Exam 2: Money and the Monetary System

No other asset is as liquid as money, because money is itself, a medium of exchange.

A major international development occurred on January 1, 2002, when twelve European countries gave up their individual currencies and adopted a unified currency called the _____________.

All of the following are important components of a financial system except:

A major factor in the severity of the 2007-09 financial crisis was the massive increase in the level of debt taken on by:

Currency is part of the M1 money supply.

_____________ is a short-term debt instrument issued by commercial banks in denominations of $100,000 or more with typical maturities ranging from one month to one year that have an active secondary market that allows short-term investors to easily match their cash or liquidity needs when they arise.

Money is anything generally accepted as a means of paying for goods and services and for paying off debts.

A deficit economic unit spends more money than it brings in and must balance its money receipts with money expenditures by selling gold and/or silver.

The use of direct transfers is the more common way by which money is transferred from savers to investors.

Currency held in vaults of depository institutions is excluded from M1.

How easily and with little loss of value an asset can be exchanged for money or other assets is called exchangeability.

The role of financial institutions in a country's financial system is to accumulate and invest savings.

_____________ is a promise of future payment issued by a firm and guaranteed by a bank that is used to finance international trade with typical maturities ranging from one to six months.

Money market funds are not included in which of the following definitions of the money supply?

____________ are money, debt instruments, equity securities, and other financial contracts that are backed by real assets and the earning abilities of issuers.

The U.S. dollar was defined in terms of gold until the 1980s.

Money is perfectly liquid.

_____________ believe that when the money supply exceeds the amount of money demanded, the public will spend more rapidly, causing real economic activity or prices to rise. They also believe that a too-rapid rate of growth in the money supply will ultimately result in rising prices or inflation because excess money will be used to bid up the prices of existing goods.

If the money supply for an economy is $3 trillion and the velocity of money is 4.5, then GDP is:

Which of the following statements is false?