Question 1

As a means of payment,coins have the major drawback that they

Accepted Answer

A) are heavy and hard to transport. 
B) are hard to counterfeit. 
C) are not the most liquid assets. 
D) must be backed by gold. 
A) are heavy and hard to transport. 
B) are hard to counterfeit. 
C) are not the most liquid assets. 
D) must be backed by gold.

Question 2

Currency includes

Accepted Answer

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

Question 3

Compared to an economy that uses a medium of exchange,in a barter economy

Accepted Answer

A) transaction costs are higher. 
B) transaction costs are lower. 
C) liquidity costs are higher. 
D) liquidity costs are lower. 
A) transaction costs are higher. 
B) transaction costs are lower. 
C) liquidity costs are higher. 
D) liquidity costs are lower.

Question 4

The total collection of pieces of property that serve to store value is a person's

Accepted Answer

A) wealth. 
B) income. 
C) money. 
D) credit. 
A) wealth. 
B) income. 
C) money. 
D) credit.

Question 5

Which of the following is NOT included in the monetary aggregate M2?

Accepted Answer

A) currency 
B) savings bonds 
C) traveler's checks 
D) checking deposits 
A) currency 
B) savings bonds 
C) traveler's checks 
D) checking deposits

Question 6

Patrick places his pocket change into his savings bank on his desk each evening. By his actions,Patrick indicates that he believes that money is a

Accepted Answer

A) medium of exchange. 
B) unit of account. 
C) store of value. 
D) unit of specialization. 
A) medium of exchange. 
B) unit of account. 
C) store of value. 
D) unit of specialization.

Question 7

The evolution of the payments system from barter to precious metals,then to fiat money,then to checks can best be understood as a consequence of

Accepted Answer

A) government regulations designed to improve the efficiency of the payments system. 
B) government regulations designed to promote the safety of the payments system. 
C) innovations that reduced the costs of exchanging goods and services. 
D) competition among firms to make it easier for customers to purchase their products. 
A) government regulations designed to improve the efficiency of the payments system. 
B) government regulations designed to promote the safety of the payments system. 
C) innovations that reduced the costs of exchanging goods and services. 
D) competition among firms to make it easier for customers to purchase their products.

Question 8

The M1 measure of money includes

Accepted Answer

A) small denomination time deposits. 
B) traveler's checks. 
C) money market deposit accounts. 
D) money market mutual fund shares. 
A) small denomination time deposits. 
B) traveler's checks. 
C) money market deposit accounts. 
D) money market mutual fund shares.

Question 9

An individual's annual salary is her

Accepted Answer

A) money. 
B) income. 
C) wealth. 
D) liabilities. 
A) money. 
B) income. 
C) wealth. 
D) liabilities.

Question 10

Paper currency that has been declared legal tender but is not convertible into coins or precious metals is called ________ money.

Accepted Answer

A) commodity 
B) fiat 
C) electronic 
D) funny 
A) commodity 
B) fiat 
C) electronic 
D) funny

Question 11

From 2004 to 2007,the growth rates of M1 and M2

Accepted Answer

A) were identical. 
B) both increased but at different rates. 
C) both decreased but at different rates. 
D) moved in opposite directions. 
A) were identical. 
B) both increased but at different rates. 
C) both decreased but at different rates. 
D) moved in opposite directions.

Question 12

Which of the following sequences accurately describes the evolution of the payments system?

Accepted Answer

A) barter,coins made of precious metals,paper currency,checks,electronic funds transfers 
B) barter,coins made of precious metals,checks,paper currency,electronic funds transfers 
C) barter,checks,paper currency,coins made of precious metals,electronic funds transfers 
D) barter,checks,paper currency,electronic funds transfers 
A) barter,coins made of precious metals,paper currency,checks,electronic funds transfers 
B) barter,coins made of precious metals,checks,paper currency,electronic funds transfers 
C) barter,checks,paper currency,coins made of precious metals,electronic funds transfers 
D) barter,checks,paper currency,electronic funds transfers

Question 13

When we say that income is a flow variable,we mean that

Accepted Answer

A) we must attach a time period to the measure for it to make sense. 
B) it is measured at a given point in time. 
C) it moves through our hands quickly. 
D) the value is constantly changing. 
A) we must attach a time period to the measure for it to make sense. 
B) it is measured at a given point in time. 
C) it moves through our hands quickly. 
D) the value is constantly changing.

