Question 1

Commodity money

Accepted Answer

A)  has no intrinsic value. 
B)  has intrinsic value. 
C)  is used exclusively in the economies of western Europe and North America. 
D)  is used as reserves to back fiat money. 
A)  has no intrinsic value. 
B)  has intrinsic value. 
C)  is used exclusively in the economies of western Europe and North America. 
D)  is used as reserves to back fiat money. B

Question 2

What are the two main functions of central banks?

Accepted Answer

Most central banks have two main functions; macroeconomic stability is the maintenance of stable growth and prices and the avoidance of excessive and damaging swings in economic activity. The second main function is the maintenance of stability in the financial system. To achieve the first function, central banks have the power to increase or decrease the amount of currency in that economy. The set of actions taken by the central bank in order to affect the money supply is known as monetary policy.

Question 3

Commodity money has value independent of its use as money.

Accepted Answer

A) True 
 B)False  True

Question 4

A central bank is designed to regulate the quantity of money made available in the economy. This is called the

Accepted Answer

A)  money supply. 
B)  gold standard. 
C)  stock assets. 
D)  bonds. 
A)  money supply. 
B)  gold standard. 
C)  stock assets. 
D)  bonds.

Question 5

What is the refinancing rate?

Accepted Answer

The central bank of an economy will set

Question 6

Economists argue that the move from barter to money increased trade and production. How is this possible?

Accepted Answer

The use of money allows people

Question 7

Are credit cards and debit cards money? What is the difference between credit cards and debit cards?

Accepted Answer

Neither credit cards nor debit cards are

Question 8

If a society chooses to use fiat money, it

Accepted Answer

A)  must guarantee the convertibility of its currency into gold. 
B)  give its central bank independence. 
C)  cannot make use of a banking system. 
D)  must have a mechanism for regulating the quantity of money in the economy. 
A)  must guarantee the convertibility of its currency into gold. 
B)  give its central bank independence. 
C)  cannot make use of a banking system. 
D)  must have a mechanism for regulating the quantity of money in the economy.

Question 9

Which of the following statements is NOT true?

Accepted Answer

A)  The purchase of government bonds from the public increases the money supply. 
B)  Monetary policy in the euro area is set by the Governing Council of the European Central Bank. 
C)  When the central bank sells government bonds to the public, the money supply decreases. 
D)  Monetary policy in the UK is set by the Chancellor of the Exchequer in consultation with the Bank of England. 
A)  The purchase of government bonds from the public increases the money supply. 
B)  Monetary policy in the euro area is set by the Governing Council of the European Central Bank. 
C)  When the central bank sells government bonds to the public, the money supply decreases. 
D)  Monetary policy in the UK is set by the Chancellor of the Exchequer in consultation with the Bank of England.

Question 10

What is the name of the policy designed to limit the risks across the financial sector by focusing on improving 'prudential' standards of operation that enhance stability and reduce risk?

Accepted Answer

A)  governance 
B)  compliance 
C)  systemic policy 
D)  macroprudential policy 
A)  governance 
B)  compliance 
C)  systemic policy 
D)  macroprudential policy

Question 11

In 1997, the UK government granted the Bank of England independence in the setting of

Accepted Answer

A)  share prices 
B)  the exchange rate 
C)  the money supply 
D)  interest rates 
A)  share prices 
B)  the exchange rate 
C)  the money supply 
D)  interest rates

Question 12

Discuss the constraints on bank lending.

Accepted Answer

Banks create money by lending, but a num

Question 13

An example of fiat money is

Accepted Answer

A)  paper euros. 
B)  gold. 
C)  silver coins. 
D)  cigarettes. 
A)  paper euros. 
B)  gold. 
C)  silver coins. 
D)  cigarettes.

Question 14

Which of the following would NOT be used by a central bank to influence interest rates in the economy?

Accepted Answer

A)  Selling government bonds 
B)  Buying shares 
C)  Setting reserve requirements 
D)  Changing the refinancing rate 
A)  Selling government bonds 
B)  Buying shares 
C)  Setting reserve requirements 
D)  Changing the refinancing rate

Question 15

Which one of the following statements is NOT correct?

