Question 1

If an individual moves money from a money market deposit account to currency,

Accepted Answer

A) M1 increases and M2 stays the same. 
B) M1 stays the same and M2 increases. 
C) M1 stays the same and M2 stays the same. 
D) M1 increases and M2 decreases. 
A) M1 increases and M2 stays the same. 
B) M1 stays the same and M2 increases. 
C) M1 stays the same and M2 stays the same. 
D) M1 increases and M2 decreases. A

Question 2

If the price level doubles,the value of money

Accepted Answer

A) doubles. 
B) more than doubles,due to scale economies. 
C) rises but does not double,due to diminishing returns. 
D) falls by 50 percent. 
A) doubles. 
B) more than doubles,due to scale economies. 
C) rises but does not double,due to diminishing returns. 
D) falls by 50 percent. D

Question 3

Of the following,the largest is

Accepted Answer

A) money market deposit accounts. 
B) demand deposits. 
C) M1. 
D) M2. 
A) money market deposit accounts. 
B) demand deposits. 
C) M1. 
D) M2. D

Question 4

If there are four goods in a barter economy,then one needs to know ________ prices in order to exchange one good for another.

Accepted Answer

A) 8 
B) 6 
C) 5 
D) 4 
A) 8 
B) 6 
C) 5 
D) 4

Question 5

In explaining the evolution of money

Accepted Answer

A) government regulation is the most important factor. 
B) commodity money,because it is valued more highly,tends to drive out paper money. 
C) new forms of money evolve to lower transaction costs. 
D) paper money is always backed by gold and therefore more desirable than checks. 
A) government regulation is the most important factor. 
B) commodity money,because it is valued more highly,tends to drive out paper money. 
C) new forms of money evolve to lower transaction costs. 
D) paper money is always backed by gold and therefore more desirable than checks.

Question 6

To an economist,________ is anything that is generally accepted in payment for goods and services or in the repayment of debt.

Accepted Answer

A) wealth 
B) income 
C) money 
D) credit 
A) wealth 
B) income 
C) money 
D) credit

Question 7

Although ________ currency is lighter than coins made of metals,a disadvantage arising from modern technology is the ease of ________.

Accepted Answer

A) paper; transport 
B) commodity; counterfeiting 
C) fiat; transport 
D) paper; counterfeiting 
A) paper; transport 
B) commodity; counterfeiting 
C) fiat; transport 
D) paper; counterfeiting

Question 8

Which of the following statements uses the economists' definition of money?

Accepted Answer

A) I plan to earn a lot of money over the summer. 
B) Betsy is rich-she has a lot of money. 
C) I hope that I have enough money to buy my lunch today. 
D) The job with New Company gave me the opportunity to earn more money. 
A) I plan to earn a lot of money over the summer. 
B) Betsy is rich-she has a lot of money. 
C) I hope that I have enough money to buy my lunch today. 
D) The job with New Company gave me the opportunity to earn more money.

Question 9

Which of the following statements accurately describes the two measures of the money supply?

Accepted Answer

A) The two measures do not move together,so they cannot be used interchangeably by policymakers. 
B) The two measures' movements closely parallel each other,even on a month-to-month basis. 
C) Short-run movements in the money supply are extremely reliable. 
D) M2 is the narrowest measure the Fed reports. 
A) The two measures do not move together,so they cannot be used interchangeably by policymakers. 
B) The two measures' movements closely parallel each other,even on a month-to-month basis. 
C) Short-run movements in the money supply are extremely reliable. 
D) M2 is the narrowest measure the Fed reports.

Question 10

The M2 monetary aggregate contains everything that is in M1 plus other assets that are highly ________ (can be turned into cash quickly at very little cost).

Accepted Answer

A) liquid 
B) stable 
C) consistent 
D) efficient 
A) liquid 
B) stable 
C) consistent 
D) efficient

Question 11

Why are most of the U.S.dollars held outside of the United States?

Accepted Answer

Concern about high inflation e

Question 12

The difference between money and income is that

Accepted Answer

A) money is a flow and income is a stock. 
B) money is a stock and income is a flow. 
C) there is no difference-money and income are both stocks. 
D) there is no difference-money and income are both flows. 
A) money is a flow and income is a stock. 
B) money is a stock and income is a flow. 
C) there is no difference-money and income are both stocks. 
D) there is no difference-money and income are both flows.

