Question 1

Which of the following is a function of money?

Accepted Answer

A) a means of reducing transactions costs 
B) tool for barter 
C) a medium of exchange 
D) a measure of liquidity 
E) a means of pooling risk 
A) a means of reducing transactions costs 
B) tool for barter 
C) a medium of exchange 
D) a measure of liquidity 
E) a means of pooling risk

Question 2

In the United Kingdom, the currency drain ratio is 38 percent of deposits and the reserve ratio is 2 percent of deposits.The U.K.money multiplier is

Accepted Answer

A) 2.50. 
B) 3.61. 
C) 3.45. 
D) 0.38. 
E) 2.55. 
A) 2.50. 
B) 3.61. 
C) 3.45. 
D) 0.38. 
E) 2.55.

Question 3

When the nominal interest rate rises, the opportunity cost of holding money

Accepted Answer

A) falls, and people hold more money. 
B) rises, and people hold less money. 
C) falls, and people hold less money. 
D) rises, and people hold more money. 
E) does not change. 
A) falls, and people hold more money. 
B) rises, and people hold less money. 
C) falls, and people hold less money. 
D) rises, and people hold more money. 
E) does not change.

Question 4

The amount of real money people want to hold will increase if either the amount they are spending increases or the

Accepted Answer

A) price level increases. 
B) price level decreases. 
C) interest rate decreases. 
D) interest rate increases. 
E) price of bond falls. 
A) price level increases. 
B) price level decreases. 
C) interest rate decreases. 
D) interest rate increases. 
E) price of bond falls.

Question 5

A bank can create money by

Accepted Answer

A) converting reserves into securities. 
B) lending its excess reserves. 
C) selling some of its securities. 
D) increasing its reserves. 
E) printing more cheques. 
A) converting reserves into securities. 
B) lending its excess reserves. 
C) selling some of its securities. 
D) increasing its reserves. 
E) printing more cheques.

Question 6

Which one of the following is not a store of value?

Accepted Answer

A) a credit card 
B) a fixed term deposit 
C) a non- personal chequable deposit 
D) a personal chequable deposit 
E) a non- chequable deposit 
A) a credit card 
B) a fixed term deposit 
C) a non- personal chequable deposit 
D) a personal chequable deposit 
E) a non- chequable deposit

Question 7

Without money to act as a medium of exchange,

Accepted Answer

A) all exchanges that take place under a monetary system would still take place. 
B) the standard of living in the economy would increase. 
C) barter exchange would allow for a much simpler yet increased standard of living. 
D) the increased transactions costs associated with trading would prohibit some trades from taking place. 
E) independence in production would lead to a proliferation of new products. 
A) all exchanges that take place under a monetary system would still take place. 
B) the standard of living in the economy would increase. 
C) barter exchange would allow for a much simpler yet increased standard of living. 
D) the increased transactions costs associated with trading would prohibit some trades from taking place. 
E) independence in production would lead to a proliferation of new products.

Question 8

The official definitions of money can include all of the following except

Accepted Answer

A) personal chequable deposits. 
B) fixed term deposits. 
C) non- chequable deposits. 
D) deposits owned by the Government of Canada. 
E) currency outside banks. 
A) personal chequable deposits. 
B) fixed term deposits. 
C) non- chequable deposits. 
D) deposits owned by the Government of Canada. 
E) currency outside banks.

Question 9

The quantity of money that the banking system can create is limited by

Accepted Answer

A) the number of consumers who apply for loans. 
B) the monetary base, desired reserves, and desired currency holdings. 
C) bank managers' decisions. 
D) the credit ratings of the consumers who are applying for loans. 
E) the quantity of bank notes released by the Bank of Canada. 
A) the number of consumers who apply for loans. 
B) the monetary base, desired reserves, and desired currency holdings. 
C) bank managers' decisions. 
D) the credit ratings of the consumers who are applying for loans. 
E) the quantity of bank notes released by the Bank of Canada.

Question 10

Use the figure below to answer the following questions.
   Figure 8.5.2
-Refer to Figure 8.5.2.Which one of the following best shows the effect of a rise in the price level?

