Question 1

A store of value is:

Accepted Answer

A) an asset that can be used to transport purchasing power from one period of time to another. 
B) a standard unit that provides a consistent way of quoting prices. 
C) what sellers generally accept and buyers generally use to pay for goods and services. 
D) the ability to buy something today but to defer payment to the future. 
A) an asset that can be used to transport purchasing power from one period of time to another. 
B) a standard unit that provides a consistent way of quoting prices. 
C) what sellers generally accept and buyers generally use to pay for goods and services. 
D) the ability to buy something today but to defer payment to the future. A

Question 2

Which of the following is not a function of money?

Accepted Answer

A) medium of exchange 
B) unit of account 
C) store of value 
D) standard of barter 
A) medium of exchange 
B) unit of account 
C) store of value 
D) standard of barter D

Question 3

When a grocery store accepts your $10 note in exchange for bread and milk, this illustrates that the $10 note is serving as a:

Accepted Answer

A) medium of exchange. 
B) unit of account. 
C) store of value. 
D) standard of deferred payment. 
A) medium of exchange. 
B) unit of account. 
C) store of value. 
D) standard of deferred payment. A

Question 4

If, during a deposit expansion, not all money is re-deposited into the banking system and some leaks out as currency, then the real world multiplier is:

Accepted Answer

A) smaller than 1/RR. 
B) larger than 1/RR. 
C) equal to 1/RR. 
D) not related to 1/RR. 
A) smaller than 1/RR. 
B) larger than 1/RR. 
C) equal to 1/RR. 
D) not related to 1/RR.

Question 5

If some people who receive bank loans hold part of the amount as currency instead of depositing the full amount, the deposit multiplier to be ________ it would have been if all loans are fully deposited in banks.

Accepted Answer

A) greater than 
B) the same as 
C) either greater than or smaller than 
D) smaller than 
A) greater than 
B) the same as 
C) either greater than or smaller than 
D) smaller than

Question 6

Which of the following is used by the Reserve Bank of Australia as the main measure of monetary movements in Australia?

Accepted Answer

A) M1 
B) M3 
C) broad money 
D) credit 
A) M1 
B) M3 
C) broad money 
D) credit

Question 7

The Reserve Bank of Australia intervenes in the financial markets mostly to stop interest rates from changing.

Accepted Answer

A) True 
 B)False

Question 8

Governments in the world today issue fiat money that cannot be redeemed for gold.

Accepted Answer

A) True 
 B)False

Question 9

What is 'commodity money'? Give an example.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Commodity money is a good that is used a

Question 10

When a worker gets paid weekly but pays his bills at the end of the month, money functions as __________ during the month.

Accepted Answer

A) medium of exchange 
B) unit of account 
C) store of value 
D) standard of deferred payment 
A) medium of exchange 
B) unit of account 
C) store of value 
D) standard of deferred payment

Question 11

The 'quantity' equation becomes the basis for a theory when we assume that velocity of money is constant.

Accepted Answer

A) True 
 B)False

Question 12

What are the implications of the 'quantity theory of money' for monetary policy and price stability?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

If Irving Fisher was correct in his assu

Question 13

The simple deposit multiplier is the ratio of the amount of:

Accepted Answer

A) new reserves created by the banks to the amount of deposits. 
B) new reserves created by the banks to the amount of loans. 
C) deposits created by the banks to the amount of new reserves. 
D) deposits created by the banks. 
A) new reserves created by the banks to the amount of deposits. 
B) new reserves created by the banks to the amount of loans. 
C) deposits created by the banks to the amount of new reserves. 
D) deposits created by the banks.

Question 14

A car dealer sells you a car today in exchange for money in the future. This illustrates which function of money?

Accepted Answer

A) medium of exchange 
B) unit of account 
C) store of value 
D) standard of deferred payment 
A) medium of exchange 
B) unit of account 
C) store of value 
D) standard of deferred payment

Question 15

'Barter' takes place in an economy when:

Accepted Answer

A) goods and services are exchanged for money. 
B) money is exchanged for goods and services. 
C) goods and services are exchanged for other goods and services. 
D) goods and services are exchanged for liabilities. 
A) goods and services are exchanged for money. 
B) money is exchanged for goods and services. 
C) goods and services are exchanged for other goods and services. 
D) goods and services are exchanged for liabilities.

Question 16

Suppose that the bank has the following balance sheet:
   
If the bank's reserve ratio is 0.1, what is the maximum the bank can loan out? Suppose that the bank intends to loan out the maximum amount it can. Show the immediate impact of the loan on the bank's balance sheet.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Since the bank's reserve ratio is 10%, i

Question 17

Explain whether a cash deposit into a bank is an 'asset' or a 'liability' for the bank.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The deposit is a liability for the bank,

Question 18

If you transfer all of your currency to your demand deposit account, then initially, M1 will ________ and M3 will ________.

