Question 1

_____________ believe that a change in the money supply first causes a change in interest rate levels, which, in turn, alters the demand for goods and services.

Accepted Answer

A)  Monetarists 
B)  Supply Siders 
C)  Neo Classicalists 
D)  Keynesians 
A)  Monetarists 
B)  Supply Siders 
C)  Neo Classicalists 
D)  Keynesians A

Question 2

Because credit card balances and limits can affect the rate of turnover of money supply and contribute to money supply expansion, these balances and limits are included in the M3 definition of money supply.

Accepted Answer

A) True 
 B)False  False

Question 3

Inflation is

Accepted Answer

A)  an increase in the purchasing power of money 
B)  a decrease in the quality of goods and services 
C)  an increase in the prices of goods and services not offset by increases in the quality of those goods and services 
D)  a measure of the money supply 
A)  an increase in the purchasing power of money 
B)  a decrease in the quality of goods and services 
C)  an increase in the prices of goods and services not offset by increases in the quality of those goods and services 
D)  a measure of the money supply C

Question 4

_____________ believe that a change in the money supply first causes a change in interest rate levels, which, in turn, alters the demand for goods and services.

Accepted Answer

A)  Monetarists 
B)  Keynesians 
C)  Neo Classicalists 
D)  Walraisians 
A)  Monetarists 
B)  Keynesians 
C)  Neo Classicalists 
D)  Walraisians

Question 5

The savings-investment process

Accepted Answer

A)  involves the transfer of business funds to individuals for investing in stocks and bonds 
B) involves the transfer of business funds to individuals for investing in homes 
C)  involves the transfer in individual savings to the Federal Government. 
D)  involves the transfer in individual savings to business firms in exchange for their securities. 
A)  involves the transfer of business funds to individuals for investing in stocks and bonds 
B) involves the transfer of business funds to individuals for investing in homes 
C)  involves the transfer in individual savings to the Federal Government. 
D)  involves the transfer in individual savings to business firms in exchange for their securities.

Question 6

Currently, the international monetary system can best be described as a managed floating exchange rate system.

Accepted Answer

A) True 
 B)False

Question 7

All restrictions on U.S. citizens holding gold in money form were removed by President Obama in 2010.

Accepted Answer

A) True 
 B)False

Question 8

"Continentals" were denominated in dollars and were backed by gold.

Accepted Answer

A) True 
 B)False

Question 9

A major objective of the Fed is to regulate and control the supply of money and the availability of credit.

Accepted Answer

A) True 
 B)False

Question 10

Even though credit card balances and limits are not included in any definition of money supply, these balances and limits can affect the rate of turnover of money supply and contribute to money supply expansion.

Accepted Answer

A) True 
 B)False

Question 11

Most of the financial assets added to the M2 definition of money supply provide their owners with a higher rate of return than do M1 financial assets.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following would not be considered liquid?

Accepted Answer

A)  money in savings accounts 
B)  coins 
C)  currency 
D)  all the above are liquid 
A)  money in savings accounts 
B)  coins 
C)  currency 
D)  all the above are liquid

Question 13

The velocity of money measures the rate of circulation of the money supply and can be expressed by the following equation (note: GDP = gross domestic product and MS = money supply):

Accepted Answer

A)  VM = GDP/MS 
B)  VM = MS/GDP 
C)  VM = MS x GDP 
D)  all of the above 
A)  VM = GDP/MS 
B)  VM = MS/GDP 
C)  VM = MS x GDP 
D)  all of the above

Question 14

If the money supply for an economy is $3 trillion and GDP is $10 trillion, then the velocity of money is:

Accepted Answer

A)  $3.33 trillion 
B)  $13.0 trillion 
C)  $7.0 trillion 
D)  $30 trillion 
A)  $3.33 trillion 
B)  $13.0 trillion 
C)  $7.0 trillion 
D)  $30 trillion

Question 15

The banking system creates money.

Accepted Answer

A) True 
 B)False

Question 16

Fiat money is legal tender proclaimed to be money by law.

