Question 1

A gold-based commodity money prevents:

Accepted Answer

A)   The central bank from independently pursuing expansionary monetary policy
B)   Recessions
C)   Confidence from falling
D)   Countries from erecting trade barriers with one another A

Question 2

In the face of expected depreciation of a fixed exchange rate, the central bank must:

Accepted Answer

A)   Lower interest rates
B)   Raise interest rates
C)   Expand the monetary base
D)   Raise minimum reserve requirements B

Question 3

Which of these is the least desirable characteristic of gold:

Accepted Answer

A)   It does not corrode
B)   It can be alloyed with other metals
C)   It is scarce
D)   Bars of it are heavy D

Question 4

Which of the following is the factor that least prevents us from returning to a gold standard:

Accepted Answer

A)   Speculative attacks against exchange rates
B)   Lack of confidence in gold
C)   An insufficient stock of gold
D)   A desire to maintain autonomous monetary policy

Question 5

Gold as an investment:

Accepted Answer

A)   Produces little-to-no return
B)   Yields high returns
C)   Pays high dividends
D)   Has a higher average return than stocks

Question 6

Which of the following is the least important factor that can make gold serve as a form of money:

Accepted Answer

A)   It can be a medium of exchange
B)   It can be a store of value
C)   It is durable
D)   It can be a unit of account

Question 7

The price of gold is primarily driven by:

Accepted Answer

A)   Confidence in the ruling government of a nation
B)   How the stock market is performing
C)   Supply and demand
D)   Markets' expectation of a recession

Question 8

The most common solution to a speculative attack against a fixed exchange rate is to:

Accepted Answer

A)   Borrow money from other countries
B)   Reduce capital controls
C)   Appoint new governors of the central bank
D)   Abandon the fixed exchange rate

Question 9

A gold standard is:

Accepted Answer

A)   A political system
B)   A system of floating exchange rate
C)   A system of fixed exchange rates
D)   A system of no international trade

Exam 11: Gold