978-1259723223 Test Bank TBChap034 Part 2

subject Type Homework Help
subject Pages 14
subject Words 5501
subject Authors Campbell McConnell, Sean Flynn, Stanley Brue

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written consent of McGraw-Hill Education.
AACSB: Knowledge Application
Acces s i b i l i t y : Keyboard Navigation
Blooms: Remember
Difficulty: 01 Easy
Learning Objective: 34-02 List and describe the components of the U.S. money supply.
Test Bank: I
Topic: The Components of the Money Supply
50. The money supply is backed
51. Which of the following does not explain what backs the money supply in the United States?
52. Suppose that the federal government suddenly declared that wheat was to be used as money.
What is a possible outcome of that decision?
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written consent of McGraw-Hill Education.
A. The value of the "wheat dollar" would be unstable depending on crop yields from year to
year.
B. Farmers would replace corn and soy crops with wheat.
C. Wheat would function as money so long as people accept it in exchange for goods and
services.
D. All of these are possible outcomes.
53. The purchasing power of money and the price level vary
54. The value of money varies
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accept it as payment.
Test Bank: I
Topic: What Backs the Money Supply?
55. If the price index rises from 100 to 120, the purchasing power value of the dollar
56. If the price index rises from 200 to 250, the purchasing power value of the dollar
57. The purchasing power of the dollar
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written consent of McGraw-Hill Education.
Acces s i b i l i t y : Keyboard Navigation
Blooms: Understand
Difficulty: 02 Medium
Learning Objective: 34-03 Describe what backs the money supply, making us willing to
accept it as payment.
Test Bank: I
Topic: What Backs the Money Supply?
58. During periods of rapid inflation, money may cease to work as a medium of exchange
59. Stabilizing a nation's price level and the purchasing power of its money can be achieved
60. Other things equal, an excessive increase in the money supply will
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written consent of McGraw-Hill Education.
C. have no impact on the purchasing power of the dollar.
D. reduce the price level.
61. If P equals the price level expressed as an index number and $V equals the value of the
dollar, then
62.
Year
Price Level
Value of Dollar
1
1.00
$1.00
2
1.25
3
0.80
4
0.50
Refer to the given table. The value of the dollar in year 2 is
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written consent of McGraw-Hill Education.
C. $0.80.
D. $0.75.
63.
Year
Price Level
Value of Dollar
1
1.00
$1.00
2
1.25
3
0.80
4
0.50
Refer to the given table. The value of the dollar in year 3 is
64.
Year
Price Level
Value of Dollar
1
1.00
$1.00
2
1.25
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3
0.80
4
0.50
Refer to the given table. The value of the dollar in year 4 is
65. The central authority of the U.S. banking system is the
66. The Federal Reserve System was created in
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67. In the U.S. economy, the money supply is controlled by the
68. As it relates to Federal Reserve activities, the acronym FOMC describes the
69. The Federal Open Market Committee (FOMC) is made up of
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written consent of McGraw-Hill Education.
A. the chair of the Board of Governors along with the 12 presidents of the Federal Reserve
Banks.
B. the seven members of the Board of Governors along with the president of the New York
Federal Reserve Bank.
C. the seven members of the Board of Governors of the Federal Reserve System along with the
three members of the Council of Economic Advisers.
D. 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.
70. The group that sets the Federal Reserve System's policy on buying and selling government
securities (bills, notes, and bonds) is the
71. Approximately how many commercial banks are now (2016) operating in the United States?
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written consent of McGraw-Hill Education.
Acces s i b i l i t y : Keyboard Navigation
Blooms: Understand
Difficulty: 02 Medium
Learning Objective: 34-04 Discuss the makeup of the Federal Reserve and its relationship
to banks and thrifts.
Test Bank: I
Topic: The Federal Reserve and the Banking System
73. The Board of Governors of the Federal Reserve has members.
74. The members of the Federal Reserve Board
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written consent of McGraw-Hill Education.
C. are elected by votes of the 12 presidents of the Federal Reserve Banks.
D. are appointed for 14-year terms.
75. An important routine function of the Federal Reserve Bank is to
76. Which of the following statements best describes the 12 Federal Reserve Banks?
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written consent of McGraw-Hill Education.
Learning Objective: 34-05 Identify the functions and responsibilities of the Federal
Reserve and explain why Fed independence is important.
Test Bank: I
Topic: Fed Functions, Responsibilities, and Independence
77. The seven members of the Board of Governors of the Federal Reserve System are
78. To say that the Federal Reserve Banks are quasi-public banks means that
79. Which of the following is the basic economic policy function of the Federal Reserve Banks?
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80. The Federal Reserve System
81. Research for industrially advanced countries indicates that
82. Research involving industrially advanced countries suggests that
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83. Commercial banks and thrift institutions
84. "Subprime mortgage loans" refer to
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written consent of McGraw-Hill Education.
Learning Objective: 34-06 Identify and explain the main factors that contributed to the
financial crisis of 2007-2008.
Test Bank: I
Topic: The Financial Crisis of 2007 and 2008
85. What are "mortgage-backed securities"?
86. When banks bundled mortgage loans and sold the resulting mortgage-backed securities,
87. Banks lost money during the mortgage default crisis because
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written consent of McGraw-Hill Education.
D. of all of these reasons.
88. In the financial industry, "securitization" refers to
89. Collateralized default swaps
90. What does it mean when economists say that home buyers are "underwater" on their
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mortgages?
91. The "shadow banking system" refers to
2008.
92. Which of the following statements is true about the high rate of mortgage defaults that
contributed to the financial crisis of 2007 and 2008?
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written consent of McGraw-Hill Education.
D. The high rate of defaults resulted primarily from the two years of recession preceding the
mortgage default crisis.
93. Which of the following financial institutions declared bankruptcy as a result of the financial
crisis of 2007 and 2008?
94. Which of the following financial institutions was acquired by Bank of America as a result of
the financial crisis of 2007 and 2008?
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written consent of McGraw-Hill Education.
Topic: The Financial Crisis of 2007 and 2008
95. TARP, created in 2008, stands for
96. How much did the U.S. Congress allocate to the Troubled Asset Relief Program in 2008?
97. Some economists are concerned that the financial rescue provided by the TARP will
encourage financial investors and firms to take on greater risks in the future. This is an example
of
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written consent of McGraw-Hill Education.
Acces s i b i l i t y : Keyboard Navigation
Blooms: Understand
Difficulty: 02 Medium
Learning Objective: 34-07 Discuss the actions of the U.S. Treasury and the Federal
Reserve that helped keep the banking and financial crisis of 2007-2008 from worsening.
Test Bank: I
Topic: The Policy Response to the Financial Crisis
98. Which of the following statements is true as a result of Federal Reserve efforts to rescue the
financial industry from the financial crisis of 2007 and 2008?
99. TARP and other lender-of-last-resort programs implemented by the Fed in response to the
financial crisis of 2007 and 2008

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