Accepted Answer

A) True 
 B)False

Question 17

Functions of money include all of the following except

Accepted Answer

A)  Money serves as a medium of exchange. 
B)  Money may be held as a store of value. 
C)  Money determines the wealth of a nation. 
D)  The quality of goods and services. 
A)  Money serves as a medium of exchange. 
B)  Money may be held as a store of value. 
C)  Money determines the wealth of a nation. 
D)  The quality of goods and services.

Question 18

Starting in 1934, U.S. citizens were prohibited from holding monetary gold in the United States.

Accepted Answer

A) True 
 B)False

Question 19

The velocity of money measures:

Accepted Answer

A)  the quantity of money in an economy 
B)  the rate of circulation of the money supply 
C)  the level of inflation caused by the money supply 
D)  none of the above 
A)  the quantity of money in an economy 
B)  the rate of circulation of the money supply 
C)  the level of inflation caused by the money supply 
D)  none of the above

Question 20

Functions of money include all of the following except

Accepted Answer

A)  Money serves as a medium of exchange. 
B)  Money may be held as a store of value. 
C)  Money serves as a standard of value. 
D)  All of the above are functions of money. 
A)  Money serves as a medium of exchange. 
B)  Money may be held as a store of value. 
C)  Money serves as a standard of value. 
D)  All of the above are functions of money.

_____________ believe that a change in the money supply first causes a change in interest rate levels, which, in turn, alters the demand for goods and services.

Because credit card balances and limits can affect the rate of turnover of money supply and contribute to money supply expansion, these balances and limits are included in the M3 definition of money supply.

Inflation is

_____________ believe that a change in the money supply first causes a change in interest rate levels, which, in turn, alters the demand for goods and services.

The savings-investment process

Currently, the international monetary system can best be described as a managed floating exchange rate system.

All restrictions on U.S. citizens holding gold in money form were removed by President Obama in 2010.

"Continentals" were denominated in dollars and were backed by gold.

A major objective of the Fed is to regulate and control the supply of money and the availability of credit.

Even though credit card balances and limits are not included in any definition of money supply, these balances and limits can affect the rate of turnover of money supply and contribute to money supply expansion.

Most of the financial assets added to the M2 definition of money supply provide their owners with a higher rate of return than do M1 financial assets.

Which of the following would not be considered liquid?

The velocity of money measures the rate of circulation of the money supply and can be expressed by the following equation (note: GDP = gross domestic product and MS = money supply):

If the money supply for an economy is $3 trillion and GDP is $10 trillion, then the velocity of money is:

The banking system creates money.

Fiat money is legal tender proclaimed to be money by law.

Functions of money include all of the following except

Starting in 1934, U.S. citizens were prohibited from holding monetary gold in the United States.

The velocity of money measures:

Functions of money include all of the following except

The Financial Environment

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

Exam 2: Money and the Monetary System

_____________ believe that a change in the money supply first causes a change in interest rate levels, which, in turn, alters the demand for goods and services.

Because credit card balances and limits can affect the rate of turnover of money supply and contribute to money supply expansion, these balances and limits are included in the M3 definition of money supply.

Inflation is

_____________ believe that a change in the money supply first causes a change in interest rate levels, which, in turn, alters the demand for goods and services.

The savings-investment process

Currently, the international monetary system can best be described as a managed floating exchange rate system.

All restrictions on U.S. citizens holding gold in money form were removed by President Obama in 2010.

"Continentals" were denominated in dollars and were backed by gold.

A major objective of the Fed is to regulate and control the supply of money and the availability of credit.

Even though credit card balances and limits are not included in any definition of money supply, these balances and limits can affect the rate of turnover of money supply and contribute to money supply expansion.

Most of the financial assets added to the M2 definition of money supply provide their owners with a higher rate of return than do M1 financial assets.

Which of the following would not be considered liquid?

The velocity of money measures the rate of circulation of the money supply and can be expressed by the following equation (note: GDP = gross domestic product and MS = money supply):

If the money supply for an economy is $3 trillion and GDP is $10 trillion, then the velocity of money is:

The banking system creates money.

Fiat money is legal tender proclaimed to be money by law.

Functions of money include all of the following except

Starting in 1934, U.S. citizens were prohibited from holding monetary gold in the United States.

The velocity of money measures:

Functions of money include all of the following except

The Financial Environment

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters