A Quiz On Ch 13 Money And Banking

10 Questions

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A Quiz On Ch 13 Money And Banking

The world today is becoming a cashless economy and everyone is embracing the use of banks to keep our money and using debit and credit notes. Have you read chapter 13 of McConnell and Brue on money and banking? Take the review test below and refresh your memory on the topic.


Questions and Answers
  • 1. 
    • A. 

      True

    • B. 

      False

  • 2. 
    The money supply designated M1 is the sum of currency and noncheckable deposits.
    • A. 

      True

    • B. 

      False

  • 3. 
    The currency component of M1 includes both coins and paper money.
    • A. 

      True

    • B. 

      False

  • 4. 
    If a coin is token money, its face value is less than its intrinsic value.
    • A. 

      True

    • B. 

      False

  • 5. 
    Both commercial banks and thrift institutions accept checkable deposits.
    • A. 

      True

    • B. 

      False

  • 6. 
    The checkable deposit of the Federal government at the Federal Reserve Banks are a component of M1.
    • A. 

      True

    • B. 

      False

  • 7. 
    M2 exceeds M1 by the amount of noncheckable savings, small time deposits, and money market deposit accounts and money market mutual funds.
    • A. 

      True

    • B. 

      False

  • 8. 
    A small time deposit is one that is less than $100,000.
    • A. 

      True

    • B. 

      False

  • 9. 
    M2 is less than M3 by the amount of small time deposits in depository institutions.
    • A. 

      True

    • B. 

      False

  • 10. 
    Economists and public officials are in general agreement on how to define the money supply in the U.S.
    • A. 

      True

    • B. 

      False

  • 11. 
    A near money is a medium of exchange.
    • A. 

      True

    • B. 

      False

  • 12. 
    Currency and checkable deposits are money because they are acceptable to sellers in exchange for goods and services.
    • A. 

      True

    • B. 

      False

  • 13. 
    If money is to have a fairly stable value, its supply must be limited relative to the demand for it.
    • A. 

      True

    • B. 

      False

  • 14. 
    There is a transactions demand for money because households and business firms use money as a store of value.
    • A. 

      True

    • B. 

      False

  • 15. 
    An increase in the price level would, ceteris paribus, increase the transactions demand for money.
    • A. 

      True

    • B. 

      False

  • 16. 
    An increase in the nominal GDP, ceteris paribus, will increase both the total demand for money and the equilibrium rate of interest in the economy.
    • A. 

      True

    • B. 

      False

  • 17. 
    Bond prices and interest rates are inversely related.
    • A. 

      True

    • B. 

      False

  • 18. 
    Members of the Board of Governors of the Federal Reserve System are appointed by the president and confirmed by the senate.
    • A. 

      True

    • B. 

      False

  • 19. 
    The Federal Open Market Committee is responsible for keeping the stock market open and regulated.
    • A. 

      True

    • B. 

      False

  • 20. 
    The Federal Reserve Banks are the bankers' banks because they make loans to and accept deposits from depository institutions.
    • A. 

      True

    • B. 

      False

  • 21. 
    Federal Reserve Banks are owned and operated by the U.S. government.
    • A. 

      True

    • B. 

      False

  • 22. 
    At times, the Fed lends money to banks and thrifts, charging them an interest rate called the bank and thrift rate.
    • A. 

      True

    • B. 

      False

  • 23. 
    Congress established the Fed as an independent agency to protect it from political pressure so that it can effectively control the money supply and maintain price stability.
    • A. 

      True

    • B. 

      False

  • 24. 
    In recent years, banks and thrifts have increased their share of the financial services indurty and control of financial assets.
    • A. 

      True

    • B. 

      False

  • 25. 
    It is expected that electronic money will reduce the problems for the Fed in controlling the money supply.
    • A. 

      True

    • B. 

      False