Accepted Answer

A)  A repurchase agreement is the sale of a non-monetary asset together with an agreement to repurchase it at a specified future date. 
B)  The difference between the price at which a commercial bank sells an asset to the central bank and the price at which it agrees to buy it back can be expressed as an annualized percentage of the selling price, and this is called the refinancing rate. 
C)  In the UK the refinancing rate is known as the repo rate. 
D)  If the central bank raises its refinancing rate then the commercial banks will try to increase their lending. 
A)  A repurchase agreement is the sale of a non-monetary asset together with an agreement to repurchase it at a specified future date. 
B)  The difference between the price at which a commercial bank sells an asset to the central bank and the price at which it agrees to buy it back can be expressed as an annualized percentage of the selling price, and this is called the refinancing rate. 
C)  In the UK the refinancing rate is known as the repo rate. 
D)  If the central bank raises its refinancing rate then the commercial banks will try to increase their lending.

Question 16

Wealth held in ______________ is almost as convenient for buying things as wealth held as cash.

Accepted Answer

A)  savings accounts 
B)  stock options 
C)  trading accounts 
D)  current bank accounts 
A)  savings accounts 
B)  stock options 
C)  trading accounts 
D)  current bank accounts

Question 17

Which of the following statements about money is not true?

Accepted Answer

A)  A debit card is not really money because it is only a means of transferring money between accounts. 
B)  All the wealth that people hold, in whatever form, should be considered as money. 
C)  Wealth held in the current account you hold with your bank is almost as convenient for buying things as wealth held in your wallet, so the wealth in current accounts should be included in measures of money. 
D)  In a complex economy it is not easy to draw a clear dividing line between assets that should be considered as money and those that should not. 
A)  A debit card is not really money because it is only a means of transferring money between accounts. 
B)  All the wealth that people hold, in whatever form, should be considered as money. 
C)  Wealth held in the current account you hold with your bank is almost as convenient for buying things as wealth held in your wallet, so the wealth in current accounts should be included in measures of money. 
D)  In a complex economy it is not easy to draw a clear dividing line between assets that should be considered as money and those that should not.

Question 18

If there is 100 per cent reserve banking, the money supply is unaffected by the proportion of its money that the public chooses to hold as currency rather than as bank deposits.

Accepted Answer

A) True 
 B)False

Question 19

What is the difference between the average interest banks earn on assets and the average interest rate paid on liabilities?

Accepted Answer

A)  spread 
B)  loss 
C)  gain 
D)  change 
A)  spread 
B)  loss 
C)  gain 
D)  change

Question 20

What is the difference between money and wealth?

Accepted Answer

Money is defined as the set of

Exam 27: The Monetary System

Commodity money

What are the two main functions of central banks?

Commodity money has value independent of its use as money.

A central bank is designed to regulate the quantity of money made available in the economy. This is called the

What is the refinancing rate?

Economists argue that the move from barter to money increased trade and production. How is this possible?

Are credit cards and debit cards money? What is the difference between credit cards and debit cards?

If a society chooses to use fiat money, it

Which of the following statements is NOT true?

What is the name of the policy designed to limit the risks across the financial sector by focusing on improving 'prudential' standards of operation that enhance stability and reduce risk?

In 1997, the UK government granted the Bank of England independence in the setting of

Discuss the constraints on bank lending.

An example of fiat money is

Which of the following would NOT be used by a central bank to influence interest rates in the economy?

Which one of the following statements is NOT correct?

Wealth held in ______________ is almost as convenient for buying things as wealth held as cash.

Which of the following statements about money is not true?

If there is 100 per cent reserve banking, the money supply is unaffected by the proportion of its money that the public chooses to hold as currency rather than as bank deposits.

What is the difference between the average interest banks earn on assets and the average interest rate paid on liabilities?

What is the difference between money and wealth?

What Is Economics

Thinking Like an Economist

The Market Forces of Supply and Demand

Elasticity and Its Applications

Background to Demand: Consumer Choices

Background to Supply: Firms in Competitive Markets

Consumers, Producers and the Efficiency of Markets

Supply, Demand and Government Policies

The Tax System

Public Goods, Common Resources and Merit Goods

Market Failure and Externalities

Information and Behavioural Economics

Firms Production Decisions

Market Structures I: Monopoly

Market Structures Ii: Monopolistic Competition

Market Structures Iii: Oligopoly

The Economics of Factor Markets

Income Inequality and Poverty

Interdependence and the Gains From Trade

Measuring a Nations Well-Being

Measuring the Cost of Living

Production and Growth

Unemployment

Saving, Investment and the Financial System

The Basic Tools of Finance

Issues in Financial Markets

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Business Cycles

Keynesian Economics and the Is-Lm Analysis

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Supply-Side Policies

Common Currency Areas and European Monetary Union

The Financial Crisis and Sovereign Debt

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