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Quiz 1
The due date for this quiz is Tue 10 Jun 2014 8:59 PM PDT.
This quiz refers to the first two weeks of the class, i.e. Lectures 1-4 and Readings Young and
Minsky. Like all quizzes in this course, you can take it a maximum of three times, and only the
highest score counts. But the maximum score for the second attempt is 80% and the maximum
score for the third attempt is 60%, to encourage you to think before you submit.
In accordance with the Coursera Honor Code, I (amay) certify that the answers here
are my own work.
Question 1
With reference to the weekly accounts published by the Fed here, which of the following items
best captures the concept of liquidity reserves for the central bank of the United States?
Gold + SDR + foreign currency
Gold
Coin
Federal Reserve Notes, or currency
Question 2
What was the major difference between the National Banking System and the Federal Reserve
System?
The FR system allowed for greater elasticity of the money supply
Under the NB system, banks could not hold government bonds as reserves
The FR system instituted reserve requirements to add discipline to the system
Gold standard versus Fiat money
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Question 3
Which of the following statements is NOT an accurate characterization of Minsky's views?
Ponzi financed firms have greater cash outflow commitments than cash inflow
Debt finance is bad for economic growth
A central bank acting as lender of last resort can and should put a floor under financial crisis
Hedge financed firms have greater cash inflow than cash outflow commitments
Question 4
Why did banks suspend convertibility after Salmon P. Chase withdrew the proceeds of his loan in
gold?
Bankers wanted to devalue the dollar in order to profit from foreign exchange holdings
Banks could no longer credibly promise to pay out gold for their other depositors
Bankers wanted to punish the government for tricking them
Bankers wanted the remaining gold for themselves in case they needed to flee the country
after the war
Question 5
Which of the following statements about Civil War finance is NOT true?
Uncertainty about the eventual gold parity of the legal tenders caused the dollar exchange
rate to fall
Money finance of war was a desperation measure, a last resort not a first resort
Banks used the 2% government bonds to back their bank notes because the interest rate
was so low
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The issue of greenbacks as payment for needed war materials caused an overall increase in
aggregate demand, which drove up prices
Question 6
According to Minsky, a Silicon Valley startup company that expects current spending to exceed
current receipts for the next five years is engaged in...
Ponzi finance, if it is using debt to cover its losses
charity work
printing money
standard business practice
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