Multiple Choice: Identify the letter of the best answer. Five points
each.
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1.
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How
does the Federal Reserve remain independent of political pressure? a. | It receives
funding from Congress. | b. | Board members serve for 14 year terms, longer than any
president. | c. | Board members are approved by the
Senate. | d. | Federal Reserve Banks are not owned by private
businesses. | | |
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2.
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The FDIC was
established to a. | protect the savings of
the American people. | b. | help with the financing of World War II. | c. | federalize the banking
system. | d. | create a government banking monopoly. | | |
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3.
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What
is the relationship between inflation and economic growth? a. | Inflation leads
to economic growth. | b. | Inflation hinders economic growth. | c. | Inflation makes
economic growth impossible. | d. | Inflation is not related to economic
growth. | | |
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4.
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Which
of the following is a disadvantage of barter? a. | It is not legal. | b. | It is too easy
to trade. | c. | It is rare for people to have a coincidence of
wants. | d. | It is very expensive to regulate. | | |
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5.
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The
United States currency system is a. | commodity money | c. | specie | b. | barter
money | d. | fiat
money | | | | |
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6.
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Money loses
its value when it a. | becomes too
portable. | c. | is
durable. | b. | is divisible. | d. | becomes too plentiful. | | | | |
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7.
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Before the founding of the Federal Reserve, banking panics were common
because a. | there was no
mechanism in place to regulate banking activities. | b. | our economy was
expanding and our currency was inelastic. | c. | currency notes were often
counterfeited. | d. | our banking system experienced liquidity
problems. | e. | all are correct. | | |
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8.
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Which
of the following explains how checks and credit cards are NOT alike? a. | convenience | c. | forms of
money | b. | portability | d. | proof of payment | | | | |
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9.
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What
happens if the money supply grows too fast? a. | inflation | c. | bank panics | b. | deflation | d. | war | | | | |
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10.
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When
a one dollar bill that is old and worn out is worth just as much as a crisp, new one dollar bill, the
currency is said to be a. | durable | c. | portable | b. | divisible | d. | fungible | | | | |
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