1. Which of the following best defines what money is now and what it has been in the past?

a)currency

b)currency plus checking deposits

c)currency plus credit cards

d)anything accepted as a means of payment

e)anything used as a store of value

2. Which of the following is not a function of money?

i.unit of account

ii.store of value

iii.unit of debt

a)i only

b)ii only

c)iii only

d)Both ii and iii

e)Both i and ii

3. Barter is:

a)the exchange of goods and services for money

b)the pricing of goods and services with one agreed upon standard

c)the exchange of goods and services directly for other goods and services

d)a generally accepted means of payment

e)storing money for use at a later date

4. If someone buries money in a tin can beneath a tree, the money is functioning as a:

a)medium of exchange

b)unit of account

c)means of payment

d)store of value

e)bartering tool

5. Which of the following counts as part of M1?

a)$5,000 worth of gold

b)$5,000 worth of government bonds

c)$5,000 in a checking account

d)$5,000 credit line on a credit card

e)$5,000 of real estate

6. M2 equals:

a)M1 and is just another name for currency outside of banks

b)M1 plus savings deposits, small time deposits, and money market fund deposits

c)M1 minus traveler's checks because they are not really money

d)currency plus savings deposits, all time deposits, and money market funds and other deposits

e)M1 plus savings deposits and small time deposits minus money market fund deposits

7. If currency outside of banks is $800 billion; traveler's checks are $10 billion; checkable deposits owned by individuals and businesses are $700 billion; savings deposits are $4,000 billion; small time deposits are $1,000 billion; and money market funds and other deposits are $800 billion, then M1 equals ____ billion.

a)$7,310

b)$5,800

c)$2,510

d)$1,510

e)$710

8. Credit cards, debit cards, and e-checks are:

a)always counted as money

b)not money

c)sometimes counted as money, depending on how they are used

d)sometimes counted as money, depending on what is purchased

e)sometimes counted as money, depending on what measure of money is being used

9. A commercial bank's main goal is to

a)provide loans to its customers

b)maximize the wealth of its stockholders

c)help the government when it needs money

d)lend money to the Federal Reserve banks

e)open checking and savings accounts

10. A commercial bank's reserves are:

a)bonds issued by the U.S. government that are very safe

b)the provision of funds to businesses and individuals

c)currency in its vault plus the balance on its reserve account at a Federal Reserve Bank

d)savings and time deposits

e)its loans

11. Which of the following lists includes only banks' assets?

a)liquid assets, loans, securities, and reserves

b)reserves, savings deposits, securities, and loans

c)reserves, securities, and savings deposits

d)securities, reserves, checkable deposits, and liquid assets

e)reserves, checkable deposits, and loans

12. A bank has $400 in checkable deposits, $800 in savings deposits, $700 in time deposits, $900 in loans to businesses, $300 in outstanding credit card balances, $500 in government securities, $10 in currency in its vault, and $20 in deposits at the Fed. The bank's deposits that are part of M1 equal:

a)$1,900

b)$400

c)$1,210

d)$530

e)$410

13. Which of the following accepts deposits from and/or sell shares to the general public?

i.money market funds

ii.thrift institutions

iii.commercial banks

a)i only

b)ii only

c)iii only

d)ii and iii

e)i, ii, and iii

14. Which of the following is a thrift institution?

a)a savings and loan association

b)a money market fund

c)a commercial bank

d)a loan institution

e)the Federal Reserve

15. Regulating the amount of money in the United States is one of the most important responsibilities

of the:

a)State Department

b)state governments

c)Treasury Department

d)Federal Reserve

e)U.S. Mint

16. The Board of Governors of the Federal Reserve System has:

a)12 members appointed by the president of the United States

b)12 members elected by the public

c)7 members appointed by the president of the United States

d)7 members elected by the public

e)7 members appointed to life terms

17. The Fed's policy tools include:

a)required reserve ratios, the discount rate, open market operations, and extraordinary crisis measures

b)holding deposits for the U.S. government, reserve requirements, and the discount rate

c)setting regulations for lending standards and extraordinary crisis measures

d)supervision of the banking system and buying and selling commercial banks

e)required reserve ratios, income tax rates, and open market operations

18. The Fed's policy is determined by the:

a)Federal Open Market Committee

b)Executive Council to the Governor

c)Regional Federal Reserve Banks

d)Board of Governors

e)Federal Monetary Policy Committee

19. The minimum percent of deposits that banks must hold and cannot loan is determined by the:

a)interest rate

b)discount rate

c)required reserve ratio

d)federal funds rate

e)ratio of M2 to M1

20. The discount rate is the interest rate that:

a)commercial banks charge their customers

b)commercial banks charge each other for the loan of reserves

c)the Fed charges the government for loans

d)the Fed charges commercial banks when it loans reserves to the banks

e)the Fed pays commercial banks on their reserves held at the Fed

21. The monetary base is the:

a)minimum reserves banks must hold to cover any losses from unpaid loans

b)sum of coins, Federal Reserve notes, and banks' reserves at the Fed

c)sum of gold and foreign exchange held by the Fed

d)sum of government securities and loans to banks held by the Fed

e)sum of coins, required reserves, and bank loans

22. If Federal Reserve notes and coins are $765 billion, and banks' reserves at the Fed are $8 billion, the gold stock is $11 billion, and the Fed owns $725 billion of government securities, what does the monetary base equal?

a)$765 billion

b)$773 billion

c)$776 billion

d)$744 billion

e)$1,509 billion

23. If the Federal Reserve ____ the required reserve ratio, the interest rate ____.

a)lowers; rises

b)lowers; falls

c)raises; does not change

d)raises; falls

e)Not enough information is given because the effect depends also on the size of the monetary base