Accepted Answer

A) A movement from A to F 
B) A movement from A to C 
C) A movement from A to E 
D) A movement from A to B 
E) None of the above 
A) A movement from A to F 
B) A movement from A to C 
C) A movement from A to E 
D) A movement from A to B 
E) None of the above

Question 11

The higher and more unpredictable the changes in a monetary unit, the

Accepted Answer

A) more confidence people will have in holding it for the future. 
B) more likely it will be used as a store of value. 
C) less likely it will be used as a store of value. 
D) more likely it will be used as a standard of deferred payment. 
E) less likely contracts will be written to counterbalance the uncertainty of its value in the future. 
A) more confidence people will have in holding it for the future. 
B) more likely it will be used as a store of value. 
C) less likely it will be used as a store of value. 
D) more likely it will be used as a standard of deferred payment. 
E) less likely contracts will be written to counterbalance the uncertainty of its value in the future.

Question 12

Barter can only take place if there is

Accepted Answer

A) low transaction costs. 
B) money. 
C) a double coincidence of wants. 
D) no inflation. 
E) a double coincidence of money. 
A) low transaction costs. 
B) money. 
C) a double coincidence of wants. 
D) no inflation. 
E) a double coincidence of money.

Question 13

Suppose that the banking system has excess reserves of $10 million, the desired reserve ratio is 10 percent and the currency drain ratio is 40 percent.By how much will the quantity of money increase?

Accepted Answer

A) $28 million 
B) $50 million 
C) $40 million 
D) $22 million 
E) $12.5 million 
A) $28 million 
B) $50 million 
C) $40 million 
D) $22 million 
E) $12.5 million

Question 14

The money multiplier will decrease if the currency drain ratio

Accepted Answer

A) increases or the desired reserve ratio increases. 
B) decreases or the desired reserve ratio decreases. 
C) decreases and the monetary base increases. 
D) decreases or the desired reserve ratio increases. 
E) increases or the desired reserve ratio decreases. 
A) increases or the desired reserve ratio increases. 
B) decreases or the desired reserve ratio decreases. 
C) decreases and the monetary base increases. 
D) decreases or the desired reserve ratio increases. 
E) increases or the desired reserve ratio decreases.

Question 15

The higher and more unpredictable the changes in the monetary unit, the

Accepted Answer

A) lower the opportunity cost of using it as a standard of deferred payment. 
B) less likely barter exchange will replace it. 
C) lower the opportunity cost of using it as a store of value. 
D) higher the opportunity cost of using it as a store of value. 
E) lower the opportunity cost of using it as a medium of exchange. 
A) lower the opportunity cost of using it as a standard of deferred payment. 
B) less likely barter exchange will replace it. 
C) lower the opportunity cost of using it as a store of value. 
D) higher the opportunity cost of using it as a store of value. 
E) lower the opportunity cost of using it as a medium of exchange.

Question 16

Use the figure below to answer the following questions.
   Figure 8.5.1
-Refer to Figure 8.5.1.Everything else remaining the same, which graph best shows the effect of a decrease in real GDP?

Accepted Answer

A) a 
B) b 
C) c 
D) d 
E) a and c 
A) a 
B) b 
C) c 
D) d 
E) a and c

Question 17

Money's function as a unit of account can best be described as

Accepted Answer

A) a generally accepted medium of exchange. 
B) a commodity that can be exchanged for another commodity. 
C) an entry in an accounting ledger. 
D) an agreed- upon measure for stating the prices of goods and services. 
E) a method of recording transactions. 
A) a generally accepted medium of exchange. 
B) a commodity that can be exchanged for another commodity. 
C) an entry in an accounting ledger. 
D) an agreed- upon measure for stating the prices of goods and services. 
E) a method of recording transactions.

Question 18

Suppose that people decide to hold more money as cash.Which statement best illustrates the impact of this action on the money multiplier? The money multiplier

Accepted Answer

A) decreases because of the increase in the currency drain ratio. 
B) increases because of a decrease in deposits. 
C) increases because of the increase in the currency drain ratio. 
D) decreases because of the decrease in the currency drain ratio. 
E) increases because of the decrease in the currency drain ratio. 
A) decreases because of the increase in the currency drain ratio. 
B) increases because of a decrease in deposits. 
C) increases because of the increase in the currency drain ratio. 
D) decreases because of the decrease in the currency drain ratio. 
E) increases because of the decrease in the currency drain ratio.

