Question 1

What does it mean when economists say that home buyers are "underwater" on their mortgages?

Accepted Answer

A)   Buyers owe more on their mortgage than the properties are worth.
B)   Buyers are financially incapable of repaying their mortgages and bankruptcy is inevitable.
C)   Buyers are purchasing homes on flood plains and are highly susceptible to financial losses.
D)   Buyers are paying interest rates substantially higher than current market interest rates,creating interest payments that create financial hardship.E) B) and D)
F) B) and C)

Question 2

Which of the following programs provides loans of U.S.securities to primary dealers for one-month terms,in an effort to enhance liquidity in U.S.securities markets?

Accepted Answer

A)   Primary Dealer Credit Facility.
B)   Commercial Paper Funding Facility.
C)   Term Asset-Backed Securities Loan Facility.
D)   Term Securities Lending Facility.E) All of the above
F) A) and B)

Question 3

The M2 money supply is larger than the M1 money supply.

Accepted Answer

A) True 
 B)False

Question 4

"Near-monies" are included in:

Accepted Answer

A)   both M1 and M2.
B)   M2 only.
C)   M1 only.
D)   neither M1 nor M2.E) None of the above
F) C) and D)

Question 5

Firms whose central business is providing individual account shares of a group of stocks,bonds,or both are known as:

Accepted Answer

A)   insurance companies.
B)   thrifts.
C)   commercial banks.
D)   mutual funds companies.E) B) and C)
F) B) and D)

Question 6

Checkable deposits held in saving and loan institutions,mutual savings banks,and credit unions are part of the M1 definition of the money supply.

Accepted Answer

A) True 
 B)False

Question 7

Between September 2007 and September 2009:

Accepted Answer

A)   the Fed oversaw the conversion of all thrifts into commercial banks.
B)   the FDIC closed more than 200 U.S.banks and shifted their deposits to other banks.
C)   the Fed increased capital requirements for larger financial institutions in an effort to reduce moral hazard.
D)   the FDIC paid out more than $500 billion to depositors who held money in failed banks.E) None of the above
F) B) and C)

Question 8

In defining money as M1,economists exclude time deposits because:

Accepted Answer

A)   the intrinsic value of time deposits is nil.
B)   the purchasing power of time deposits is much less stable than that of checkable deposits and currency.
C)   they are not directly or immediately a medium of exchange.
D)   they are not recognized by the federal government as legal tender.E) None of the above
F) All of the above

Question 9

The programs enacted to bail out the financial system from crisis in 2007 and 2008 helped alleviate the moral hazard problem in the financial industry.

Accepted Answer

A) True 
 B)False

Question 10

Money functions as:

Accepted Answer

A)   a store of value.
B)   a unit of account.
C)   a medium of exchange.
D)   all of these.E) B) and D)
F) B) and C)

Question 11

Subprime mortgage loans are so named because the rates charged are below the prime interest rate.

Accepted Answer

A) True 
 B)False

Question 12

Laws passed in the late 1990s restricted the activities of financial firms to narrowly defined services they could provide,prompting the financial crisis of 2007 and 2008.

Accepted Answer

A) True 
 B)False

Question 13

Assuming no other changes,if checkable deposits decrease by $40 billion and balances in money market mutual funds increase by $40 billion,the:

Accepted Answer

A)   M1 money supply will decline and the M2 money supply will remain unchanged.
B)   M1 and M2 money supplies will not change.
C)   M1 money supply will increase and the M2 money supply will remain unchanged.
D)   M1 and M2 money supplies will both decline.E) B) and D)
F) All of the above

Question 14

Answer the question on the basis of the following list of assets: 1.Large-denominated ($100,000 and over) time deposits
2) Noncheckable savings deposits
3) Currency (coins and paper money) in circulation
4) Small-denominated (under $100,000) time deposits
5) Stock certificates
6) Checkable deposits
7) Money market deposit accounts
8) Money market mutual fund balances held by individuals
9) Money market mutual fund balances held by businesses
10) Currency held in bank vaults
Refer to the given list.The M2 definition of money comprises:

Accepted Answer

A)   Items 2,3,4,6,7,8,and 10.
B)   Items 3,4,5,and 6.
C)   Items 2,3,4,6,7,and 8.
D)   All of the items listed.E) A) and D)
F) B) and D)

Exam 33: Money, Banking, and Financial Institutions

The programs enacted to bail out the financial system from crisis in 2007 and 2008 helped alleviate the moral hazard problem in the financial industry.

Correct Answer
verified

Money functions as:

Correct Answer
verified

In defining money as M1,economists exclude time deposits because:

Correct Answer
verified

Laws passed in the late 1990s restricted the activities of financial firms to narrowly defined services they could provide,prompting the financial crisis of 2007 and 2008.

Correct Answer
verified

Which of the following programs provides loans of U.S.securities to primary dealers for one-month terms,in an effort to enhance liquidity in U.S.securities markets?

Correct Answer
verified

Firms whose central business is providing individual account shares of a group of stocks,bonds,or both are known as:

Correct Answer
verified

"Near-monies" are included in:

Correct Answer
verified

Assuming no other changes,if checkable deposits decrease by $40 billion and balances in money market mutual funds increase by $40 billion,the:

Correct Answer
verified

Correct Answer
verified

Checkable deposits held in saving and loan institutions,mutual savings banks,and credit unions are part of the M1 definition of the money supply.

Correct Answer
verified

Subprime mortgage loans are so named because the rates charged are below the prime interest rate.

Correct Answer
verified

Between September 2007 and September 2009:

Correct Answer
verified

What does it mean when economists say that home buyers are "underwater" on their mortgages?

Correct Answer
verified

The M2 money supply is larger than the M1 money supply.

Correct Answer
verified

Exam 33: Money, Banking, and Financial Institutions

The programs enacted to bail out the financial system from crisis in 2007 and 2008 helped alleviate the moral hazard problem in the financial industry.

Correct AnswerverifiedShow Answer

Money functions as:

Correct AnswerverifiedShow Answer

In defining money as M1,economists exclude time deposits because:

Correct AnswerverifiedShow Answer

Laws passed in the late 1990s restricted the activities of financial firms to narrowly defined services they could provide,prompting the financial crisis of 2007 and 2008.

Correct AnswerverifiedShow Answer

Which of the following programs provides loans of U.S.securities to primary dealers for one-month terms,in an effort to enhance liquidity in U.S.securities markets?

Correct AnswerverifiedShow Answer

Firms whose central business is providing individual account shares of a group of stocks,bonds,or both are known as:

Correct AnswerverifiedShow Answer

"Near-monies" are included in:

Correct AnswerverifiedShow Answer

Assuming no other changes,if checkable deposits decrease by $40 billion and balances in money market mutual funds increase by $40 billion,the:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Checkable deposits held in saving and loan institutions,mutual savings banks,and credit unions are part of the M1 definition of the money supply.

Correct AnswerverifiedShow Answer

Subprime mortgage loans are so named because the rates charged are below the prime interest rate.

Correct AnswerverifiedShow Answer

Between September 2007 and September 2009:

Correct AnswerverifiedShow Answer

What does it mean when economists say that home buyers are "underwater" on their mortgages?

Correct AnswerverifiedShow Answer

The M2 money supply is larger than the M1 money supply.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified