Question 1

Although there has been a reported increase in counterfeit money, it is estimated to currently account for

Accepted Answer

Counterfeit money is estimated to currently account for less than 1 percent of genuine currency.

Question 2

The central bank of the United States is known as the

Accepted Answer

The Fed is short for the Federal Reserve System, which is the central bank of the United States. It is responsible for implementing monetary policy, supervising and regulating banks, and providing financial services to the U.S. government. Options A, C, D, and E are incorrect as they either refer to other central banks or commercial banks in the United States.

Question 3

Time deposits require the depositor to keep the money at the bank for a certain amount of time or else lose interest. They are therefore not as liquid as checking deposits, but it is normally possible to withdraw funds from them.

Accepted Answer

Time deposits, also known as CDs or certificates of deposit, do require the depositor to keep the money at the bank for a certain amount of time, but it is still possible to withdraw funds from them before the maturity date, albeit with a penalty fee. This means they are not as liquid as checking deposits but not completely illiquid either.

Question 4

One of the main reasons the U.S. Treasury is redesigning dollar bills (such as the $10, $20, and $50 denominated bills) is so that they are more difficult to counterfeit.

Accepted Answer

The redesign of dollar bills aims to incorporate new security features that make them more difficult to counterfeit.

Question 5

If a country's currency is on a gold standard, does that mean there can be no inflation? Explain.

Accepted Answer

The answer of If a country's currency is on a...

Question 6

For a bank to make a profit, the interest rate on its deposit liabilities must be higher than the interest rate on its loan receipts.

Accepted Answer

Banks typically make a profit by lending at interest rates that are higher than the interest rates they offer on deposits. This difference is known as the interest rate spread.

Question 7

The Federal Reserve

Accepted Answer

The Federal Reserve serves as a "bank to other banks," providing services such as lending money, processing payments, and maintaining accounts for other banks in the United States. It is also responsible for regulating the supply of money and credit in the economy.

Question 8

The central bank of the United States of America is commonly known as the Fed.

Accepted Answer

This statement is true. The Fed refers to the Federal Reserve System, which is the central banking system of the United States.

Question 9

Banks are referred to as intermediaries because they

Accepted Answer

Banks act as intermediaries by channeling funds from depositors to borrowers. They accept deposits from individuals and businesses and use these funds to provide loans to other individuals and businesses.

Question 10

Is money the same as income? Explain.

Accepted Answer

The answer of Is money the same as income? Explain.
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Question 11

The money supply is the sum of the currency in circulation.

Accepted Answer

The money supply includes both currency in circulation and money held in bank accounts or other financial instruments.

Question 12

Financial intermediaries exist primarily because

Accepted Answer

Financial intermediaries exist primarily to make a profit by connecting borrowers and savers, mitigating risks, and providing financial services that match customer needs. While they may also be subject to federal mandates, they do not exist solely for that purpose. They are not part of the U.S. Treasury or the Federal Reserve System, although they may be regulated by those entities. Historical accident may have played a role in their development, but it is not their primary reason for existence.

Question 13

Which of the following is true?

Accepted Answer

It is customary for banks to pay a higher interest rate on loans than they would pay on savings accounts. Banks make a profit by charging borrowers a higher interest rate than they pay to depositors.

Question 14

The chair of the Board of Governors of the Federal Reserve is

Accepted Answer

The chair of the Board of Governors of the Federal Reserve is appointed by the president and confirmed by the Senate. The appointment can be renewed for additional terms, typically lasting four years each.

Question 15

A commercial bank is

Accepted Answer

A commercial bank is a financial intermediary that accepts deposits from individuals and businesses and uses those funds to make loans or invest in securities. Commercial banks are not part of the Federal Reserve, the federal government, or the U.S. Treasury. They are for-profit institutions, unlike nonprofit organizations.

Question 16

The chair of the Board of Governors of the Federal Reserve since 2014 is

Accepted Answer

The chair of the Board of Governors of the Federal Reserve since 2014 was Janet Yellen.

Question 17

The Federal Reserve System is divided into how many districts?

Accepted Answer

The Federal Reserve System is divided into 12 districts, each of which is overseen by a Federal Reserve Bank.

Question 18

The "Fed" is the nickname for

Accepted Answer

The "Fed" is a commonly used nickname for the Federal Reserve System, which is the central banking system of the United States. It is responsible for controlling the nation's money supply and implementing monetary policy.

Question 19

Items in M1 are more liquid than items in M2.

Accepted Answer

M1 includes currency, demand deposits, and other highly liquid assets, while M2 includes M1 plus various savings accounts and time deposits which are less liquid than the items in M1.

Question 20

The Board of Governors of the Federal Reserve is

Accepted Answer

The Board of Governors of the Federal Reserve is appointed by the president and confirmed by the Senate, with each governor serving a 14-year term. This structure is designed to ensure the board's independence from political pressure.

Quiz 22: Money and Inflation