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1. What determines the acceptability of dollar bills as a medium of exchange?

A. our society's willingness to use green paper notes issued by the Federal Reserve as money
B. the willingness of the Federal Reserve to redeem dollar bills for gold
C. the willingness of the U.S. Treasury to redeem dollar bills for gold
D. the public's fear that failing to accept dollar bills will trigger a hyperinflation

2. The attribute that distinguishes money from other assets is that only money

A. retains its value during times of inflation.
B. is counted in determining the size of an individual's wealth.
C. serves as a medium of exchange.
D. may be used as collateral for a bank loan.

3. When economists refer to the role of money as a standard of deferred payment, they mean that

A. payments by checks are usually deferred until the checks clear the bank.
B. money earns interest while loan payments are deferred.
C. money provides a standard for payments that will occur in the future.
D. money today is worth less than money tomorrow.

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Related questions

10. Which of the following instruments would most likely be utilized in the direct finance market?

A) Bank commercial loans. B) U.S. Treasury Bills.

C) Commercial Paper. D) Equities.

11. The managers of a firm met with a loan officer from a local bank to apply for a loan. They told the bank's loan

officer that the loan is intended to finance an expansion in the company’s production facility. Based on this

information, the loan officer granted the loan. However unexpected tariffs increased the cost of raw materials

needed in the production process and the loan had to be used to pay for materials rather than the planned

expansion. This incident is an example of

A) moral hazard.

B) market risk.

C) adverse selection.

D) banks' failing to charge high enough interest rates on business loans.

E) a situation in which direct finance, rather than indirect finance, should be employed.

12. From the choices below, indicate what is likely the most important asset category (in terms of $ value) in a

Money Market Mutual Fund.

A) Corporate Bonds B) Treasury Bills C) Non-Negotiable CDs D) Equities

13. Compared to interest rates on long-term U.S. Treasury debt, interest rates on short-term U.S. Treasury debt tends to

fluctuate________ and is usually __________ over time.

A) more: higher B) less: lower C) more; lower D) less; higher

14. Which of the following is true about legal tender?

A) Only legal tender may be used to pay taxes in the U.S.

B) Having legal tender status from the government is sufficient for something to be used as money.

C) Cash and checking accounts are legal tender.

D) None of the above is accurate.

15. When economists refer to the role of money as a unit of account, they mean that

A) most accounting systems reflect that goods are purchased with currency.

B) all goods are priced in terms of all other goods.

C) money gives traders a single, consistent way of measuring value in the economy.

D) money makes it possible for specialization to take place.

E) agents do not have to exercise their claim on scarce resources immediately.

16. The Federal Reserve System:

A) is required to make loans in the Fed Funds market

B) is required to create the money necessary for the U.S. Government to pay its bills.

C) is required to make loans to the U.S. Treasury.

D) is required to maintain price stability.

17. The interest rate that the Fed targets to indicate its stance on monetary policy is known as:

A) the discount rate. B) the prime rate. C) the fed funds rate. D) the standard rate.

18. Of money's three functions, the one that allows us to make decisions that maximize our satisfaction is its function as a

A) medium of exchange B) unit of account. C) standard of deferred payment D) store of value.

19. In the United States, money is backed by

A) gold and silver. B) Federal Reserve notes.

C) Congress D) Social infrastructure, political stability, and economic potential.

20. Which of the following would not be considered to be part of the money supply?

A) Currency in ATM machines

B) Coins stored in children’s piggy banks

C) U.S. Federal Reserve notes being used for transactions in India

D) A & B above

E) None of the above. All are part of the U.S. money supply.

I need help answering the following multiple choice questions

11. The managers of a firm met with a loan officer from a local bank to apply for a loan. They told the bank's loan

officer that the loan is intended to finance an expansion in the company’s production facility. Based on this

information, the loan officer granted the loan. However unexpected tariffs increased the cost of raw materials

needed in the production process and the loan had to be used to pay for materials rather than the planned

expansion. This incident is an example of

A) moral hazard.

B) market risk.

C) adverse selection.

D) banks' failing to charge high enough interest rates on business loans.

E) a situation in which direct finance, rather than indirect finance, should be employed.

12. From the choices below, indicate what is likely the most important asset category (in terms of $ value) in a

Money Market Mutual Fund.

A) Corporate Bonds B) Treasury Bills C) Non-Negotiable CDs D) Equities

13. Compared to interest rates on long-term U.S. Treasury debt, interest rates on short-term U.S. Treasury debt tends to

fluctuate________ and is usually __________ over time.

A) more: higher B) less: lower C) more; lower D) less; higher

14. Which of the following is true about legal tender?

A) Only legal tender may be used to pay taxes in the U.S.

B) Having legal tender status from the government is sufficient for something to be used as money.

C) Cash and checking accounts are legal tender.

D) None of the above is accurate.

15. When economists refer to the role of money as a unit of account, they mean that

A) most accounting systems reflect that goods are purchased with currency.

B) all goods are priced in terms of all other goods.

C) money gives traders a single, consistent way of measuring value in the economy.

D) money makes it possible for specialization to take place.

E) agents do not have to exercise their claim on scarce resources immediately.

16. The Federal Reserve System:

A) is required to make loans in the Fed Funds market

B) is required to create the money necessary for the U.S. Government to pay its bills.

C) is required to make loans to the U.S. Treasury.

D) is required to maintain price stability.

17. The interest rate that the Fed targets to indicate its stance on monetary policy is known as:

A) the discount rate. B) the prime rate. C) the fed funds rate. D) the standard rate.

18. Of money's three functions, the one that allows us to make decisions that maximize our satisfaction is its function as a

A) medium of exchange B) unit of account. C) standard of deferred payment D) store of value.

19. In the United States, money is backed by

A) gold and silver. B) Federal Reserve notes.

C) Congress D) Social infrastructure, political stability, and economic potential.

20. Which of the following would not be considered to be part of the money supply?

A) Currency in ATM machines

B) Coins stored in children’s piggy banks

C) U.S. Federal Reserve notes being used for transactions in India

D) A & B above

E) None of the above. All are part of the U.S. money supply.

