1.  If you write a check on a bank to purchase a used Honda Civic, you are using money primarily as 
a medium of exchange.
a store of value.
a unit of account.
an economic investment.

2.  Currency held in the vault of First National Bank is 
counted as part of M1.
counted as part of M2, but not M1.
only counted as part of M1 if it was deposited into a checking account.
not counted as part of the money supply.

3.  Answer the question on the basis of the following list of assets:

1. Large-denominated ($100,000 and more) time deposits
2. Noncheckable savings deposits
3. Currency (coins and paper money) in circulation
4. Small-denominated (less than $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 above list. The M2 definition of money comprises

items 2, 3, 4, 6, 7, 8, and 10.
items 3, 4, 5, and 6.
items 2, 3, 4, 6, 7, and 8.
all of the items listed.

4.  Assume Company X deposits $100,000 in cash in Commercial Bank A. If no excess reserves exist at the time this deposit is made and the reserve ratio is 20 percent, Bank A, by itself, can initially increase the money supply by a maximum of 
$50,000.
$180,000.
$80,000.
$500,000.

5.  The federal funds market is the market in which 
banks borrow from the Federal Reserve Banks.
U.S. securities are bought and sold.
banks borrow reserves from one another on an overnight basis.
Federal Reserve Banks borrow from one another.

6.  When a bank loan is repaid, the supply of money 
is constant, but its composition will have changed.
is decreased.
is increased.
may either increase or decrease.

7.  The asset demand for money is most closely related to money functioning as a 
unit of account.
medium of exchange.
store of value.
measure of value.

8.  The equilibrium rate of interest in the market for money is determined by the intersection of the 
supply of money curve and the asset demand for money curve.
supply of money curve and the transactions demand for money curve.
supply of money curve and the total demand for money curve.
investment demand curve and total demand for money curve.

9.  In the United States, monetary policy is the responsibility of the 
U.S. Treasury.
Department of Commerce.
Board of Governors of the Federal Reserve System.
U.S. Congress.

10.  A restrictive monetary policy is designed to shift the: 
aggregate demand curve rightward.
aggregate demand curve leftward.
aggregate supply curve rightward.
aggregate supply curve leftward.

11.  What are the two significant characteristics of the fractional reserve banking system? (Points : 5)

12.  Describe what changes in the Fed's major policy tools lead to [a] expansionary and [b] restrictive or contractionary monetary policies.