54. During the Great Depression, the Federal Reserve Board: prevented many bank
ID: 1127974 • Letter: 5
Question
54. During the Great Depression, the Federal Reserve Board:
prevented many bank failures.
failed to act as a lender of last resort.
failed to clear checks adequately.
began operating as the government's bank.
issued too many bank notes.
55. The M1 money supply consists of:
only coins and currency held by the nonbank public.
certificates of deposit only.
coins and currency held by the nonbank public, checkable deposits, and traveler's checks.
money market mutual fund accounts, savings accounts, and other miscellaneous near-monies.
only paper currency.
Stores need not accept your check but must accept currency because:
currency is backed by gold.
checks are not money but currency is.
currency is legal tender, but checks are not.
currency is easier to handle.
currency is a medium of exchange, but checks are not.
56. Which of the following is not true of Federal Reserve notes?
They are fiat money.
They are a liability of the Fed.
They are redeemable for other Federal Reserve notes.
They are redeemable for gold.
They are counted as currency in the money supply
Question 58 M2 consists of:
M1 plus savings accounts, small time deposits, money market mutual funds, and miscellaneous near- monies.
coins, currency, and checkable deposits only.
only near-monies.
M1 plus time deposits only.
M1 plus money market mutual funds only.
59. Which of the following is not money?
Checks
Coins
Federal reserve notes
Debit cards
Credit cards
60. Many people prefer debit cards to checks because:
checkbooks are not required and direct payments are made.
checks are unsafe for use.
debit cards delay money payments.
using checks is time consuming.
debit cards help account holders get a loan from the card issuer.
61. Banks earn a profit on the difference between:
the interest charged from depositors and the interest offered to borrowers.
he interest charged on loans and the interest paid on deposits.
the deposit and loan balances.
liabilities and deposits.
dividends and interest.
62. Which of the following is true of banks?
Banks reduce the opportunity cost of holding idle cash.
Banks act as intermediaries between the government and private investors. Banks can reduce risk by lending to rich borrowers.
Banks reduce the transaction costs of borrowing and lending money.
Banks can reduce risks by extending more loans.
Question 63 1 pts
On a bank's balance sheet, the value of its assets must equal:
net worth only.
liabilities only.
owner's equity.
the value of its liabilities plus net worth.
its revenues minus costs.
Question 64 1 pts
Which of the following is an asset to a bank?
Checkable deposits
Transaction deposits
Credit cards
Loans
Borrowings from the Fed
Question 65 1 pts
Suppose a bank has $6,000 in checkable deposits and the required reserve ratio is 0.2. If the bank wishes to hold no excess reserves, its actual reserves will be:
$4,000.
$1,200.
$3,000.
less than $1,000
. $4,800.
Question 67 1 pts
A bank can legally hold reserves as:
gold and coins.
gold and checks.
cash in its vault and non-interest-bearing reserve deposits at the Fed.
gold and non-interest-bearing reserve deposits at the Fed.
U.S. government securities and coins.
68. The liquidity of an asset indicates:
its buying power.
the ease with which it can be converted into cash without a significant loss of value.
the ease with which it can be converted into another asset.
how likely people are to trade it internationally.
its intrinsic value.
Question 69 1 pts
A bank finds itself short of required reserves and therefore borrows from another commercial bank. The interest rate on this loan is:
zero.
the prime rate.
the discount rate.
the federal funds rate.
the required reserve ratio.
70. Banks want to minimize their holdings of excess reserves because:
they will be penalized by the Federal Reserve System if excess reserves are too high.
required reserves are also minimized when banks minimize their holdings of excess reserves.
the money multiplier becomes too large if the excess reserves are high.
they want to borrow more on the federal funds market.
excess reserves earn no interest.
72. Table 14.1
EUBANK
Assets
Liabilities and Net Worth
Deposits at the Fed
$40,000
Checkable deposits
$500,000
Cash
$10,000
Net Worth
$20,000
Loans
$300,000
Securities
$150,000
Fed Stock
$20,000
The table above shows the balance sheet of Eubank. If Eubank is holding no excess reserves, its required reserve must be:
5 percent
4 percent
10 percent
20 percent
2 percent
73. Which of the following essential factors enables commercial banks to create money?
Required reserves
Excess reserves
State and local government securities
U.S. government securities
Net worth
Question 74 1 pts
The money expansion process continues until there are no more:
required reserves in the system.
demand deposits in the system.
excess reserves in the system that banks are willing to lend.
liabilities in the system.
assets in the system.
76.If the simple money multiplier is 5, the required reserve ratio must be equal to _____.
5 percent
0
10 percent
50 percent
20 percent
52. Which of the following statements is true of open-market operations?
Open-market operations involve clearing checks.
Open-market operations involve lending money to member banks.
Open-market operations involve accepting deposits from member banks.
Open-market operations involve the Fed's purchase and sale of government securities.
Open-market operations involve the Fed’s purchase and sale of foreign exchange.
51. Which of the following is not a goal of the Fed?
Maintaining a high level of employment
Maintaining stability in interest rates
Maintaining high prices to encourage production
Maintaining stability in financial markets
Maintaining stability in foreign exchange markets
50. Which of the following is correct regarding the discount rate?
It is the interest rate that commercial banks charge their most creditworthy customers.
It is the interest rate that thrift institutions charge for home mortgages.
It is the interest rate at which depository institutions can borrow from the Federal Reserve.
It is the interest rate set in the market for U.S. Treasury Bills.
It is the prime interest rate.
49. Which of the following is not performed by the Fed?
Holding member bank reserves on deposit
Making loans to member banks
Issuing bank notes
Serving as bankers to other banks
Holding deposits of households and firms
47.Which of the following statements is true?
The Federal Reserve System was established by the U.S. Constitution.
The Federal Reserve System was established immediately after the Civil War.
The Federal Reserve System was established in 1913.
The Federal Reserve System was established during the Great Depression.
The Federal Reserve System was established immediately following World War II.
44. Which of the following is most critical for the maintenance of an efficient and productive economy?
Money backed by gold or silver, Steadily rising prices, An unlimited and unregulated supply of money, A properly functioning monetary system or A well-organized barter system
43. Federal Reserve notes are _____.
checks, commodity money , coins, backed by gold or fiat money ?
42. Money that is acceptable because the government requires that it be accepted in payment of debt is _____.
legal, commodity, money, bad money, baccked by gov wealth or hoarded by people?
54. During the Great Depression, the Federal Reserve Board:
prevented many bank failures.
failed to act as a lender of last resort.
failed to clear checks adequately.
began operating as the government's bank.
issued too many bank notes.
Explanation / Answer
54. Answer: failed to act as a lender of last resort.
Explanation: Central banks are supposed to act as the lender of the last resort and save banks from failure. However, during the great depression, the Fed failed to do so and many banks failed during that time.
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