Question 1

If an individual moves money from a small-denomination time deposit to a demand deposit account,

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.

Question 2

When compared to exchange systems that rely on money,disadvantages of the barter system include:

Accepted Answer

A) the requirement of a double coincidence of wants. 
B) lowering the cost of exchanging goods over time. 
C) lowering the cost of exchange to those who would specialize. 
D) encouraging specialization and the division of labor. 
A) the requirement of a double coincidence of wants. 
B) lowering the cost of exchanging goods over time. 
C) lowering the cost of exchange to those who would specialize. 
D) encouraging specialization and the division of labor.

Question 3

Which of the following is not a form of e-money?

Accepted Answer

A) a debit card 
B) a credit card 
C) a stored-value card 
D) a smart card 
A) a debit card 
B) a credit card 
C) a stored-value card 
D) a smart card

Question 4

Compared to an electronic payments system,a payments system based on checks has the major drawback that

Accepted Answer

A) checks are less costly to process. 
B) checks take longer to process,meaning that it may take several days before the depositor can get her cash. 
C) fraud may be more difficult to commit when paper receipts are eliminated. 
D) legal liability is more clearly defined. 
A) checks are less costly to process. 
B) checks take longer to process,meaning that it may take several days before the depositor can get her cash. 
C) fraud may be more difficult to commit when paper receipts are eliminated. 
D) legal liability is more clearly defined.

Question 5

The other checkable deposits component of the M1 measure reported by the Federal Reserve includes

Accepted Answer

A) negotiable time deposits. 
B) money market mutual fund shares. 
C) automatic transfer from savings accounts. 
D) money market deposit accounts. 
A) negotiable time deposits. 
B) money market mutual fund shares. 
C) automatic transfer from savings accounts. 
D) money market deposit accounts.

Question 6

Which of the following statements best explains how the use of money in an economy increases economic efficiency?

Accepted Answer

A) Money increases economic efficiency because it is costless to produce. 
B) Money increases economic efficiency because it discourages specialization. 
C) Money increases economic efficiency because it decreases transactions costs. 
D) Money cannot have an effect on economic efficiency. 
A) Money increases economic efficiency because it is costless to produce. 
B) Money increases economic efficiency because it discourages specialization. 
C) Money increases economic efficiency because it decreases transactions costs. 
D) Money cannot have an effect on economic efficiency.

Question 7

Which of the following is a true statement?

Accepted Answer

A) Money and income are flow variables. 
B) Money is a flow variable. 
C) Income is a flow variable. 
D) Money and income are stock variables. 
A) Money and income are flow variables. 
B) Money is a flow variable. 
C) Income is a flow variable. 
D) Money and income are stock variables.

Question 8

Because it is a unit of account,money

Accepted Answer

A) increases transaction costs. 
B) reduces the number of prices that need to be calculated. 
C) does not earn interest. 
D) discourages specialization. 
A) increases transaction costs. 
B) reduces the number of prices that need to be calculated. 
C) does not earn interest. 
D) discourages specialization.

Question 9

A person's house is part of her

Accepted Answer

A) money. 
B) income. 
C) liabilities. 
D) wealth. 
A) money. 
B) income. 
C) liabilities. 
D) wealth.

Question 10

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

Accepted Answer

A) 20 
B) 25 
C) 30 
D) 45 
A) 20 
B) 25 
C) 30 
D) 45

Question 11

If merchants in the country Zed choose to close their doors,preferring to be stuck with rotting merchandise rather than worthless currency,then one can conclude that Zed is experiencing a

Accepted Answer

A) superdeflation. 
B) hyperdeflation. 
C) disinflation. 
D) hyperinflation. 
A) superdeflation. 
B) hyperdeflation. 
C) disinflation. 
D) hyperinflation.

Question 12

Which of the following is not included in the monetary aggregate M2?

Accepted Answer

A) Currency 
B) Savings bonds 
C) Traveler's checks 
D) Checking deposits 
A) Currency 
B) Savings bonds 
C) Traveler's checks 
D) Checking deposits

Question 13

When we say that money is a stock variable,we mean that

Accepted Answer

A) the quantity of money is measured at a given point in time. 
B) we must attach a time period to the measure. 
C) it is sold in the equity market. 
D) money never loses purchasing power. 
A) the quantity of money is measured at a given point in time. 
B) we must attach a time period to the measure. 
C) it is sold in the equity market. 
D) money never loses purchasing power.

