Question 1

Automatic teller machines and debit cards are examples of

Accepted Answer

A) electronic funds transfer systems. 
B) commodity monies. 
C) legal tender in the United States. 
D) modern barter systems. 
A) electronic funds transfer systems. 
B) commodity monies. 
C) legal tender in the United States. 
D) modern barter systems.

Question 2

Money market deposit accounts are included in

Accepted Answer

A) only M1. 
B) only M2. 
C) M1 and M2. 
D) neither M1 nor M2. 
A) only M1. 
B) only M2. 
C) M1 and M2. 
D) neither M1 nor M2.

Question 3

How was it possible for stamped and unstamped commodity money to circulate at the same time?

Accepted Answer

A) It was not possible; the unstamped money drove the stamped money out of circulation. 
B) It was not possible; the stamped money drove the unstamped money out of circulation. 
C) The unstamped money was accepted at a discount to the stamped money. 
D) The stamped money was accepted at a discount to the unstamped money. 
A) It was not possible; the unstamped money drove the stamped money out of circulation. 
B) It was not possible; the stamped money drove the unstamped money out of circulation. 
C) The unstamped money was accepted at a discount to the stamped money. 
D) The stamped money was accepted at a discount to the unstamped money.

Question 4

Wealth is

Accepted Answer

A) the sum of the value of assets. 
B) equal to income. 
C) a flow variable. 
D) the sum of the value of assets minus value of liabilities. 
A) the sum of the value of assets. 
B) equal to income. 
C) a flow variable. 
D) the sum of the value of assets minus value of liabilities.

Question 5

Which of the following is NOT true of allocating goods and services through a system of government rationing?

Accepted Answer

A) No country has ever actually attempted to allocate goods and services in this way. 
B) Shifts in the costs of producing individual goods and services will not be reflected in the trade accomplished by rationing. 
C) Shifts in the values that consumers place on different goods and services will not be reflected in the trade accomplished by rationing. 
D) Incentives to produce are reduced under such a system. 
A) No country has ever actually attempted to allocate goods and services in this way. 
B) Shifts in the costs of producing individual goods and services will not be reflected in the trade accomplished by rationing. 
C) Shifts in the values that consumers place on different goods and services will not be reflected in the trade accomplished by rationing. 
D) Incentives to produce are reduced under such a system.

Question 6

When economists refer to the role of money as a store of value, they mean that

Accepted Answer

A) money never loses its value, unlike other assets. 
B) money allows value to be stored easily. 
C) the value of money falls only when the quantity of money in circulation falls. 
D) the value of money falls only when the quantity of money in circulation rises. 
A) money never loses its value, unlike other assets. 
B) money allows value to be stored easily. 
C) the value of money falls only when the quantity of money in circulation falls. 
D) the value of money falls only when the quantity of money in circulation rises.

Question 7

A monetary aggregate is a measure of

Accepted Answer

A) the inflation rate. 
B) the total economic activity of the country. 
C) money broader than currency. 
D) definitive money. 
A) the inflation rate. 
B) the total economic activity of the country. 
C) money broader than currency. 
D) definitive money.

Question 8

If money is declared to be legal tender, it must be

Accepted Answer

A) minted from a precious metal. 
B) acceptable to citizens of foreign countries. 
C) possible to exchange it for an equivalent amount of precious metal. 
D) accepted to settle private transactions and it must be used in paying taxes. 
A) minted from a precious metal. 
B) acceptable to citizens of foreign countries. 
C) possible to exchange it for an equivalent amount of precious metal. 
D) accepted to settle private transactions and it must be used in paying taxes.

Question 9

What is a "central bank"?

Accepted Answer

A) Any commercial bank located in the capital of a country 
B) The largest bank in a particular banking system 
C) Any commercial bank that is willing to make loans to other commercial banks 
D) A special governmental or quasi-governmental institution in the financial system that regulates the medium of exchange 
A) Any commercial bank located in the capital of a country 
B) The largest bank in a particular banking system 
C) Any commercial bank that is willing to make loans to other commercial banks 
D) A special governmental or quasi-governmental institution in the financial system that regulates the medium of exchange

Question 10

The most important economic benefit from specialization is that it

Accepted Answer

A) makes it possible for an economy to begin using money. 
B) leads to an increase in the standard of living in an economy. 
C) makes barter possible. 
D) eliminates the need for financial markets. 
A) makes it possible for an economy to begin using money. 
B) leads to an increase in the standard of living in an economy. 
C) makes barter possible. 
D) eliminates the need for financial markets.

Question 11

Money as a medium of exchange refers only to

Accepted Answer

A) currency. 
B) gold coins. 
C) anything that is generally accepted as payment for goods and services. 
D) checks at commercial banks. 
A) currency. 
B) gold coins. 
C) anything that is generally accepted as payment for goods and services. 
D) checks at commercial banks.

Question 12

Which of the following statements is true about M2?

Accepted Answer

A) Its total value is smaller than that of M1. 
B) Apart from those assets also included in M1, it includes no assets that offer check-writing features. 
C) Its total value is about five times as large as M1. 
D) It includes large-denomination time deposits. 
A) Its total value is smaller than that of M1. 
B) Apart from those assets also included in M1, it includes no assets that offer check-writing features. 
C) Its total value is about five times as large as M1. 
D) It includes large-denomination time deposits.