Question 13

Even economists have no single,precise definition of money because

Accepted Answer

A) money supply statistics are a state secret. 
B) the Federal Reserve does not employ or report different measures of the money supply. 
C) the "moneyness" or liquidity of an asset is a matter of degree. 
D) economists find disagreement interesting and refuse to agree for ideological reasons. 
A) money supply statistics are a state secret. 
B) the Federal Reserve does not employ or report different measures of the money supply. 
C) the "moneyness" or liquidity of an asset is a matter of degree. 
D) economists find disagreement interesting and refuse to agree for ideological reasons.

Question 14

Currency includes

Accepted Answer

A) paper money and coins. 
B) paper money,coins,and checks. 
C) paper money and checks. 
D) paper money,coins,checks,and savings deposits. 
A) paper money and coins. 
B) paper money,coins,and checks. 
C) paper money and checks. 
D) paper money,coins,checks,and savings deposits.

Question 15

For a commodity to function effectively as money it must be

Accepted Answer

A) easily standardized,making it easy to ascertain its value. 
B) difficult to make change. 
C) deteriorate quickly so that its supply does not become too large. 
D) hard to carry around. 
A) easily standardized,making it easy to ascertain its value. 
B) difficult to make change. 
C) deteriorate quickly so that its supply does not become too large. 
D) hard to carry around.

Question 16

Recent financial innovation makes the Federal Reserve's job of conducting monetary policy

Accepted Answer

A) easier,since the Fed now knows what to consider money. 
B) more difficult,since the Fed now knows what to consider money. 
C) easier,since the Fed no longer knows what to consider money. 
D) more difficult,since the Fed no longer knows what to consider money. 
A) easier,since the Fed now knows what to consider money. 
B) more difficult,since the Fed now knows what to consider money. 
C) easier,since the Fed no longer knows what to consider money. 
D) more difficult,since the Fed no longer knows what to consider money.

Question 17

As the payments system evolves from barter to a monetary system,

Accepted Answer

A) commodity money is likely to precede the use of paper currency. 
B) transaction costs increase. 
C) the number of prices that need to be calculated increase rather dramatically. 
D) specialization decreases. 
A) commodity money is likely to precede the use of paper currency. 
B) transaction costs increase. 
C) the number of prices that need to be calculated increase rather dramatically. 
D) specialization decreases.

Question 18

Which of the following is included in both M1 and M2?

Accepted Answer

A) Currency 
B) Savings deposits 
C) Small-denomination time deposits 
D) Money market deposit accounts 
A) Currency 
B) Savings deposits 
C) Small-denomination time deposits 
D) Money market deposit accounts

Question 19

A disadvantage of ________made from precious metals is that it is very heavy and hard to transport from one place to another.

Accepted Answer

A) commodity money 
B) fiat money 
C) electronic money 
D) paper money 
A) commodity money 
B) fiat money 
C) electronic money 
D) paper money

Question 20

Money is

Accepted Answer

A) anything that is generally accepted in payment for goods and services or in the repayment of debt. 
B) a flow of earnings per unit of time. 
C) the total collection of pieces of property that are a store of value. 
D) always based on a precious metal like gold or silver. 
A) anything that is generally accepted in payment for goods and services or in the repayment of debt. 
B) a flow of earnings per unit of time. 
C) the total collection of pieces of property that are a store of value. 
D) always based on a precious metal like gold or silver.

Exam 3: What Is Money

If an individual moves money from a money market deposit account to currency,

If the price level doubles,the value of money

Of the following,the largest is

If there are four goods in a barter economy,then one needs to know ________ prices in order to exchange one good for another.

In explaining the evolution of money

To an economist,________ is anything that is generally accepted in payment for goods and services or in the repayment of debt.

Although ________ currency is lighter than coins made of metals,a disadvantage arising from modern technology is the ease of ________.

Which of the following statements uses the economists' definition of money?

Which of the following statements accurately describes the two measures of the money supply?

The M2 monetary aggregate contains everything that is in M1 plus other assets that are highly ________ (can be turned into cash quickly at very little cost).

Why are most of the U.S.dollars held outside of the United States?

The difference between money and income is that

Even economists have no single,precise definition of money because

Currency includes

For a commodity to function effectively as money it must be

Recent financial innovation makes the Federal Reserve's job of conducting monetary policy

As the payments system evolves from barter to a monetary system,

Which of the following is included in both M1 and M2?

A disadvantage of ________made from precious metals is that it is very heavy and hard to transport from one place to another.

Money is

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

Understanding Interest Rates

The Behavior of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Financial Crises

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Central Banks and the Federal Reserve System

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory,inflation and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

The ISLM Model

Filters

Although currency is lighter than coins made of metals,a disadvantage arising from modern technology is the ease of .