Accepted Answer

A) increase; not change 
B) not change; increase 
C) not change; not change 
D) decrease; increase 
A) increase; not change 
B) not change; increase 
C) not change; not change 
D) decrease; increase

Question 19

Suppose that you want to buy a new car and so you transfer $10 000 of your funds from a fixed term bank account into your demand deposit account. Carefully explain how this affects M1 and M3.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Fixed term bank accounts are part of M3.

Question 20

A cash withdrawal from the banking system:

Accepted Answer

A) lowers demand deposits to zero. 
B) decreases demand deposits. 
C) increases the money supply. 
D) increases excess reserves. 
A) lowers demand deposits to zero. 
B) decreases demand deposits. 
C) increases the money supply. 
D) increases excess reserves.

A store of value is:

Which of the following is not a function of money?

When a grocery store accepts your $10 note in exchange for bread and milk, this illustrates that the $10 note is serving as a:

If, during a deposit expansion, not all money is re-deposited into the banking system and some leaks out as currency, then the real world multiplier is:

If some people who receive bank loans hold part of the amount as currency instead of depositing the full amount, the deposit multiplier to be ________ it would have been if all loans are fully deposited in banks.

Which of the following is used by the Reserve Bank of Australia as the main measure of monetary movements in Australia?

The Reserve Bank of Australia intervenes in the financial markets mostly to stop interest rates from changing.

Governments in the world today issue fiat money that cannot be redeemed for gold.

What is 'commodity money'? Give an example. _ _

When a worker gets paid weekly but pays his bills at the end of the month, money functions as __________ during the month.

The 'quantity' equation becomes the basis for a theory when we assume that velocity of money is constant.

What are the implications of the 'quantity theory of money' for monetary policy and price stability? _ _

The simple deposit multiplier is the ratio of the amount of:

A car dealer sells you a car today in exchange for money in the future. This illustrates which function of money?

'Barter' takes place in an economy when:

Suppose that the bank has the following balance sheet: If the bank's reserve ratio is 0.1, what is the maximum the bank can loan out? Suppose that the bank intends to loan out the maximum amount it can. Show the immediate impact of the loan on the bank's balance sheet. _ _

Explain whether a cash deposit into a bank is an 'asset' or a 'liability' for the bank. _ _

If you transfer all of your currency to your demand deposit account, then initially, M1 will and M3 will .

Suppose that you want to buy a new car and so you transfer $10 000 of your funds from a fixed term bank account into your demand deposit account. Carefully explain how this affects M1 and M3. _ _

A cash withdrawal from the banking system:

Economics: Foundations and Models

Choices and Trade Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Gdp: Measuring Total Production, Income and Economic Growth

Economic Growth, the Financial System and Business Cycles

Long-Run Economic Growth: Sources and Policies

Unemployment

Inflation

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Monetary Policy

Fiscal Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 11: Money, Banks and the Reserve Bank of Australia

A store of value is:

Which of the following is not a function of money?

When a grocery store accepts your $10 note in exchange for bread and milk, this illustrates that the $10 note is serving as a:

If, during a deposit expansion, not all money is re-deposited into the banking system and some leaks out as currency, then the real world multiplier is:

If some people who receive bank loans hold part of the amount as currency instead of depositing the full amount, the deposit multiplier to be ________ it would have been if all loans are fully deposited in banks.

Which of the following is used by the Reserve Bank of Australia as the main measure of monetary movements in Australia?

The Reserve Bank of Australia intervenes in the financial markets mostly to stop interest rates from changing.

Governments in the world today issue fiat money that cannot be redeemed for gold.

What is 'commodity money'? Give an example. _____________________________________________________________________________________________ _____________________________________________________________________________________________

When a worker gets paid weekly but pays his bills at the end of the month, money functions as __________ during the month.

The 'quantity' equation becomes the basis for a theory when we assume that velocity of money is constant.

What are the implications of the 'quantity theory of money' for monetary policy and price stability? _____________________________________________________________________________________________ _____________________________________________________________________________________________

The simple deposit multiplier is the ratio of the amount of:

A car dealer sells you a car today in exchange for money in the future. This illustrates which function of money?

'Barter' takes place in an economy when:

Explain whether a cash deposit into a bank is an 'asset' or a 'liability' for the bank. _____________________________________________________________________________________________ _____________________________________________________________________________________________

If you transfer all of your currency to your demand deposit account, then initially, M1 will ________ and M3 will ________.

A cash withdrawal from the banking system:

Economics: Foundations and Models

Choices and Trade Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Gdp: Measuring Total Production, Income and Economic Growth

Economic Growth, the Financial System and Business Cycles

Long-Run Economic Growth: Sources and Policies

Unemployment

Inflation

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Monetary Policy

Fiscal Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

What is 'commodity money'? Give an example. _ _

What are the implications of the 'quantity theory of money' for monetary policy and price stability? _ _

Explain whether a cash deposit into a bank is an 'asset' or a 'liability' for the bank. _ _

If you transfer all of your currency to your demand deposit account, then initially, M1 will and M3 will .