What backs the U.S. dollar? Include the distinction between commodity money and fiat money in your answer. What are the components of the most narrowly defined money supply in the United States? Distinguish between M1 and M2. What are near monies?

What is the major purpose of the Federal Reserve System? What is the major responsibility of the Board of Governors and the Federal Open Market Committee? Should the Fed be independent or a government agency subordinate to Congress and the president?

The easier it is to convert an asset directly into goods and services without loss, the a. less secure it is.b. more secure it is.c. more liquid it is.d. less liquid it is.

M1 refers to a. the most narrowly defined money supply.b. currency held by the public plus checking account balances.c. the smallest dollar amount of the money supply definitions.d. All of the answers above are correct.

The M1 definition of the money supply consists of a. coins and currency in circulation.b. coins and currency in circulation, and check-able deposits.c. Federal Reserve notes, gold certificates, and checkable deposits.d. Federal Reserve notes and bank loans.

Which of the following items is not included when computing M1? a. Coins in circulation.b. Currency in circulation.c. Savings accounts.d. Checking account entries.

If the Fed decides to engage in an open market operation to increase the money supply, what will it do? a. Sell Treasury bonds, bills, or notes on the bond market.b. Buy Treasury bonds, bills, or notes on the bond market.c. Increase the required reserve ratio.d. Increase the fed funds rate.

__________ plus__________ plus__________ equals. a. Total deposits, loans, required reserves, excess reserves.b. Loans, required reserves, excess reserves, total deposits.c. Required reserves, total deposits, excess reserves, loans.d. Excess reserves, loans, total deposits, required reserves.

If a bank has total deposits of $100,000 with$10,000 set aside to meet reserve requirements of the Fed, its required reserve ratio is a. $10,000.b. 10 percent.c. 0.1 percent.d. 1 percent.

Assume a simplified banking system in which all banks are subject to a uniform required reserve ratio of 30 percent and checkable deposits are the only form of money. A bank that receives a new deposit of $10,000 is able to extend new loans up to a maximum of a. $3,000.b. $7,000.c. $10,000.d. $30,000.