ECO 2013 Ch. 31

The Federal Reserve System is the institution that issues the U.S. paper currency or dollar bills.

When there is inflation in the economy, it implies that the:
Price index is rising and the purchasing power of money is falling

What function is money serving when you deposit money in a savings account?
A store of value

Which of the following functions of money enables society to gain the benefits of geographic and labor specialization?
Medium of exchange

Currency and checkable deposits are:
The major components of money supply M1

The consolidation in the financial industry into fewer and larger firms:
Progressed further in the Financial Crisis of 2007-2008

Checkable deposits are included in:
both M1 and M2

The following programs were part of the Fed’s “lender of last resort” efforts in response to the Financial Crisis of 2007-2008, except:
TARP (Troubled Asset Relief Program)

Which one of the following is considered to be a stock rather than a flow?

Economic studies conducted in industrially advanced countries suggest there is:
An inverse relationship between the degree of independence of the central bank and the size of the average annual rate of inflation

The Federal Open Market Committee (FOMC):
Sets policy on the sale and purchase of government bonds by the Fed

When a bank’s loans are written off, it means that the bank’s:
Reserves shrink, whereas its debt remains the same

Members of the Federal Reserve Board of Governors are:
Appointed by the President to staggered 14-year terms

Store gift cards and university meal cards are perfect examples of debit cards.

How many Federal Reserve Banks are there?

Paper money or currency in the U.S. is essentially:
A debt of a government agency

Money in the U.S. are essentially debts of:
The government and the banks

Generally speaking, the greater the amount of assets people hold in the form of near-monies, the:
Greater is their willingness to spend out of their money incomes

When the Fed acts as a “lender of last resort”, like it did in the financial crisis of 2007-2008, it is performing its role of:
Being the bankers’ bank

Joe Rogers deposits $200 in currency in his checking account at a bank. This deposit is treated as:
No change in the money supply because the $200 in currency has been converted to a $200 increase in checkable deposits

The so-called stored-value cards include the following, except:
Debit cards

Which of the following was not one of the three largest U.S. banks in 2009?

The M1 money supply is composed of:
Checkable deposits and currency in circulation

The Federal backing for money in the United States comes from:
Controlling the money supply in order to keep the value of money relatively stable over time

Checkable deposits are money because they are:
Acceptable as payment

Money functions as a store of value if it allows you to:
Delay purchases until you want the goods

One major advantage of credit cards used for transactions is that they:
Allow consumers to coordinate timing and payment for purchases

The following financial institutions traditionally accept deposits from savers, except:
Investment banks

The Federal Reserve System performs the following functions, except:
Providing banking services to the general public

Securitization, the process of forming new securities by bundling or slicing up groups of securities like mortgages and bonds, is:
A way of reducing risk though diversification

The “bail-out” money that went to giant financial institutions like Citibank and Goldman Sachs, along with General Motors and Chrysler, came from the
Troubled Assets Relief Program

Subprime mortgages, which played a central role in the Financial Crisis of 2007-2008, had been strongly encouraged and supported by the government before the crisis.

The major wave of defaults on home mortgages in 2007 destabilized:
Banks including those that made the loans indirectly

The Federal Reserve System consists of which of the following?
Board of Governors and the 12 Federal Reserve Banks

People can generally get the following items at their commercial banks, except:
Money market mutual funds

Money eliminates the need for a coincidence of wants in trading primarily through its role as a:
Medium of exchange

Which of the following “backs” the value of money in the United States?
The acceptability of it as a medium of exchange

Holding the money deposits of businesses and households and making loans to the public are the basic functions of:
Commercial banks and thrift institutions

As of January 2010, slightly more than half of the money supply (M1) was in the form of:

The so-called mortgage-backed securities are all of the following, except:
Their use was strongly discouraged by the Federal government

Use the following list to answer the question about the money supply Items.

1. Money market mutual funds held by individuals
2. Savings deposits, including money market deposit accounts
3. Money market mutual funds held by businesses
4. Currency held by the public
5. Small time deposits
6. Checkable deposits

Refer to the list above. The M1 money supply is composed of items:

4 and 6

The use of a credit card is most similar to:
Obtaining a short-term loan

The bail-out money given to the car companies GM and Chrysler came from the Fed acting in its role as “lender of last resort”.

The Financial Crisis of 2007-2008 halted the consolidation in the U.S. financial industry that had caused a declining number but increasing size of firms in the industry prior to the crisis.

The twelve Federal Reserve Banks can best be characterized as:
Central banks, banker’s banks, and quasi-public banks

Traditionally, the Federal Reserve can give emergency loans only to:
Commercial banks

When a consumer wants to compare the price of one product with another, money is primarily functioning as a:
Unit of account

A few years prior to the Financial Crisis of 2007-2008, many people were getting approved for mortgage loans even without proper documentation or credit checks.

The Great Recession was the main cause of the Financial Crisis of 2007-2008.

Money supply M1 does not include the currency held by:
Commercial banks

When was the Federal Reserve System established?

Which of the following would be considered to be the most liquid?
Checkable deposits

The so-called moral hazard problem refers to one’s tendency to:
Take on greater risk if one is at least partly insured against losses

The Fed traditionally can grant loans to commercial banks, but not to investments banks and securities firms.

The general public can open deposit accounts at their district’s Federal Reserve Bank.

Insurance companies are a major category of financial institutions.

The main function of the Federal Reserve System is to.
Control the money supply

Use the following list to answer the question about the money supply Items.

1. Money market mutual funds held by individuals
2. Savings deposits, including money market deposit accounts
3. Money market mutual funds held by businesses
4. Currency held by the public
5. Small time deposits
6. Checkable deposits

Refer to the above table. Which items are included in the M2 money supply, but not the M1 money supply?

1, 2, and 5

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