Deck 27: Money

Question 1

Which of the following is not true about the Bank of England?

A) The Bank of England is the banker to the government.
B) The Bank of England is the UK's largest high street bank.
C) The Bank of England manages the government's finances.
D) The Bank of England controls the issue of notes and coins.

Answer 1

B

Question 2

What is the interest rate?

A) The interest rate is the cost of borrowing money.
B) The interest rate is the cost of living.
C) The interest rate measures the standard of living.
D) The interest rate measures the value of the currency.

Answer 2

A

Question 3

The demand for money does NOT include:

A) The transaction motive
B) The precautionary motive
C) The contractionary motive
D) The speculative motive

Answer 3

C

Question 4

The size of the money multiplier depends mainly on:

A) The reserve ratio
B) The marginal propensity to consume
C) The marginal propensity to save
D) The accelerator ratio

Question 5

Lower interest rates are likely to lead to:

A) Less consumption
B) Higher savings
C) Less investment
D) A fall in the exchange rate

Question 6

The Fisher Equation of Exchange is MT=PV

Question 7

Monetarists believe that the main cause of inflation is excessive growth of money demand.

Question 8

In the liquidity trap an increase in the money supply has no impact on the interest rate.

Question 9

The interest rate in the UK is set by the _____________________ Policy Committee

Question 10

A problem with the barter system is that it relies on:

A) High quality goods
B) Low cost goods
C) The double coincidence of wants
D) None of the above

Question 11

The most liquid financial asset is?

A) Money in a 30 day notice account
B) Cash
C) Shares
D) Government bond

Question 12

A merchant bank

A) Lends mainly to retailers
B) Lends mainly to government
C) Lends mainly to businesses
D) Lends mainly to high street savers

Question 13

Which of the following is not a role of a central bank such as the Bank of England.?

A) Manage government finances.
B) Be the banker to commercial banks.
C) Hold foreign exchange reserves.
D) Be the banker to the general public.

Question 14

The interest rate is

A) The price of one currency in terms of another
B) The cost of borrowing money
C) The cost of shares
D) The proportion of households which have a mortgage