Question 19

According to the quantity theory of money, in the long run

Accepted Answer

A) Y/M is constant. 
B) Y/P is constant. 
C) M/V is constant. 
D) V/M is constant. 
E) M/P is constant. 
A) Y/M is constant. 
B) Y/P is constant. 
C) M/V is constant. 
D) V/M is constant. 
E) M/P is constant.

Question 20

The equation of exchange in terms of growth rate is

Accepted Answer

A) Inflation rate = Real GDP growth rate. 
B) Money growth rate - Rate of velocity change = Inflation rate + Real GDP growth rate. 
C) Inflation rate = Money growth rate + Rate of velocity change + Real GDP growth rate. 
D) Money growth rate = Inflation rate - Real GDP growth rate. 
E) Money growth rate + Rate of velocity change = Inflation rate + Real GDP growth rate. 
A) Inflation rate = Real GDP growth rate. 
B) Money growth rate - Rate of velocity change = Inflation rate + Real GDP growth rate. 
C) Inflation rate = Money growth rate + Rate of velocity change + Real GDP growth rate. 
D) Money growth rate = Inflation rate - Real GDP growth rate. 
E) Money growth rate + Rate of velocity change = Inflation rate + Real GDP growth rate.

Which of the following is a function of money?

In the United Kingdom, the currency drain ratio is 38 percent of deposits and the reserve ratio is 2 percent of deposits.The U.K.money multiplier is

When the nominal interest rate rises, the opportunity cost of holding money

The amount of real money people want to hold will increase if either the amount they are spending increases or the

A bank can create money by

Which one of the following is not a store of value?

Without money to act as a medium of exchange,

The official definitions of money can include all of the following except

The quantity of money that the banking system can create is limited by

Use the figure below to answer the following questions. Figure 8.5.2 -Refer to Figure 8.5.2.Which one of the following best shows the effect of a rise in the price level?

The higher and more unpredictable the changes in a monetary unit, the

Barter can only take place if there is

Suppose that the banking system has excess reserves of $10 million, the desired reserve ratio is 10 percent and the currency drain ratio is 40 percent.By how much will the quantity of money increase?

The money multiplier will decrease if the currency drain ratio

The higher and more unpredictable the changes in the monetary unit, the

Use the figure below to answer the following questions. Figure 8.5.1 -Refer to Figure 8.5.1.Everything else remaining the same, which graph best shows the effect of a decrease in real GDP?

Money's function as a unit of account can best be described as

Suppose that people decide to hold more money as cash.Which statement best illustrates the impact of this action on the money multiplier? The money multiplier

According to the quantity theory of money, in the long run

The equation of exchange in terms of growth rate is

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 8: Money, the Price Level, and Inflation

Which of the following is a function of money?

In the United Kingdom, the currency drain ratio is 38 percent of deposits and the reserve ratio is 2 percent of deposits.The U.K.money multiplier is

When the nominal interest rate rises, the opportunity cost of holding money

The amount of real money people want to hold will increase if either the amount they are spending increases or the

A bank can create money by

Which one of the following is not a store of value?

Without money to act as a medium of exchange,

The official definitions of money can include all of the following except

The quantity of money that the banking system can create is limited by

Use the figure below to answer the following questions. Figure 8.5.2 -Refer to Figure 8.5.2.Which one of the following best shows the effect of a rise in the price level?

The higher and more unpredictable the changes in a monetary unit, the

Barter can only take place if there is

Suppose that the banking system has excess reserves of $10 million, the desired reserve ratio is 10 percent and the currency drain ratio is 40 percent.By how much will the quantity of money increase?

The money multiplier will decrease if the currency drain ratio

The higher and more unpredictable the changes in the monetary unit, the

Use the figure below to answer the following questions. Figure 8.5.1 -Refer to Figure 8.5.1.Everything else remaining the same, which graph best shows the effect of a decrease in real GDP?

Money's function as a unit of account can best be described as

Suppose that people decide to hold more money as cash.Which statement best illustrates the impact of this action on the money multiplier? The money multiplier

According to the quantity theory of money, in the long run

The equation of exchange in terms of growth rate is

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters