Quiz 14 & 15

The functions of money are to serve as a:

• resource allocator, method for accounting, and means of income distribution.

• determinant of consumption, investment, and government spending.

• unit of account, store of value, and medium of exchange.

• factor of production, exchange, and aggregate supply.

Currency in circulation is part of

• M2

• both M1 and M2

• neither M1 and M2

• M1 only

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

• standard of deferred payments.

• medium of exchange.

• unit of account.

• store of value.

Refer to the above table. The size of the M₁ money supply is:

• $1415 billion.

• $1618 billion.

• $979 billion.

• $1236 billion.

Mike transfers $4000 from her savings account to her checking account. What effect is this change likely to have on M1 and M2?

• M2 increases and M1 stays the same.

• M1 decreases and M2 increases.

• M1 increases and M2 stays the same.

• M1 increases and M2 decreases.

In the United States, the money supply (M1) includes

• paper currency, coins, gold certificates, and time deposits

• currency, checkable deposits, and Series E bonds.

• coins, paper currency, checkable deposits, and credit balances with brokers.

• coins, paper currency, and checkable deposits.

U.S. currency has value primarily because it:

• is legal tender, is generally acceptable in exchange for goods or services, and is backed by the gold and silver of the federal government.

• is relatively scarce, is legal tender, and is generally acceptable in exchange for goods and services.

• is generally acceptable in exchange for goods and services, is backed by the gold and silver of the federal government, and facilitates trade.

• facilitates trade, is legal tender, and permits the use of credit cards and near-monies.

What "backs" the money supply?

• The fact that the intrinsic value of coins in circulation is greater than their face value.

• The U.S. government's ability to keep the value of money relatively stable.

• The amount of gold the U.S. government has on deposit at its banks.

• The fact that currency is issued as Federal Reserve Notes.

The Federal Reserve System consists of which of the following?

• U.S. Treasury Department and Bureau of Engraving and Printing.

• Federal Deposit Insurance Corporation and Controller of the Currency.

• Board of Governors and the 12 Federal Reserve Banks.

• Federal Open Market Committee and Office of Thrift Supervision

The 12 Federal Reserve Banks can best be characterized as:

• investment banks, bankers' banks, and public banks.

• regional banks, public banks, and member banks.

• central banks, bankers' banks, and quasi-public banks.

• national banks, quasi-public banks, and investment banks.