ECON 3110 - Exam #2 Fall 2026

The primary responsibility of all central banks is monetary policy.

True or False

True

Following the Great Depression, the power of the Fed shifted to the

a. New York Federal Reserve Bank.

b. Federal Open Market Committee.

c. board of governors of the Federal Reserve.

d. secretary of the treasury.

b. Federal Open Market Committee.

The position of chair of the Federal Reserve is filled in what way? 

a. The chair of the Fed is elected by a vote of the members of Congress.

b. The chair of the Fed is elected by a congressional committee of economic experts.

c. The chair of the Fed is appointed by the president of the United States and confirmed by the House of Representatives and the Senate.

d. The chair of the Fed is appointed by the president of the United States and confirmed by the US Senate.

d. The chair of the Fed is appointed by the president of the United States and confirmed by the US Senate.

What would be expected in a market for used cars, assuming asymmetric information and buyers who have little way to determine good used cars from poor used cars?

a. The average price for used cars would go down and drive the clunker used cars out of the market.

b. The average price for used cars would go down and drive the better used cars out of the market.

c. There would be little to no impact on the market for used cars.

d. The asymmetric information would lead to a fair and efficient market.

b. The average price for used cars would go down and drive the better used cars out of the market.

A one-time deposit in a bank will result in

a. no expansion in the money supply.

b. an expansion in the money supply that is smaller than the size of the one-time deposit.

c. an expansion in the money supply that is equal in size to the one-time deposit.

d. an expansion in the money supply that is larger than the size of the one-time deposit.

d. an expansion in the money supply that is larger than the size of the one-time deposit.

Which of the following qualifies as a liability to a bank?

a. A business loan

b. A mortgage

c. Demand deposits

d. A Treasury bond

c. Demand deposits

Which of these is currently true for the chair of the Federal Reserve? 

a. The chair position is a term of just two years and is nonrenewable. 

b. The chair position requires a background in economics or finance; the four-year term is renewable. 

c. The chair position requires a background in banking or finance; the two-year term is nonrenewable. 

d. The chair position has no formal qualifications; the four-year term is renewable.

d. The chair position has no formal qualifications; the four-year term is renewable.

Which of these describes an example of asymmetric information in the bond market? 

a. Bond issuers have longer-term goals than bond buyers.

b. Bond issuers have better insight about their future profitability than bond buyers.

c. Bond issuers and bond buyers have different experiences in the bond market.

d. Bond issuers are more conservative about the future than bond buyers.

b. Bond issuers have better insight about their future profitability than bond buyers.

Deductibles are one way insurance companies protect themselves from careless drivers.

True or False

True

The board of governors of the Federal Reserve has three primary responsibilities, which are

a. oversight of the printing of money, commercial bank regulation, and the operations of the Fed.

b. the operations of the Fed, commercial bank regulation, and monetary policy.

c. monetary policy, fiscal policy, and the operations of the Fed.

d. maintenance of the gold standard, the operations of the Fed, and monetary policy.

b. the operations of the Fed, commercial bank regulation, and monetary policy.