Question 1

Which of the following is the largest measure of money?

Accepted Answer

A) Federal Reserve notes 
B) definitive money 
C) M1 
D) M2 
A) Federal Reserve notes 
B) definitive money 
C) M1 
D) M2

Question 2

Under a barter system

Accepted Answer

A) each good has many prices. 
B) each good has a single price. 
C) no prices for goods exist. 
D) prices for goods are very stable. 
A) each good has many prices. 
B) each good has a single price. 
C) no prices for goods exist. 
D) prices for goods are very stable.

Question 3

In August 2006, what was the total value of Federal Reserve Notes in circulation?

Accepted Answer

A) $120 million 
B) $460 million 
C) $793 billion 
D) $6 trillion 
A) $120 million 
B) $460 million 
C) $793 billion 
D) $6 trillion

Question 4

Which of the following is the most efficient means of trade?

Accepted Answer

A) Barter 
B) Money 
C) Government rationing 
D) The combination of barter with some government rationing 
A) Barter 
B) Money 
C) Government rationing 
D) The combination of barter with some government rationing

Question 5

Money eliminates the need for

Accepted Answer

A) any government role in the economy. 
B) specialization. 
C) people to have a double coincidence of wants. 
D) the market system. 
A) any government role in the economy. 
B) specialization. 
C) people to have a double coincidence of wants. 
D) the market system.

Question 6

Which of the following are included in M1, but not in M2?

Accepted Answer

A) Currency 
B) Checking account deposits 
C) Travelers checks 
D) Everything in M1 is in M2. 
A) Currency 
B) Checking account deposits 
C) Travelers checks 
D) Everything in M1 is in M2.

Question 7

How many prices would there be in a barter economy with 10 goods?

Accepted Answer

A) 10 
B) 45 
C) 50 
D) 100 
A) 10 
B) 45 
C) 50 
D) 100

Question 8

When economists refer to the role of money as a unit of account, they mean that

Accepted Answer

A) most accounting systems reflect that goods are purchased with currency. 
B) most accounting systems reflect that goods are purchased with checks. 
C) money gives traders a way of measuring value in the economy. 
D) money makes it possible for specialization to take place. 
A) most accounting systems reflect that goods are purchased with currency. 
B) most accounting systems reflect that goods are purchased with checks. 
C) money gives traders a way of measuring value in the economy. 
D) money makes it possible for specialization to take place.

Question 9

Until the 1980s, most economists

Accepted Answer

A) included only gold and silver coins in their definition of the money supply. 
B) used M1 as the measure of money. 
C) used M2 as the measure of money. 
D) used currency as the measure of money. 
A) included only gold and silver coins in their definition of the money supply. 
B) used M1 as the measure of money. 
C) used M2 as the measure of money. 
D) used currency as the measure of money.

Question 10

Barter is

Accepted Answer

A) another name for money. 
B) an exchange of goods and services directly for goods and services. 
C) the basis for economic specialization. 
D) the main system of exchange in the United States today. 
A) another name for money. 
B) an exchange of goods and services directly for goods and services. 
C) the basis for economic specialization. 
D) the main system of exchange in the United States today.

Question 11

A "price index" is a

Accepted Answer

A) summary statistic that reflects changes in the price of a group of goods and services relative to the price in a base year. 
B) measure of the interest rate. 
C) good whose price tends to increase and decrease at about the same rate as most other goods. 
D) measure of economic growth. 
A) summary statistic that reflects changes in the price of a group of goods and services relative to the price in a base year. 
B) measure of the interest rate. 
C) good whose price tends to increase and decrease at about the same rate as most other goods. 
D) measure of economic growth.

Question 12

Money is a medium of exchange in that

Accepted Answer

A) money is generally accepted for buying and selling goods and services. 
B) currency may be exchanged for gold at any national bank. 
C) other assets may be better or worse in facilitating exchange than money. 
D) it must maintain most of its value over time 
A) money is generally accepted for buying and selling goods and services. 
B) currency may be exchanged for gold at any national bank. 
C) other assets may be better or worse in facilitating exchange than money. 
D) it must maintain most of its value over time

Question 13

The GDP implicit price deflator was 112.7 in 2005 and 116.0 in 2006. Therefore, the increase in the price level between the base year and 2006 was

Accepted Answer

A) 2.8%. 
B) 2.9%. 
C) 3.3%. 
D) 16%. 
A) 2.8%. 
B) 2.9%. 
C) 3.3%. 
D) 16%.

