Question 1

Which of the following statements accurately describes the two measures of the money supply?

Accepted Answer

A)  The two measures do not move together, so they cannot be used interchangeably by policymakers. 
B)  The two measures' movements closely parallel each other, even on a month-to-month basis. 
C)  Short-run movements in the money supply are extremely reliable. 
D)  M2 is the narrowest measure the Fed reports. 
A)  The two measures do not move together, so they cannot be used interchangeably by policymakers. 
B)  The two measures' movements closely parallel each other, even on a month-to-month basis. 
C)  Short-run movements in the money supply are extremely reliable. 
D)  M2 is the narrowest measure the Fed reports. A

Question 2

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. C

Question 3

In explaining the evolution of money

Accepted Answer

A)  government regulation is the most important factor. 
B)  commodity money, because it is valued more highly, tends to drive out paper money. 
C)  new forms of money evolve to lower transaction costs. 
D)  paper money is always backed by gold and therefore more desirable than checks. 
A)  government regulation is the most important factor. 
B)  commodity money, because it is valued more highly, tends to drive out paper money. 
C)  new forms of money evolve to lower transaction costs. 
D)  paper money is always backed by gold and therefore more desirable than checks. C

Question 4

Which of the following statements best explains how the use of money in an economy increases economic efficiency?

Accepted Answer

A)  Money increases economic efficiency because it is costless to produce. 
B)  Money increases economic efficiency because it discourages specialization. 
C)  Money increases economic efficiency because it decreases transactions costs. 
D)  Money cannot have an effect on economic efficiency. 
A)  Money increases economic efficiency because it is costless to produce. 
B)  Money increases economic efficiency because it discourages specialization. 
C)  Money increases economic efficiency because it decreases transactions costs. 
D)  Money cannot have an effect on economic efficiency.

Question 5

A hyperinflation is

Accepted Answer

A)  a period of extreme inflation generally greater than 50% 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% 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 6

An electronic payments system has not completely replaced the paper payments system because of all of the following reasons except

Accepted Answer

A)  expensive equipment is necessary to set up the system. 
B)  security concerns. 
C)  privacy concerns. 
D)  transportation costs. 
A)  expensive equipment is necessary to set up the system. 
B)  security concerns. 
C)  privacy concerns. 
D)  transportation costs.

Question 7

________ is the relative ease and speed with which an asset can be converted into a medium of exchange.

Accepted Answer

A)  Efficiency 
B)  Liquidity 
C)  Deflation 
D)  Specialization 
A)  Efficiency 
B)  Liquidity 
C)  Deflation 
D)  Specialization

Question 8

Which of the following statements uses the economists' definition of money?

Accepted Answer

A)  I plan to earn a lot of money over the summer. 
B)  Betsy is rich-she has a lot of money. 
C)  I hope that I have enough money to buy my lunch today. 
D)  The job with New Company gave me the opportunity to earn more money. 
A)  I plan to earn a lot of money over the summer. 
B)  Betsy is rich-she has a lot of money. 
C)  I hope that I have enough money to buy my lunch today. 
D)  The job with New Company gave me the opportunity to earn more money.

Question 9

If an individual moves money from currency to a demand 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 10

________ is a flow of earnings per unit of time.

Accepted Answer

A)  Income 
B)  Money 
C)  Wealth 
D)  Currency 
A)  Income 
B)  Money 
C)  Wealth 
D)  Currency

Question 11

Of money's three functions,the one that distinguishes money from other assets is its function as a

Accepted Answer

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

Question 12

Since it does not have to be converted into anything else to make purchases,________ is the most liquid asset.

Accepted Answer

A)  money 
B)  stock 
C)  artwork 
D)  gold 
A)  money 
B)  stock 
C)  artwork 
D)  gold

Question 13

If an individual moves money from a demand deposit account to a money market 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 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 increases and M2 decreases.

Question 14

Explain how cigarettes could be called "money" in prisoner-of-war camps of World War II.

Accepted Answer

The cigarettes performed the three funct

Question 15

What factors have slowed down the movement to a system where all payments are made electronically?

Accepted Answer

The equipment necessary to set up the sy

Question 16

Recent financial innovation makes the Federal Reserve's job of conducting monetary policy

Accepted Answer

A)  easier, since the Fed now knows what to consider money. 
B)  more difficult, since the Fed now knows what to consider money. 
C)  easier, since the Fed no longer knows what to consider money. 
D)  more difficult, since the Fed no longer knows what to consider money. 
A)  easier, since the Fed now knows what to consider money. 
B)  more difficult, since the Fed now knows what to consider money. 
C)  easier, since the Fed no longer knows what to consider money. 
D)  more difficult, since the Fed no longer knows what to consider money.

Question 17

Kevin purchasing concert tickets with his debit card is an example of the ________ function of money.

Accepted Answer

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

Question 18

Money is

Accepted Answer

A)  anything that is generally accepted in payment for goods and services or in the repayment of debt. 
B)  a flow of earnings per unit of time. 
C)  the total collection of pieces of property that are a store of value. 
D)  always based on a precious metal like gold or silver. 
A)  anything that is generally accepted in payment for goods and services or in the repayment of debt. 
B)  a flow of earnings per unit of time. 
C)  the total collection of pieces of property that are a store of value. 
D)  always based on a precious metal like gold or silver.

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

Increasing transactions costs of selling an asset make the asset

Accepted Answer

A)  more valuable. 
B)  more liquid. 
C)  less liquid. 
D)  more moneylike. 
A)  more valuable. 
B)  more liquid. 
C)  less liquid. 
D)  more moneylike.

Exam 3: What Is Money

Which of the following statements accurately describes the two measures of the money supply?

A fall in the level of prices

In explaining the evolution of money

Which of the following statements best explains how the use of money in an economy increases economic efficiency?

A hyperinflation is

An electronic payments system has not completely replaced the paper payments system because of all of the following reasons except

________ is the relative ease and speed with which an asset can be converted into a medium of exchange.

Which of the following statements uses the economists' definition of money?

If an individual moves money from currency to a demand deposit account,

________ is a flow of earnings per unit of time.

Of money's three functions,the one that distinguishes money from other assets is its function as a

Since it does not have to be converted into anything else to make purchases,________ is the most liquid asset.

If an individual moves money from a demand deposit account to a money market deposit account,

Explain how cigarettes could be called "money" in prisoner-of-war camps of World War II.

What factors have slowed down the movement to a system where all payments are made electronically?

Recent financial innovation makes the Federal Reserve's job of conducting monetary policy

Kevin purchasing concert tickets with his debit card is an example of the ________ function of money.

Money is

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

Increasing transactions costs of selling an asset make the asset

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

Understanding 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

Financial Crises

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

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

The ISLM Model

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