that banks hold as reserves, total reserves as a percentage of total deposits
Q.19.
How the Fed influences reserves now
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    $10,000 of new money.
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    Term Auction Facility
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    makes trade easier.
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    M2 but not M1.
Q.20.
Open-Market Operations
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    The paper bills and coins in the hands of the public
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    Purchase and sale of US government bonds by the Fed
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    uncommon because of FDIC deposit insurance.
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    Minimum percent of deposits that banks must keep as reserves
Q.21.
What is achieved by fiscal policies?
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    Economic growth
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    U.S. dollar
  • 0%
    It increases
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    Term Auction Facility
Q.22.
Federal Open Market Committee
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    Amount of money the banking system generates with each dollar of reserves
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    1. Board of Governors2. 12 Regional Fed banks3. Federal Open Market Committee (FOMC)
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    Purchase and sale of US government bonds by the Fed
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    Includes Board of Governors, decides monetary policy
Q.23.
Fiat money
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    An institution that oversees the banking system and regulates the money supply
  • 0%
    Takes the form of a commodity with intrinsic value
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    Money without intrinsic value, used as money because of government decree
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    The yardstick people use to post prices and record debts, portable
Q.24.
Commodity money
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    Money without intrinsic value, used as money because of government decree
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    Takes the form of a commodity with intrinsic value
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    Quantity of money available in the economy
  • 0%
    The paper bills and coins in the hands of the public
Q.25.
Central Bank
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    Money without intrinsic value, used as money because of government decree
  • 0%
    An institution that oversees the banking system and regulates the money supply
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    Carried out by the government and adjusted taxes and government spending
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    The interest rate on loans the Fed makes to banks
Q.26.
Fractional Reserve Banking System
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    Banks keep a fraction of deposits as reserves and use the rest to make loans
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    True
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    Bank reserves decrease and so does the money supply
  • 0%
    1. Trade would require barter2. Every transaction would require a double coincidence of wants
Q.27.
How can the Fed change the money supply (2)
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    borrow more from the Fed and lend more to the public. The money supply increases.
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    Currency may be a preferable store of wealth for criminals.
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    1. Changing the bank reserves2. Changing the money multiplier
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    =change in bank reserves X money multiplier
Q.28.
Bank Capital
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    Resources a bank obtains by issuing equity to its owners
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    The yardstick people use to post prices and record debts, portable
  • 0%
    The interest rate on loans the Fed makes to banks
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    Carried out by the government and adjusted taxes and government spending
Q.29.
Reserve ratio formula
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    Purchase and sale of US government bonds by the Fed
  • 0%
    Minimum percent of deposits that banks must keep as reserves
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    Fraction of deposits that banks hold as reserves, total reserves as a percentage of total deposits
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    Total reserves/ total deposits X 100
Q.30.
Bank Capital formula
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    Term Auction Facility
  • 0%
    Assets- Liabilities
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    Deposits, Debt, Equity (capital)
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    Loans, reserves, securities
Q.31.
Money
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    200 million tazes
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    1. Board of Governors2. 12 Regional Fed banks3. Federal Open Market Committee (FOMC)
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    1. Currency2. Demand deposits3. Traveler's checks4. Other checkable deposits
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    Group of safe assets that households and businesses can use to make payments or to hold as short-term investments
Q.32.
What does the Fed system consist of? (3)
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    1. Board of Governors2. 12 Regional Fed banks3. Federal Open Market Committee (FOMC)
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    The setting of the money supply by policymakers in the central bank, carried out by central bank
  • 0%
    1. Changing the bank reserves2. Changing the money multiplier
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    200 million tazes
Q.33.
How the Fed traditionally influences reserves
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    All of the above are correct.
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    borrow more from the Fed and lend more to the public. The money supply increases.
  • 0%
    Term Auction Facility
  • 0%
    Adjusting the discount rate
Q.34.
Money Supply
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    Balances in bank accounts that depositors can access on demand by writing a check
  • 0%
    Quantity of money available in the economy
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    =change in bank reserves X money multiplier
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    Fraction of deposits that banks hold as reserves, total reserves as a percentage of total deposits
Q.35.
2 Types of Money:
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    M= C+DC= CurrencyD= Demand Deposits
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    1. Commodity money2. Fiat money
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    commodity money and function as a unit of account.
  • 0%
    =change in bank reserves X money multiplier
Q.36.
What is included in assets (own)
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    Economic growth
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    Located around the U.S.
  • 0%
    Price stability and economic growth
  • 0%
    Loans, reserves, securities
Q.37.
T-Account
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    The yardstick people use to post prices and record debts, portable
  • 0%
    Resources a bank obtains by issuing equity to its owners
  • 0%
    An institution that oversees the banking system and regulates the money supply
  • 0%
    A simplified accounting statement that shows a bank's assets and liabilities
Q.38.
Medium of Exchange
  • 0%
    Balances in bank accounts that depositors can access on demand by writing a check
  • 0%
    7 members, located in Washington D.C.
  • 0%
    Carried out by the government and adjusted taxes and government spending
  • 0%
    An item buyers give to sellers when they want to purchase goods and services, divisible