Ch.14 econ

money functions as:

a store of value, a unit of account, a medium of exchange.

A $70 price tag on a sweater in a department store window is an example of money functioning as a:

unit of account

Stock market price quotations best exemplify money serving as a:

unit of account

Purchasing common stock by writing a check best exemplifies money serving as a:

medium of exchange

The paper money used in the United States is:

federal reserve notes

In the United States, the money supply (M1) is comprised of:

coins, paper currency, and checkable deposits.

Currency held in the vault of First National Bank is:

not counted as part of the money supply.

Checkable deposits are classified as money because:

they can be readily used in purchasing goods and paying debts.

To say that coins are "token money" means that:

their face value is greater than their intrinsic value.

Which of the following is not part of the M2 money supply?

Large-denominated time deposits.

A checking account entry is money because it:

performs the functions of money.

Currency in circulation is part of:

both M1 and M2.

Checkable deposits are:

included in M1

Paper money (currency) in the United States is issued by the:

Federal Reserve Banks.

Coins in people’s pockets and purses are:

included both in M1 and in M2.

Coins held in commercial banks are:

not part of the nation’s money supply.

Checkable deposits include:

the deposits of banks and thrifts on which checks can be written.

The difference between M1 and M2 is that:

the latter includes small-denominated time deposits, noncheckable savings accounts, money market deposit accounts, and money market mutual fund balances.

"Near-monies" are included in:

M2 only

Small-denominated time deposits, by definition:

are less than $100,000.

near-monies:

are certain highly liquid financial assets that do not function directly as a medium of exchange but can be readily converted into M1.

1. Large-denominated ($100,000 and over) time deposits
2. Noncheckable savings deposits
3. Currency (coins and paper money) in circulation
4. Small-denominated (under $100,000) time deposits
5. Stock certificates
6. Checkable deposits
7. Money market deposit accounts
8. Money market mutual fund balances held by individuals
9. Money market mutual fund balances held by businesses
10. Currency held in bank vaults

Refer to the given list. The M1 definition of money comprises item(s):

3 and 6

1. Large-denominated ($100,000 and over) time deposits
2. Noncheckable savings deposits
3. Currency (coins and paper money) in circulation
4. Small-denominated (under $100,000) time deposits
5. Stock certificates
6. Checkable deposits
7. Money market deposit accounts
8. Money market mutual fund balances held by individuals
9. Money market mutual fund balances held by businesses
10. Currency held in bank vaults

Refer to the given list. The M2 definition of money comprises:

Items 2, 3, 4, 6, 7, and 8.

Time deposits of $100,000 or more are:

not a component of M1 or M2.

Currency held within banks is part of:

none of these definitions of the money supply.

The money supply is backed:

by the government’s ability to control the supply of money and therefore to keep its value relatively stable.

The purchasing power of money and the price level vary:

inversely

If the price index rises from 100 to 120, the purchasing power value of the dollar:

will fall by one-sixth.

The purchasing power of the dollar:

is the reciprocal of the price level.

During periods of rapid inflation, money may cease to work as a medium of exchange:

because people and businesses will not want to accept it in transactions.

Other things equal, an excessive increase in the money supply will:

decrease the purchasing power of each dollar.

If P equals the price level expressed as an index number and $V equals the value of the dollar, then:

$V = 1/P.

year price level value of dollar
1 $1.00 $1.00
2 $1.25
3 $0.80
4 $0.50
Refer to the table. The value of the dollar in year 2 is:

$0.80

The central authority of the U.S. banking system is the:

Board of Governors of the Federal Reserve.

In the U.S. economy, the money supply is controlled by the:

Federal Reserve System

The Federal Open Market Committee (FOMC) is made up of:

the seven members of the Board of Governors of the Federal Reserve System along with the president of the New York Federal Reserve Bank and four other Federal Reserve Bank presidents on a rotating basis.

Which one of the following is true about the U.S. Federal Reserve System?

There are 12 regional Federal Reserve Banks.

The Board of Governors of the Federal Reserve has ____ members.

7

The members of the Federal Reserve Board:

are appointed for 14-year terms.

Which of the following statements best describes the 12 Federal Reserve Banks?

They are privately owned and publicly controlled central banks whose basic goal is to control the money supply and interest rates in promoting the general economic welfare.

The seven members of the Board of Governors of the Federal Reserve System are:

appointed by the president with the confirmation of the Senate.

The Federal Reserve System:

is basically an independent agency.

Research for industrially advanced countries indicates that:

the more independent the central bank, the lower the average annual rate of inflation.

"Subprime mortgage loans" refer to:

high-interest-rate loans to home buyers with above-average credit risk.

What are "mortgage-backed securities"?

Bonds backed by mortgage payments.

In the financial industry, "securitization" refers to:

bundling groups of loans, bonds, mortgages, and other financial debts into new securities.

What does it mean when economists say that home buyers are "underwater" on their mortgages?

Buyers owe more on their mortgage than the properties are worth.

New York Life, Prudential, and Hartford are all primarily:

insurance companies

Wells Fargo, J.P. Morgan Chase, and Citibank are all primarily:

commercial banks

Smith Barney, Charles Schwab, and Merrill Lynch are all primarily:

securities firms