Question 13

The simplest type of payments system is

Accepted Answer

A) the use of definitive money for trading goods and services. 
B) the use of electronic funds transfers. 
C) barter. 
D) the use of checks issued against accounts at commercial banks for trading goods and services. 
A) the use of definitive money for trading goods and services. 
B) the use of electronic funds transfers. 
C) barter. 
D) the use of checks issued against accounts at commercial banks for trading goods and services.

Question 14

Under a system of barter

Accepted Answer

A) each individual trades output directly with another. 
B) only agricultural goods may be traded. 
C) goods may be traded for money, but money may not be traded for goods. 
D) currency is accepted for purchases, but personal checks are not. 
A) each individual trades output directly with another. 
B) only agricultural goods may be traded. 
C) goods may be traded for money, but money may not be traded for goods. 
D) currency is accepted for purchases, but personal checks are not.

Question 15

Most economists believe that the adoption of the euro as the common currency of most countries in the European Community will result in significant economic gains to those countries. Discuss the nature of these economic gains.

Accepted Answer

The cost of converting currenc

Question 16

All of the following are examples of electronic funds EXCEPT

Accepted Answer

A) credit cards. 
B) debit cards. 
C) stored value cards. 
D) e-cash. 
A) credit cards. 
B) debit cards. 
C) stored value cards. 
D) e-cash.

Question 17

The M2 aggregate

Accepted Answer

A) includes M1 plus short-term investment accounts. 
B) includes M1 plus large-denomination time deposits. 
C) equals currency plus checking account deposits at commercial banks. 
D) is the best definition of definitive money. 
A) includes M1 plus short-term investment accounts. 
B) includes M1 plus large-denomination time deposits. 
C) equals currency plus checking account deposits at commercial banks. 
D) is the best definition of definitive money.

Question 18

When economists refer to the role of money as a standard of deferred payment, they mean that

Accepted Answer

A) payments by checks are usually deferred until the checks clear the bank. 
B) money earns interest while loan payments are deferred. 
C) money provides a standard for payments that will occur in the future. 
D) money today is worth less than money tomorrow. 
A) payments by checks are usually deferred until the checks clear the bank. 
B) money earns interest while loan payments are deferred. 
C) money provides a standard for payments that will occur in the future. 
D) money today is worth less than money tomorrow.

Question 19

All of the following are problems associated with commodity money EXCEPT

Accepted Answer

A) it is a cumbersome form of payments system. 
B) commodities tend to have little value in and of themselves. 
C) its value is dependent on its purity. 
D) costs were incurred in certifying the purity and weight of commodity money. 
A) it is a cumbersome form of payments system. 
B) commodities tend to have little value in and of themselves. 
C) its value is dependent on its purity. 
D) costs were incurred in certifying the purity and weight of commodity money.

Question 20

If the value of money increases over time, then we know

Accepted Answer

A) the economy must be experiencing inflation. 
B) the economy must be experiencing deflation. 
C) economic growth must be very rapid. 
D) economic growth must be very slow. 
A) the economy must be experiencing inflation. 
B) the economy must be experiencing deflation. 
C) economic growth must be very rapid. 
D) economic growth must be very slow.

Exam 2: Money and the Payments System

Automatic teller machines and debit cards are examples of

Money market deposit accounts are included in

How was it possible for stamped and unstamped commodity money to circulate at the same time?

Wealth is

Which of the following is NOT true of allocating goods and services through a system of government rationing?

When economists refer to the role of money as a store of value, they mean that

A monetary aggregate is a measure of

If money is declared to be legal tender, it must be

What is a "central bank"?

The most important economic benefit from specialization is that it

Money as a medium of exchange refers only to

Which of the following statements is true about M2?

The simplest type of payments system is

Under a system of barter

Most economists believe that the adoption of the euro as the common currency of most countries in the European Community will result in significant economic gains to those countries. Discuss the nature of these economic gains.

All of the following are examples of electronic funds EXCEPT

The M2 aggregate

When economists refer to the role of money as a standard of deferred payment, they mean that

All of the following are problems associated with commodity money EXCEPT

If the value of money increases over time, then we know

Introducing Money and the Financial System

Overview of the Financial System

Interest Rates and Rates of Return

The Theory of Portfolio Allocation

Determining Market Interest Rates

Risk Structure and Term Structure of Interest Rates

The Foreign-Exchange Market and Exchange Rates

Derivative Securities and Derivative Markets

Information and Financial Market Efficiency

Reducing Transactions Costs and Information Costs

What Financial Institutions Do

The Business of Banking

The Banking Industry

Banking Regulation: Crisis and Response

Banking in the International Economy

The Money Supply Process

Changes in the Monetary Base

Organization of Central Banks

Monetary Policy Tools

The Conduct of Monetary Policy

The International Financial System and Monetary Policy

The Demand for Money

Linking the Financial System and the Economy: the Is-Lm-Fe Model

Aggregate Demand and Aggregate Supply

Money and Output in the Short Run

Information Problems and Channels for Monetary Policy

Inflation: Causes and Consequences

Filters