Question 1

1pts

What is the currently unresolved question about the Federal Reserve's decision to allow Lehman Brothers to fail?

a.Was Lehman Brothers actually in that much financial distress?

b.Was Lehman Brothers actually a bank?

c.Why was the decision to let Lehman Brothers fail made on the weekend when markets were closed?

d.What is the difference between the Lehman Brothers case and the Bear Stearns case?

e.Were they really 'brothers' at Lehman Brothers?

Group of answer choices

a

b

c

d

e

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Question 2

1pts

Which measure of money (i.e., M1 or M2) is less "liquid?"

a.M1

b.M2

c.They are both equally liquid

Group of answer choices

a

b

c

No answer text provided.

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Question 3

1pts

What is the largest component of M2?

a.Currency and coins

b.Checking accounts

c.Savings accounts

d.CD accounts

e.Government accounts

Group of answer choices

a

b

c

d

e

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Question 4

1pts

Which measure of money (i.e., M1 or M2) is usually preferred by economists who are interested in monetary policy?

a.M1

b.M2

c.There is no preference between the two

Group of answer choices

a

b

c

No answer text provided.

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Question 5

1pts

Are well-run and profitable banks immune or safe from a run on the bank?

a.Yes, a well-run bank will never have to deal with a run on its bank as long as the money circulates

b.No, bank runs are something that can happen to any bank during a time of banking panic

c.Yes, profitably banks always have sufficient reserve on hand in the vault to handle any potential bank run

d.Yes, because bank customers will never create a run on a profitable bank

Group of answer choices

a

b

c

d

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Question 6

1pts

What must be done to stop a run on the bank?

a.Everyone has to wait to let things calm down

b.Bank customer confidence in the bank must be restored

c.The bank must stop withdrawals until fear subsides

d.The government must certify that a bank is in good shape

e.A bank run must be turned into a bank walk

Group of answer choices

a

b

c

d

e

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Question 7

1pts

Pick the two answers to the following: President Roosevelt ordered all banks to close for one week in 1933, and assured the American public that he would have all banks reviewed for solvency and only allow the financially sound banks to reopen. Did he actually have bank examiners go through the books of all those banks? ____. Did Roosevelt's policy work? Why or why not? ______________

a.Yes/The policy worked because bank examiners only allowed very healthy banks to re-open

b.Yes/The policy worked because having banks examiners audit banks restored confidence

c.No/Even though banks were not fully audited by bank examiners, the policy did restore confidence

d.No/The failure to fully audit all bank finances was the reason why the policy failed and bank failures continued at high rates

Group of answer choices

a

b

c

d

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Question 8

1pts

How did A.P. Giannini handle a bank run at the Bank of Italy after the 1906 San Francisco Earthquake?

a.He called upon the Federal Reserve for help and liquidity

b.He kept the bank closed until the earthquake emergency had passed

c.He got out of town until the crisis was over

d.He happily offered to give all bank depositors their money back, even though he did not actually have enough cash to do it

e.He gave bank depositors special IOU (promises to pay later) if they agreed to keep their money in the bank

Group of answer choices

a

b

c

d

e

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Question 9

1pts

How did J. P. Morgan handle a bank run in the Panic of 1907?

a.He called upon the Federal Reserve for help and liquidity

b.He kept the bank closed until the Panic was over

c.He got out of town until the Panic was over

d.He happily offered to give all bank depositors their money back, even though he did not actually have enough cash to do it

e.He gave other banks cash from his bank and from his own personal assets to help his competitors deal with the bank runs at their banks

Group of answer choices

a

b

c

d

e

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Question 10

1pts

What does liquidity mean?

a.Humidity

b.The amount of moisture in different types of money

c.The ease or difficulty in using different types of money in transactions

d.The timing it takes for prices to change during inflationary times

Group of answer choices

a

b

c

d

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Question 11

1pts

What does legal tender mean?

a.The legal requirement that a person must render assistance to someone in an emergency

b.The legal obligation to accept a form of money in payment of all debts, public and private

c.The age at which a person can enter into a contract

d.A way of cooking a steak - between rare and medium rare

Group of answer choices

a

b

c

d

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Question 12

1pts

What is the principle difference between commodity money and fiat money?

