Question 1

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

Question 2

________ is the narrowest monetary aggregate that the Bank of Canada reports.

Accepted Answer

A)  M0 
B)  M1+ 
C)  M2 
D)  M3 
A)  M0 
B)  M1+ 
C)  M2 
D)  M3

Question 3

The payments system is ________.

Accepted Answer

A)  the method of conducting transactions in the economy 
B)  used by union officials to set salary caps 
C)  an illegal method of rewarding contracts 
D)  used by your employer to determine salary increases 
A)  the method of conducting transactions in the economy 
B)  used by union officials to set salary caps 
C)  an illegal method of rewarding contracts 
D)  used by your employer to determine salary increases

Question 4

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 5

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 6

What are electronic payments? how do they reduce transaction costs? by how much?

Accepted Answer

In the past when paying bills you had to

Question 7

A hyperinflation is ________.

Accepted Answer

A)  a period of extreme inflation generally greater than 50 percent per month 
B)  a period of anxiety caused by rising prices 
C)  an increase in output caused by higher prices 
D)  impossible today because of tighter regulations 
A)  a period of extreme inflation generally greater than 50 percent per month 
B)  a period of anxiety caused by rising prices 
C)  an increase in output caused by higher prices 
D)  impossible today because of tighter regulations

Question 8

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 9

Compared to cheques, paper currency and coins have the major drawbacks that they ________.

Accepted Answer

A)  are easily stolen 
B)  are hard to counterfeit 
C)  are not the most liquid assets 
D)  must be backed by gold 
A)  are easily stolen 
B)  are hard to counterfeit 
C)  are not the most liquid assets 
D)  must be backed by gold

Question 10

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 11

If an individual moves money from currency to a personal deposit account, ________.

Accepted Answer

A)  M1+ decreases 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+ stays the same 
A)  M1+ decreases 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+ stays the same

Question 12

During hyperinflations, ________.

Accepted Answer

A)  the value of money rises rapidly 
B)  money no longer functions as a good store of value and people may resort to barter transactions on a much larger scale 
C)  middle-class savers benefit as prices rise 
D)  money's value remains fixed to the price level; that is, if prices double so does the value of money 
A)  the value of money rises rapidly 
B)  money no longer functions as a good store of value and people may resort to barter transactions on a much larger scale 
C)  middle-class savers benefit as prices rise 
D)  money's value remains fixed to the price level; that is, if prices double so does the value of money

Question 13

Explain the relationship between currency and the M1+ monetary aggregate. What does the "plus" sign represent?

Accepted Answer

Currency includes paper money and coins

Question 14

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 15

The evolution of the payments system from barter to precious metals, then to fiat money, then to cheques can best be understood as a consequence of the fact that ________.

Accepted Answer

A)  paper is more costly to produce than precious metals 
B)  precious metals were not generally acceptable 
C)  precious metals were difficult to carry and transport 
D)  paper money is less accepted than cheques 
A)  paper is more costly to produce than precious metals 
B)  precious metals were not generally acceptable 
C)  precious metals were difficult to carry and transport 
D)  paper money is less accepted than cheques

Question 16

If an individual moves money from a demand deposit account to a money market mutual fund, ________.

Accepted Answer

A)  M1+ decreases 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+ decreases and M2 decreases 
A)  M1+ decreases 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+ decreases and M2 decreases

Question 17

When economists say that money promotes ________, they mean that money encourages specialization and the division of labour.

Accepted Answer

A)  bargaining 
B)  contracting 
C)  efficiency 
D)  greed 
A)  bargaining 
B)  contracting 
C)  efficiency 
D)  greed

Question 18

The currency component includes paper money and coins held in ________.

Accepted Answer

A)  bank vaults 
B)  ATMs 
C)  the hands of the nonbank public 
D)  the central bank 
A)  bank vaults 
B)  ATMs 
C)  the hands of the nonbank public 
D)  the central bank

Question 19

Currency includes ________.

Accepted Answer

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

Question 20

A disadvantage of ________ is that it can be 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

Exam 3: What Is Money

If the price level doubles, the value of money ________.

________ is the narrowest monetary aggregate that the Bank of Canada reports.

The payments system is ________.

For a commodity to function effectively as money it must be ________.

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

What are electronic payments? how do they reduce transaction costs? by how much?

A hyperinflation is ________.

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

Compared to cheques, paper currency and coins have the major drawbacks that they ________.

Which of the following is a true statement?

If an individual moves money from currency to a personal deposit account, ________.

During hyperinflations, ________.

Explain the relationship between currency and the M1+ monetary aggregate. What does the "plus" sign represent?

A person's house is part of her ________.

The evolution of the payments system from barter to precious metals, then to fiat money, then to cheques can best be understood as a consequence of the fact that ________.

If an individual moves money from a demand deposit account to a money market mutual fund, ________.

When economists say that money promotes ________, they mean that money encourages specialization and the division of labour.

The currency component includes paper money and coins held in ________.

Currency includes ________.

A disadvantage of ________ is that it can be very heavy and hard to transport from one place to another.

Why Study Money, Banking, and Financial Markets

An Overview of the Financial System

The Meaning of Interest Rates

The Behaviour 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

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Financial Crises

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

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

Filters