Practice Test Macroeconomics Spring 2008
Chapter 16 The Monetary System
MULTIPLE CHOICE
1. Mia puts money into a piggy bank so she can spend it later. What function of money does this
illustrate?
a. store of value
b. medium of exchange
c. unit of account
d. None of the above is correct.
ANS: A
2. Which of the following best illustrates the medium of exchange function of money?
a. You keep some money hidden in your shoe.
b. You keep track of the value of your assets in terms of currency.
c. You pay for your double latte using currency.
d. None of the above is correct.
ANS: C
3. Fiat money
a. is worthless.
b. has no intrinsic value.
c. may be used as a medium of exchange, but is not legal tender.
d. performs all the functions of money except providing a unit of account.
ANS: B
4. Which type of currency has intrinsic value?
a. commodity money
b. fiat money
c. both commodity money and fiat money
d. neither commodity money nor fiat money
ANS: A
5. Which of the following is not included in M1?
a. currency
b. demand deposits
c. savings deposits
d. travelers' checks
ANS: C
6. Which of the following is included in M2 but not in M1?
a. currency
b. demand deposits
c. savings deposits
d. All of the above are included in both M1 and M2
ANS: C
1
, 7. Which of the following is included in the M2 definition of the money supply?
a. credit cards
b. money market mutual funds
c. corporate bonds
d. large time deposits
ANS: B
8. Which of the following pairs correctly lists a function of the Fed and the part of the Fed directly
responsible for that action?
a. income tax policy-Board of Governors
b. conduct open market operations-New York Federal Reserve Bank
c. lender of last resort-The FOMC
d. None of the above is correct.
ANS: B
9. Which of the following statements about the Federal Reserve is incorrect?
a. The members of the Board of Governors are also presidents of the Federal Reserve's
regional banks.
b. The Federal Open Market Committee makes monetary policy.
c. All members of the Board of Governors sit on the Federal Open Market Committee.
d. The Federal Reserve regulates banks.
ANS: A
10. The 12 regional Federal Reserve Banks
a. may not make loans to banks in their districts.
b. regulate banks in their districts.
c. send representatives to the FOMC and have a majority vote.
d. all vote on policy directives.
ANS: B
11. The Federal Open Market Committee is made up of
a. 5 of the 12 presidents of the Federal Reserve Regional banks, and the 7 members of the
Board of Governors.
b. 7 of the 12 presidents of the Federal Reserve Regional banks, and the 5 members of the
Board of Governors.
c. the 12 presidents of the Federal Reserve Regional banks, and the Chair of the Board of
Governors.
d. the 12 presidents of the Federal Reserve Regional banks, and the 7 members of the Board
of Governors.
ANS: A
12. Which of the following is not always a voting member of the FOMC?
a. the president of the New York Federal Reserve District Bank
b. the Chairman of the Board of Governors
c. the newest member of the Board of Governors
d. the president of the Boston Federal Reserve District Bank.
ANS: D
2
Chapter 16 The Monetary System
MULTIPLE CHOICE
1. Mia puts money into a piggy bank so she can spend it later. What function of money does this
illustrate?
a. store of value
b. medium of exchange
c. unit of account
d. None of the above is correct.
ANS: A
2. Which of the following best illustrates the medium of exchange function of money?
a. You keep some money hidden in your shoe.
b. You keep track of the value of your assets in terms of currency.
c. You pay for your double latte using currency.
d. None of the above is correct.
ANS: C
3. Fiat money
a. is worthless.
b. has no intrinsic value.
c. may be used as a medium of exchange, but is not legal tender.
d. performs all the functions of money except providing a unit of account.
ANS: B
4. Which type of currency has intrinsic value?
a. commodity money
b. fiat money
c. both commodity money and fiat money
d. neither commodity money nor fiat money
ANS: A
5. Which of the following is not included in M1?
a. currency
b. demand deposits
c. savings deposits
d. travelers' checks
ANS: C
6. Which of the following is included in M2 but not in M1?
a. currency
b. demand deposits
c. savings deposits
d. All of the above are included in both M1 and M2
ANS: C
1
, 7. Which of the following is included in the M2 definition of the money supply?
a. credit cards
b. money market mutual funds
c. corporate bonds
d. large time deposits
ANS: B
8. Which of the following pairs correctly lists a function of the Fed and the part of the Fed directly
responsible for that action?
a. income tax policy-Board of Governors
b. conduct open market operations-New York Federal Reserve Bank
c. lender of last resort-The FOMC
d. None of the above is correct.
ANS: B
9. Which of the following statements about the Federal Reserve is incorrect?
a. The members of the Board of Governors are also presidents of the Federal Reserve's
regional banks.
b. The Federal Open Market Committee makes monetary policy.
c. All members of the Board of Governors sit on the Federal Open Market Committee.
d. The Federal Reserve regulates banks.
ANS: A
10. The 12 regional Federal Reserve Banks
a. may not make loans to banks in their districts.
b. regulate banks in their districts.
c. send representatives to the FOMC and have a majority vote.
d. all vote on policy directives.
ANS: B
11. The Federal Open Market Committee is made up of
a. 5 of the 12 presidents of the Federal Reserve Regional banks, and the 7 members of the
Board of Governors.
b. 7 of the 12 presidents of the Federal Reserve Regional banks, and the 5 members of the
Board of Governors.
c. the 12 presidents of the Federal Reserve Regional banks, and the Chair of the Board of
Governors.
d. the 12 presidents of the Federal Reserve Regional banks, and the 7 members of the Board
of Governors.
ANS: A
12. Which of the following is not always a voting member of the FOMC?
a. the president of the New York Federal Reserve District Bank
b. the Chairman of the Board of Governors
c. the newest member of the Board of Governors
d. the president of the Boston Federal Reserve District Bank.
ANS: D
2