a.Nothing, they are two names for the same thing

b.Gold or silver or something else of value will back commodity money, but fiat money has no such backing

c.Fiat money has better backing because government requires it to have a stronger backing

d.Fiat money is more liquid

e.Fiat money is certified

Group of answer choices

a

b

c

d

e

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Question 13

1pts

What does a demand deposit account refer to?

a.A bank account that the IRS has seized

b.A bank account that has a long time period attached (and an early withdrawal penalty)

c.Checking accounts

d.Certificates of deposit

Group of answer choices

a

b

c

d

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Question 14

1pts

What will happen to M1 if a bank customer takes $500 out of her saving account and puts it in her checking account?___________ .What will happen to M2? _________

a.M1 will increase; M2 will decline

b.M1 will decrease; M2 will increase

c.M1 will increase; M2 will not change

d.M1 will not change; M2 will decline

e.M1 will not change; M2 will increase

Group of answer choices

a

b

c

d

e

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Question 15

1pts

If the unemployment rate = 7%, the inflation rate = 4%, the nominal interest rate = 2%, and the Reserve Requirement = 5%, what it the Potential Deposit Multiplier (PDM) ______?

(Simply enter you answer as a whole number. If necessary, round you answer to the nearest whole number.)

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Question 16

1pts

Which of the two - headline vs. core CPI - is a better measure of inflationary pressure in the economy?

a. The core rate is better

b. The headline rate is better

c. Neither rate addresses this issue

d. They are both the same ffor this task

Group of answer choices

a

b

c

d

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Question 17

1pts

Which of the two - headline vs. core CPI - is a better measure of the cost of living?

a. The core rate is better

b. The headline rate is better

c. Neither rate addresses this issue

d. They are both the same for this task

Group of answer choices

a

b

c

d

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Question 18

1pts

If the unemployment rate = 7%, the inflation rate = 2%, the nominal interest rate = 8%, and the Reserve Requirement = 5%, then the real interest rate = ______%

(Simply enter you answer as a whole number. Donotput a % sign with your answer. If necessary, round you answer to the nearest whole number.)

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Question 19

1pts

A computer monitor sold for $189 in 1995. What is the value of the monitor in 1999 dollars?

Use the following index:

Index(1990 = 100)

1994 ... 110

1995 ... 115

1996 ... 91

1997 ... 101

1998 ... 94

1999 ... 92

2000 ... 121

(Enter your answer as a numberwithouta $ sign.Round your answer to the nearest dollar.)

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Question 20

1pts

A basket of goods cost $14,761 in the base year. The same basket of goods cost $39,218 in 2011. What is the 2011 index value?

a. 45.3

b. 220.8

c. 265.9%

d. 45.3%

e. 220.8%

f.265.9

g. $220.80

Group of answer choices

a

b

c

d

e

f

g

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Question 21

1pts

What is the most important (and most utilized) monetary policy tool that the Federal Reserve uses to change the money supply?

a.Changing the reserve requirement

b.Open market operations

c.Printing more or less paper money

d.Discounting

Group of answer choices

a

b

c

d

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Question 22

1pts

What function must money have in order for it to truly be money?

a.It must be durable

b.It must have a commodity value

c.It must have intrinsic value

d.It must be generally accepted in exchange

e.It must be a unit of account

Group of answer choices

a

b

c

d

e

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Question 23

1pts

What is the fundamental weakness of a fractional reserve banking system?

a.It has no weaknesses

b.Reserve requirements are too restrictive

c.It is inherently at risk of a run on the bank

d.It cannot distinguish between truly productive investment loans versus silly loans to finance things like cosmetic surgeries

e.It is hard to keep track of the missing fraction

Group of answer choices

a

b

c

d

e

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Question 24

1pts

What is the fundamental strength or value of a fractional reserve banking system?

a.It runs at a fraction of the cost of full-reserve banking

b.It has proven to be a very effective way of collecting savings and channeling it into productive investments

c.It minimizes the reserves

d.It is very safe and free of inherent risks

Group of answer choices

a

b

c

d

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Question 25

2pts

The Federal Reserve has many functions and responsibilities, but of all of its responsibilities, what is its most important function or mandate?