Question 14

When paper currency is decreed by governments as legal tender,legally it must be

Accepted Answer

A) paper currency backed by gold. 
B) a precious metal such as gold or silver. 
C) accepted as payment for debts. 
D) convertible into an electronic payment. 
A) paper currency backed by gold. 
B) a precious metal such as gold or silver. 
C) accepted as payment for debts. 
D) convertible into an electronic payment.

Question 15

All of the following are necessary criteria for a commodity to function as money EXCEPT

Accepted Answer

A) it must deteriorate quickly. 
B) it must be divisible. 
C) it must be easy to carry. 
D) it must be widely accepted. 
A) it must deteriorate quickly. 
B) it must be divisible. 
C) it must be easy to carry. 
D) it must be widely accepted.

Question 16

Which of the following is NOT included in the measure of M1?

Accepted Answer

A) NOW accounts 
B) demand deposits 
C) currency 
D) savings deposits 
A) NOW accounts 
B) demand deposits 
C) currency 
D) savings deposits

Question 17

A fall in the level of prices

Accepted Answer

A) does not affect the value of money. 
B) has an uncertain effect on the value of money. 
C) increases the value of money. 
D) reduces the value of money. 
A) does not affect the value of money. 
B) has an uncertain effect on the value of money. 
C) increases the value of money. 
D) reduces the value of money.

Question 18

As a store of value,money

Accepted Answer

A) does not earn interest. 
B) cannot be a durable asset. 
C) must be currency. 
D) is a way of saving for future purchases. 
A) does not earn interest. 
B) cannot be a durable asset. 
C) must be currency. 
D) is a way of saving for future purchases.

Question 19

Which of the following is included in M2 but NOT in M1?

Accepted Answer

A) NOW accounts 
B) demand deposits 
C) currency 
D) money market mutual fund shares (retail) 
A) NOW accounts 
B) demand deposits 
C) currency 
D) money market mutual fund shares (retail)

Question 20

Defining money becomes ________ difficult as the pace of financial innovation ________.

Accepted Answer

A) less;quickens 
B) more;quickens 
C) more;slows 
D) more;stops 
A) less;quickens 
B) more;quickens 
C) more;slows 
D) more;stops

Exam 3: What Is Money

As a means of payment,coins have the major drawback that they

Currency includes

Compared to an economy that uses a medium of exchange,in a barter economy

The total collection of pieces of property that serve to store value is a person's

Which of the following is NOT included in the monetary aggregate M2?

Patrick places his pocket change into his savings bank on his desk each evening. By his actions,Patrick indicates that he believes that money is a

The evolution of the payments system from barter to precious metals,then to fiat money,then to checks can best be understood as a consequence of

The M1 measure of money includes

An individual's annual salary is her

Paper currency that has been declared legal tender but is not convertible into coins or precious metals is called ________ money.

From 2004 to 2007,the growth rates of M1 and M2

Which of the following sequences accurately describes the evolution of the payments system?

When we say that income is a flow variable,we mean that

When paper currency is decreed by governments as legal tender,legally it must be

All of the following are necessary criteria for a commodity to function as money EXCEPT

Which of the following is NOT included in the measure of M1?

A fall in the level of prices

As a store of value,money

Which of the following is included in M2 but NOT in M1?

Defining money becomes ________ difficult as the pace of financial innovation ________.

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

The Meaning of Interest Rates

The Behavior 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

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Financial Crises

Central Banks and the Federal Reserve System

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

Financial Crises in Emerging Market Economies

The ISLM Model

Filters

Defining money becomes difficult as the pace of financial innovation .