Deck 11: Saving, Investment, and the Financial System

Question 1

For defining money,____ and also includes _____.

A) M1 includes M2;near money
B) M1 includes M2;narrow money
C) M2 includes M1;near money
D) M2 includes M1;narrow money

Answer 1

M2 includes M1;near money

Question 2

If you are estimating the amount you plan to spend on a vacation,money is serving as a:

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

Answer 2

unit of account.

Question 3

All of the following are included in the definition of M2 EXCEPT:

A) coins.
B) large time deposits.
C) savings deposits.
D) demand deposits.

Answer 3

large time deposits.

Question 4

Checking accounts are counted as part of:

A) M1 only.
B) M3 only.
C) M2 and M3.
D) M1 and M2.

Question 5

Which is NOT one of the three basic functions of money?

A) a means to collect taxes
B) a medium of exchange
C) a measure of value
D) a unit of account

Question 6

Rank these components in order from the SMALLEST share of M1 to the largest.

A) coins,banknotes,demand deposits
B) banknotes,coins,demand deposits
C) demand deposits,coins,banknotes
D) demand deposits,banknotes,coins

Question 7

Money:

A) is anything that is accepted in exchange for other goods and services or for payment of debt.
B) is anything that is backed by precious metal.
C) is currency.
D) has to have an intrinsic value.

Question 8

Which is NOT a necessary characteristic for something to be accepted and used as money?

A) It is easily standardized.
B) It must have the words legal tender on it.
C) It is divisible.
D) It is generally accepted by society.

Question 9

M1 includes:

A) cash,savings deposits,demand deposits,money market deposit accounts,small-denomination time deposits,and shares in retail money market mutual funds.
B) cash,demand deposits,and small-denomination time deposits.
C) cash,demand deposits,and large-denomination time deposits.
D) cash,demand deposits,and other checkable deposits.

Question 10

Fiat money:

A) was initially used by an automobile manufacturer.
B) is made out of commodities such as gold or silver.
C) does not necessarily have any intrinsic value but has been declared by a government to be money.
D) loses its value over time.

Question 11

Which is an example of money being used as a store of value?

A) A customer buys a burger,fries,and medium diet cola for $6.95.
B) A restaurant's profits for the week of October 3 to October 10 are $1,250.
C) A customer receives $3.05 in change and returns the next day to make another purchase.
D) A restaurant sells a large ice cream sundae and charges the customer's debit card.

Question 12

All of the following are functions of money EXCEPT:

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

Question 13

M2 is ____ in dollar value than M1;it also contains ____ assets.

A) larger;less liquid
B) larger;more liquid
C) smaller;less liquid
D) smaller;more liquid

Question 14

Money used to purchase goods or services is functioning as a:

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

Question 15

The U.S.General Accounting Office (GAO)has concluded that ___________ would help the introduction of a dollar coin be successful.

A) subsidizing businesses that accept bills to help them transfer over to coins
B) removing the dollar bill from circulation
C) choosing a well-known public figure for the heads side of the coin
D) rounding prices to the nearest dollar

Question 16

Which is an example of money being used as a unit of account?

A) A customer buys a burger,fries,and medium diet cola for $6.95.
B) A restaurant's profits for the week of October 3 to October 10 are $1,250.
C) A customer receives $3.05 in change and returns the next day to make another purchase.
D) A restaurant sells a large ice cream sundae and charges the customer's debit card.

Question 17

Which of the following statements is NOT a characteristic of good money?

A) Money is easily standardized.
B) Money must have historic value.
C) Money must be durable.
D) Money must be portable.

Question 18

Barter as a system tends to work only:

A) in small U.S.towns and villages.
B) in primitive economies with little product variety.
C) when agricultural products are exchanged.
D) among large,multinational corporations.

Question 19

What are the primary functions of money?

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

Question 20

In the first century and a half of the United States' existence,paper money was backed by precious metals.Today,the U.S.dollar is no longer backed by gold or silver.The dollar today is:

A) commodity money.
B) fiat money.
C) pseudo-commodity money.
D) unbacked money.

Question 21

The use of money as a medium of exchange helps reduce the inefficiencies inherent in:

A) unstable commodity values.
B) an inflationary period.
C) a time of political uncertainty.
D) barter.

Question 22

Liquidity refers to:

A) how fast money can be transferred from one account to another account.
B) how quickly,easily,and reliably an asset can be converted into a medium of exchange.
C) how easily cash can be transported across national borders.
D) how fast money travels throughout the economy.

Question 23

Which of the following is NOT one of the criteria for a commodity to serve as money?

A) The commodity must be durable.
B) The commodity must be accepted by many people as money.
C) The commodity must be issued as currency or coin.
D) The commodity must be standardized.