Question 14

Compared to an economy that uses a medium of exchange,in a barter economy

Accepted Answer

A) transaction costs are higher. 
B) transaction costs are lower. 
C) liquidity costs are higher. 
D) liquidity costs are lower. 
A) transaction costs are higher. 
B) transaction costs are lower. 
C) liquidity costs are higher. 
D) liquidity costs are lower.

Question 15

All but the most primitive societies use money as a medium of exchange,implying that

Accepted Answer

A) the use of money is economically efficient. 
B) barter exchange is economically efficient. 
C) barter exchange cannot work outside the family. 
D) inflation is not a concern. 
A) the use of money is economically efficient. 
B) barter exchange is economically efficient. 
C) barter exchange cannot work outside the family. 
D) inflation is not a concern.

Question 16

Whatever a society uses as money,the distinguishing characteristic is that it must

Accepted Answer

A) be completely inflation proof. 
B) be generally acceptable as payment for goods and services or in the repayment of debt. 
C) contain gold. 
D) be produced by the government. 
A) be completely inflation proof. 
B) be generally acceptable as payment for goods and services or in the repayment of debt. 
C) contain gold. 
D) be produced by the government.

Question 17

The evolution of the payments system from barter to precious metals,then to fiat money,then to checks can best be understood as a consequence of

Accepted Answer

A) government regulations designed to improve the efficiency of the payments system. 
B) government regulations designed to promote the safety of the payments system. 
C) innovations that reduced the costs of exchanging goods and services. 
D) competition among firms to make it easier for customers to purchase their products. 
A) government regulations designed to improve the efficiency of the payments system. 
B) government regulations designed to promote the safety of the payments system. 
C) innovations that reduced the costs of exchanging goods and services. 
D) competition among firms to make it easier for customers to purchase their products.

Question 18

A fall in the level of prices

Accepted Answer

A) does not affect the value of money. 
B) has an uncertain effect on the value of money. 
C) increases the value of money. 
D) reduces the value of money. 
A) does not affect the value of money. 
B) has an uncertain effect on the value of money. 
C) increases the value of money. 
D) reduces the value of money.

Question 19

Explain how cigarettes could be called "money" in prisoner-of-war camps of World War II.

Accepted Answer

The cigarettes performed the three funct

Question 20

Because inflation in Germany after World War I sometimes exceeded 1,000 % per month,one can conclude that the German economy suffered from

Accepted Answer

A) deflation. 
B) disinflation. 
C) hyperinflation. 
D) superdeflation. 
A) deflation. 
B) disinflation. 
C) hyperinflation. 
D) superdeflation.

Exam 3: What Is Money

If an individual moves money from a small-denomination time deposit to a demand deposit account,

When compared to exchange systems that rely on money,disadvantages of the barter system include:

Which of the following is not a form of e-money?

Compared to an electronic payments system,a payments system based on checks has the major drawback that

The other checkable deposits component of the M1 measure reported by the Federal Reserve includes

Which of the following statements best explains how the use of money in an economy increases economic efficiency?

Which of the following is a true statement?

Because it is a unit of account,money

A person's house is part of her

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

If merchants in the country Zed choose to close their doors,preferring to be stuck with rotting merchandise rather than worthless currency,then one can conclude that Zed is experiencing a

Which of the following is not included in the monetary aggregate M2?

When we say that money is a stock variable,we mean that

Compared to an economy that uses a medium of exchange,in a barter economy

All but the most primitive societies use money as a medium of exchange,implying that

Whatever a society uses as money,the distinguishing characteristic is that it must

The evolution of the payments system from barter to precious metals,then to fiat money,then to checks can best be understood as a consequence of

A fall in the level of prices

Explain how cigarettes could be called "money" in prisoner-of-war camps of World War II.

Because inflation in Germany after World War I sometimes exceeded 1,000 % per month,one can conclude that the German economy suffered from

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

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