All of the following are part of the narrowest definition of moneysupply, M1, except:
A) Bill has $50 worth of pennies in a coffee jar
B) Mike has $600 in his checking account
C) Jill has $400 in traveler’s checks
D) Jules has $400 worth of $1 bills in the piggybank
E) John has $500 in his savings account
2. Which of the following make up the money supply as it is mostnarrowly defined?
A) coins and currency held by the nonbank public, traveler'schecks, and savings deposits
B) all coins and currency held by the nonbank public
C) coins and currency held by the nonbank public, checkingdeposits, and traveler's checks
D) coins and currency held by the nonbank public, checkingdeposits, and savings deposits
E) checking deposits, savings deposits, and money market mutualfund accounts
3. Which of the following are included in the narrowest definitionof the money supply?
A) cash in bank vaults
B) savings deposits
C) money market mutual fund accounts
D) negotiable certificates of deposit
E) checkable deposits
4. If you returned a $5 Federal Reserve note to the Fed, you couldreceive
A) $5 in silver
B) $5 in gold
C) 5 one-dollar bills
D) 10 one-dollar bills
E) a small gold bar
5. The Federal Reserve's narrowest definition of money is
A) M3
B) M2
C) M1
D) near money
E) money market mutual funds
6. As a lender, a bank holds an advantage over any individualperson because
A) individuals do not diversify their asset holdings
B) individuals are better at enforcing loan contracts
C) banks have to engage in extensive and costly searches forpotential borrowers
D) banks develop expertise in evaluating borrowers' loanapplications
E) individuals have extensive knowledge of and experience inwriting loan contracts
7. If a bank has $1 million in assets and $50,000 in net worth, itsliabilities must equal
A) $50,000
B) $1,050,000
C) $50 million
D) $1,000,000
E) $950,000
8. Suppose the required reserve ratio is 0.1 and Linda deposits$4,000 in cash at the College State Bank. If the bank held noexcess reserves before Linda's deposit and now increases itsreserves by $500, which of the following is true?
A) The bank must have lent out an additional $4,000.
B) The $500 are required reserves.
C) The bank has excess reserves of $100.
D) Both the bank's assets and its liabilities rise by $500.
E) The bank has $500 in excess reserves.
9. Suppose that the First National Bank acquires $500,000 in newdeposits and the required reserve ratio is 12 percent. Which of thefollowing is true?
A) The First National Bank can increase the money supply by$500,000.
B) The First National Bank can increase the money supply by$400,000.
C) The First National Bank can increase the money supply by$440,000.
D) The entire banking system can increase the money supply by nomore than $500,000 if the First National Bank lends out its excessreserves.
E) The entire banking system can increase the money supply by nomore than $440,000 if the First National Bank lends out its excessreserves.
10. The ability to convert a store of value into a medium ofexchange with little loss of value is known as
A) arbitrage
B) solvency
C) liquidity
D) liability
E) currency
11. Which of the following would likely increase the moneysupply?
A) One bank buys government securities from another bank.
B) The required reserve ratio increases.
C) The Fed increases the reserves of commercial banks and the bankshold these as excess reserves.
D) The discount rate increases.
E) A bank sells government securities to the Fed.
12. The simple money multiplier equals
A) the required reserve ratio
B) the reciprocal of the required reserve ratio
C) 1 minus the required reserve ratio
D) 1 minus the reciprocal of the required reserve ratio
E) the square of the required reserve ratio
13. If the simple money multiplier is 5, the required reserve ratiomust be
A) 5 percent
B) 0
C) 10 percent
D) 50 percent
E) 20 percent
14. If an increase in excess reserves of $10 million increasescheckable deposits in the banking system by a maximum of $200million, the required reserve ratio is
A) 0
B) 5 percent
C) 10 percent
D) 20 percent
E) 2 percent
15. Suppose the reserve requirement ratio is 20 percent. Assumingno bank holds excess reserves and nobody withdraws cash, a $10,000injection of new excess reserves by the Fed can create
A) $2,000 in new checkable deposits
B) $10,000 in new checkable deposits
C) $50,000 in new checkable deposits
D) $500,000 in new checkable deposits
E) $50,000 in cash
16. Which of the following is not one of the procedures the Feduses to change the money supply?
A) buying government securities
B) selling government securities
C) lending reserves through the discount window
D) changing the required reserve ratio
E) extending loans to the public
17. Which of the following statements is correct?
A) To control the money supply, the Fed relies primarily on thereserve requirement.
B) The discount rate is the rate of interest banks charge to theirbest customers.
C) The Fed changes the reserve requirement frequently.
D) Because the Fed has no way to earn income, it is dependent uponCongress for appropriations.
E) Banks can turn a borrower's IOU into money--i.e., they cancreate money.
18. Lowering the discount rate is a way to expand the money supplybecause
A) it encourages banks to borrow from the Fed so they can moreeasily accommodate their customers' needs for loans
B) it encourages business customers to borrow directly from theFed
C) a lower discount rate reduces the amount of reserves banks arerequired to keep
D) a lower discount rate automatically reduces excessreserves
E) it encourages banks to sell U.S. government securities andincrease their cash reserves
19. The Fed operates
A) on a balanced budget
B) at a loss, since Federal Reserve notes and member bank depositsearn no interest
C) at a profit, since Federal Reserve notes and bank deposits earnno interest, but government securities and loans to commercialbanks do
D) at a profit, since Federal Reserve notes and member bankdeposits earn interest
E) at a loss, since Federal Reserve notes and member bank depositsearn interest, but government securities and loans to commercialbanks do not
20. Katie Sierra is willing to pay a higher interest rate. With noincome verification, she can apply for a type of loan commonlycalled
A) lion loans
B) liars loans
C) phantom loans
D) vaporware loans
E) prime-rate loans


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