Question 24

Thelma grew some carrots in her garden.She needs a winter coat.John has an extra coat he doesn't need but would like to bake some carrot cake.The two find each other and make an exchange.This situation is called the:

A) double coincidence of wants.
B) unequal value exchange.
C) timely exchange.
D) coincidental exchange.

Question 25

Which of the following is the LEAST liquid?

A) money in a savings account
B) a Picasso painting
C) a U.S.Treasury bond
D) $100 in cash

Question 26

Fiat money:

A) has a high intrinsic value.
B) is decreed by royalty.
C) is acceptable as money because the government has decreed it to be so.
D) is unacceptable as money.

Question 27

Which of the following statements is CORRECT?

A) M2 measures assets primarily used as a medium of exchange.
B) M2 includes M1.
C) M1 includes assets primarily used as a means of saving.
D) The Federal Reserve discontinued reporting on M1 and M2 because they provide little insight into the state of the economy.

Question 28

M1 is the most _____ of all assets because as a medium of exchange it requires no conversion.

A) illiquid
B) insolvent
C) liquid
D) None of the answers is correct.

Question 29

When money is used to measure and compare the value of goods and services,it is used as a:

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

Question 30

Money is considered a _____ because it is generally accepted as payment for goods and services.

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

Question 31

The functions of money include:

A) a medium of exchange.
B) a unit of account.
C) a store of value.
D) All of the answers are correct.

Question 32

An economist notices that M1 is rapidly rising.One conclusion she might draw is that:

A) depositors want to save for the long term.
B) interest rates on savings accounts are rising.
C) consumers are preparing to make more purchases.
D) banks are discouraging their customers from borrowing and spending.

Question 33

Money is used as a _____ because it provides a yardstick for measuring and comparing the values of a wide variety of goods and services.

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

Question 34

Which of the following is included in M1?

A) savings deposits
B) large-denomination certificates of deposit
C) demand deposits
D) deposits in money market accounts

Question 35

M1 includes:

A) savings deposits.
B) banknotes and coins.
C) small-denomination time deposits.
D) money market deposit accounts.

Question 36

Yolanda took $5,000 from her checking account and put the money in her savings account at the same bank.

A) Both M1 and M2 were reduced by $5,000.
B) M1 went down by $5,000,but M2 was unchanged.
C) Neither M1 nor M2 changed because the transfer was done at the same bank.
D) M1 and M2 both rose by $5,000.

Question 37

If the government decrees that bottle tops will be treated as money,then a bottle top:

A) can still never be money because it has so little intrinsic value.
B) is called fiat money.
C) will not function well as a unit of account.
D) will serve well for international trade.

Question 38

Money is employed as a _____ because it enables people to save the money they earn today and use it to buy goods and services later.

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

Question 39

Currently,_____ is equal to roughly $2.5 trillion,and it is the most liquid part of the money supply.

A) M1
B) M2
C) M3
D) M4

Question 40

M2 includes:

A) savings deposits.
B) currency.
C) small-denomination time deposits.
D) All of the answers are correct.

Question 41

The direct exchange of goods and services is called:

A) barter.
B) a medium of exchange.
C) GDP.
D) a stock exchange.

Question 42

Which of the following lists CORRECTLY names money's functions?

A) a unit of account,a store of value,a medium of exchange
B) barter,a double coincidence of wants,a unit of account
C) transaction costs,a medium of exchange,a unit of account
D) liquidity,barter,a medium of exchange

Question 43

Sasha buys a pair of shoes for $200.She pays for it with 200,one-dollar bills.The dollar bills,in this case,are functioning as a:

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

Question 44

Which of the following assets is the LEAST liquid?

A) money
B) gold
C) silver
D) a farm

Question 45

Another term for a unit of account is:

A) a bank account.
B) a savings account.
C) a measure of value.
D) a store of value.

Question 46

Which of the following items is NOT a function of money?

A) a medium of exchange
B) a unit of account
C) a method of making change
D) a store of value

Question 47

The medium of exchange function of money allows an economy to avoid the problem of:

A) lack of a double coincidence of wants.
B) unemployment.
C) loss of purchasing power during an inflation.
D) rising interest rates.

Question 48

The unit of account function of money:

A) requires a double coincidence of wants,as in barter.
B) eliminates the need to value every item in terms of every other item.
C) is the most important function of money.
D) refers to the value of money over time.

Question 49

Successful barter in a primitive economy necessitates:

A) a double coincidence of wants.
B) a low interest rate.
C) an increasing money supply.
D) a fixed supply of money.

Question 50

If mangos were widely accepted for purposes of exchange:

A) mangos would be money.
B) mangos would lose value.
C) people would not work for mangos.
D) mango plantations would decrease in value.

Question 51

Serving as a ______ is a function of money that gives us a yardstick by which we can measure and compare the values of a wide variety of goods and services.

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

Question 52

How many prices must a consumer know in a barter economy that produces exactly 20 goods?