Question 14

Suppose the GDP implicit price deflator was 112.7 in 2005 and 116.0 in 2006. Therefore, the inflation rate in 2006 would be

Accepted Answer

A) 2.8%. 
B) 2.9%. 
C) 3.3%. 
D) 16%. 
A) 2.8%. 
B) 2.9%. 
C) 3.3%. 
D) 16%.

Question 15

When an economy relies on specialization,

Accepted Answer

A) the economy will generally produce only one product. 
B) the economy will usually be heavily agricultural. 
C) each individual in the economy produces the goods or services for which he or she has relatively the best ability. 
D) each individual will be assigned by the government to produce that good or service the government believes the economy should specialize in. 
A) the economy will generally produce only one product. 
B) the economy will usually be heavily agricultural. 
C) each individual in the economy produces the goods or services for which he or she has relatively the best ability. 
D) each individual will be assigned by the government to produce that good or service the government believes the economy should specialize in.

Question 16

Which of the following is NOT included in M2?

Accepted Answer

A) Currency 
B) Savings bonds 
C) Money market deposit accounts 
D) Overnight repurchase agreements 
A) Currency 
B) Savings bonds 
C) Money market deposit accounts 
D) Overnight repurchase agreements

Question 17

The M1 and M2 aggregates

Accepted Answer

A) have moved very closely together since 1960. 
B) have moved broadly together since 1960. 
C) have moved significantly differently during certain periods since 1960. 
D) have moved broadly together but have also moved very differently during certain periods since 1960. 
A) have moved very closely together since 1960. 
B) have moved broadly together since 1960. 
C) have moved significantly differently during certain periods since 1960. 
D) have moved broadly together but have also moved very differently during certain periods since 1960.

Question 18

The narrowest money measure is

Accepted Answer

A) currency plus checking accounts at commercial banks. 
B) currency plus all checking accounts. 
C) currency plus all deposits at financial institutions. 
D) definitive money. 
A) currency plus checking accounts at commercial banks. 
B) currency plus all checking accounts. 
C) currency plus all deposits at financial institutions. 
D) definitive money.

Question 19

Which criterion for suitability as a medium of exchange do Federal Reserve Notes meet?

Accepted Answer

A) They are of standardized quality. 
B) They are durable. 
C) They are acceptable to most traders. 
D) Federal Reserve Notes meet all of the criteria for suitability as a medium of exchange. 
A) They are of standardized quality. 
B) They are durable. 
C) They are acceptable to most traders. 
D) Federal Reserve Notes meet all of the criteria for suitability as a medium of exchange.

Question 20

By designating Federal Reserve currency as legal tender, the federal government

Accepted Answer

A) has ensured that Federal Reserve currency will serve as money. 
B) has guaranteed that Federal Reserve currency may be exchanged for an equivalent amount of gold or silver. 
C) has mandated that Federal Reserve currency be accepted in discharge of debts. 
D) has mandated that Federal Reserve currency be accepted by citizens of foreign countries in exchange for their countries' currencies. 
A) has ensured that Federal Reserve currency will serve as money. 
B) has guaranteed that Federal Reserve currency may be exchanged for an equivalent amount of gold or silver. 
C) has mandated that Federal Reserve currency be accepted in discharge of debts. 
D) has mandated that Federal Reserve currency be accepted by citizens of foreign countries in exchange for their countries' currencies.

Exam 2: Money and the Payments System

Which of the following is the largest measure of money?

Under a barter system

In August 2006, what was the total value of Federal Reserve Notes in circulation?

Which of the following is the most efficient means of trade?

Money eliminates the need for

Which of the following are included in M1, but not in M2?

How many prices would there be in a barter economy with 10 goods?

When economists refer to the role of money as a unit of account, they mean that

Until the 1980s, most economists

Barter is

A "price index" is a

Money is a medium of exchange in that

The GDP implicit price deflator was 112.7 in 2005 and 116.0 in 2006. Therefore, the increase in the price level between the base year and 2006 was

Suppose the GDP implicit price deflator was 112.7 in 2005 and 116.0 in 2006. Therefore, the inflation rate in 2006 would be

When an economy relies on specialization,

Which of the following is NOT included in M2?

The M1 and M2 aggregates

The narrowest money measure is

Which criterion for suitability as a medium of exchange do Federal Reserve Notes meet?

By designating Federal Reserve currency as legal tender, the federal government

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