A) 20
B) 40
C) 95
D) 190

Question 53

If Jack Sparrow uses a chest of pieces of eight to buy a ship,then the gold is functioning as a:

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

Question 54

Which of the following assets is MOST liquid?

A) a house
B) a U.S.savings bond
C) money
D) land

Question 55

If Jack Sparrow buries a chest of gold bullion on a deserted island and plans to come back later,then the gold is functioning as a:

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

Question 56

Which of the following statements concerning the function of money is INCORRECT?

A) Money gives us a yardstick for measuring the values of goods and services.
B) Money helps us avoid the problem of lack of a double coincidence of wants.
C) Money helps us save time in purchasing goods and services.
D) Money does not lose value when inflation occurs.

Question 57

Barter:

A) works as well as money in all cases.
B) satisfies the double coincidence of wants if an exchange takes place.
C) serves as store of value in primitive societies.
D) is any exchange,with or without the presence of money,in which the participants negotiate the terms of trade.

Question 58

The most important function of money is:

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

Question 59

Which of the following assets is MOST liquid?

A) a house
B) a Picasso painting
C) a corporate bond
D) money

Question 60

Which one of the following items is NOT a function of money?

A) a store of value
B) a unit of account
C) a double coincidence of wants
D) a medium of exchange

Question 61

_________ are near money.

A) Money market deposit accounts
B) American Express cards
C) Demand deposits
D) Traveler's checks

Question 62

Near monies include:

A) savings deposits.
B) currency.
C) demand deposits.
D) traveler's checks.

Question 63

Checking account balances are

A) part of M1 but not part of M2.
B) part of M1 and part of M2.
C) part of M2 but not part of M1.
D) not part of either M1 or M2.

Question 64

From time to time the U.S.Treasury has introduced dollar coins.The hurdles faced in doing this include all EXCEPT that:

A) some industries would incur added costs of dealing with the coins.
B) dollar coins may cause confusion with similar-sized coins.
C) the dollar bill continues to be used.
D) over time,the total cost of using coins is greater than the total cost of using bills.

Question 65

Advantages of coins over bills include all of the following EXCEPT that:

A) coins last much longer than bills.
B) the total cost of coins is less than that of bills.
C) coins circulate longer than bills.
D) production costs are lower for coins than for bills.

Question 66

Which of the following statements is TRUE?

A) Coins constitute 90% of currency.
B) Paper money constitutes 90% of M1.
C) Paper money constitutes 90% of currency.
D) Coins constitute 90% of M1.

Question 67

Which of the following assets is included in M1?

A) savings deposits
B) checkable deposits
C) reserves
D) small-denomination time deposits

Question 68

M1 is equal to:

A) currency plus demand deposits.
B) currency plus demand deposits plus savings deposits.
C) currency plus demand deposits plus traveler's checks plus other checkable deposits.
D) currency.

Question 69

M2 includes all of the following EXCEPT:

A) M1.
B) money market deposit accounts.
C) savings deposits.
D) large-denomination time deposits.

Question 70

Which of the following statements about M2 is INCORRECT?

A) M2 is a broader measure of money than M1.
B) Small-denomination time deposits are part of M2.
C) Near monies are more liquid than M1.
D) Demand deposits are part of M2.

Question 71

Savings deposits are:

A) part of M1 but not part of M2.
B) part of both M1 and M2.
C) not part of M1 but are part of M2.
D) not part of either M1 or M2.

Question 72

Which of the following would be called near money?

A) money market deposit accounts
B) silver
C) a $100 bill
D) a credit card

Question 73

Which of the following statements about M1 and M2 is CORRECT?

A) M1 is the broader measure of money.
B) M2 is greater than M1.
C) M1 includes savings deposits.
D) M2 excludes currency.

Question 74

Which of the following assets is NOT included in M2?

A) currency
B) demand deposits
C) savings deposits
D) large-denomination time deposits

Question 75

Time deposits larger than $100,000 are included in:

A) M1.
B) M2.
C) M2 but not M1.
D) neither M1 nor M2.

Question 76

Another term for M2 is:

A) near money.
B) narrow money.
C) money doubled.
D) M1 doubled.

Question 77

Which of the following assets is the MOST liquid?

A) demand deposits
B) real estate
C) stocks
D) an art collection

Question 78

Which of the following statements regarding money supply measures is INCORRECT?

A) M1 is the narrowest measure of the money supply.
B) Near monies are as liquid as cash.
C) Coins form only a small part of M1.
D) M2 is about four times the size of M1.

Question 79

Which of the following is UNTRUE?

A) Near money cannot be drawn on instantaneously but is nonetheless accessible.
B) Near money includes money market mutual fund accounts with check writing features.
C) Near money includes savings accounts.
D) Near money includes individual stocks and bonds.

Question 80

Near money includes:

A) some of M2 and some of M1.
B) some of M2 but none of M1.
C) only the money in M3 that is no longer collected.
D) hard assets such as land.