Question 1

Under the current U.S. monetary system, _____ are both considered types of money.

Accepted Answer

A)  credit cards and checks 
B)  coins and paper currency 
C)  credit cards and coins 
D)  checks and paper currency 
A)  credit cards and checks 
B)  coins and paper currency 
C)  credit cards and coins 
D)  checks and paper currency

Question 2

Suppose that a bank receives a $500 deposit and the required reserves are $10. In this case, the excess reserves are _____, and the reserve requirement is _____ percent.

Accepted Answer

A)  $450; 10 
B)  $490; 2 
C)  $450; 2 
D)  $490; 10 
A)  $450; 10 
B)  $490; 2 
C)  $450; 2 
D)  $490; 10

Question 3

By allowing people to carry purchasing power over time, money acts as a:

Accepted Answer

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

Question 4

Which of the following statements is NOT true?

Accepted Answer

A)  Under a system of commodity money, the money must be made of precious metals. 
B)  Under a gold standard, money can be exchanged for an established amount of gold. 
C)  Fiat money has value because the government says it does. 
D)  Both the gold standard and commodity money system deter high rates of inflation. 
A)  Under a system of commodity money, the money must be made of precious metals. 
B)  Under a gold standard, money can be exchanged for an established amount of gold. 
C)  Fiat money has value because the government says it does. 
D)  Both the gold standard and commodity money system deter high rates of inflation.

Question 5

According to the principle of time value of money:

Accepted Answer

A)  money loses value over time because of inflation. 
B)  money has diminishing marginal utility. 
C)  people prefer a given amount of money sooner than later. 
D)  people prefer more money to less money. 
A)  money loses value over time because of inflation. 
B)  money has diminishing marginal utility. 
C)  people prefer a given amount of money sooner than later. 
D)  people prefer more money to less money.

Question 6

The idea that an individual is willing to accept $80 today instead of $90 two years from now is known as:

Accepted Answer

A)  the diminishing marginal utility of money. 
B)  decreasing returns to money. 
C)  increasing returns to money. 
D)  the time value of money. 
A)  the diminishing marginal utility of money. 
B)  decreasing returns to money. 
C)  increasing returns to money. 
D)  the time value of money.

Question 7

If an individual moves money from a checking account into a savings account, then the value of M1 _____, and the value of M2:

Accepted Answer

A)  increases; does not change. 
B)  does not change; increases. 
C)  decreases; does not change. 
D)  does not change; decreases. 
A)  increases; does not change. 
B)  does not change; increases. 
C)  decreases; does not change. 
D)  does not change; decreases.

Question 8

Under the current U.S. monetary system, _____ are not considered to be money.

Accepted Answer

A)  checks and debit cards 
B)  checking account deposits and debit cards 
C)  checks and currency 
D)  debit cards and traveler's checks 
A)  checks and debit cards 
B)  checking account deposits and debit cards 
C)  checks and currency 
D)  debit cards and traveler's checks

Question 9

Under the current U.S monetary system, ______ are not considered to be money.

Accepted Answer

A)  checks and checking account deposits 
B)  debit cards and credit cards 
C)  credit cards and checking account deposits 
D)  traveler's checks and credit cards 
A)  checks and checking account deposits 
B)  debit cards and credit cards 
C)  credit cards and checking account deposits 
D)  traveler's checks and credit cards

Question 10

Suppose that the reserve requirement is 10 percent and a commercial bank has $500 million in deposits. In this case, the required reserves are _____ million, and the maximum amount the banks can lend out is _____ million.

Accepted Answer

A)  $50; $50 
B)  $10; $490 
C)  $50; $450 
D)  $100; $400 
A)  $50; $50 
B)  $10; $490 
C)  $50; $450 
D)  $100; $400

Question 11

Which of the following is NOT considered to be an ideal characteristic of money?

Accepted Answer

A)  tangibility 
B)  divisibility 
C)  portability 
D)  uniformity 
A)  tangibility 
B)  divisibility 
C)  portability 
D)  uniformity

Question 12

Which of the following is not a function of money?

Accepted Answer

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

Question 13

The gold standard refers to a system where money:

Accepted Answer

A)  is made from gold. 
B)  has value because the government says it does. 
C)  is valued in terms of gold and can be exchanged for it. 
D)  can be exchanged for treasury bonds. 
A)  is made from gold. 
B)  has value because the government says it does. 
C)  is valued in terms of gold and can be exchanged for it. 
D)  can be exchanged for treasury bonds.

Question 14

Which of the following statements is NOT true?

Accepted Answer

A)  Digital systems of payments cannot be considered money because they are not tangible. 
B)  Fiat money has value because the government says it does. 
C)  Under a gold standard, money can be exchanged for a fixed amount of gold. 
D)  Commodity money need not be made up only of precious metals. 
A)  Digital systems of payments cannot be considered money because they are not tangible. 
B)  Fiat money has value because the government says it does. 
C)  Under a gold standard, money can be exchanged for a fixed amount of gold. 
D)  Commodity money need not be made up only of precious metals.

Question 15

An economy uses coins made of gold as money. This is an example of:

Accepted Answer

A)  fiat money. 
B)  gold standard. 
C)  commodity money. 
D)  commodity standard. 
A)  fiat money. 
B)  gold standard. 
C)  commodity money. 
D)  commodity standard.

Question 16

Assume that individuals hold no cash and banks hold no excess reserves. The Federal Reserve buys $100 worth of Treasury securities from a bank, and the money supply increases by $500. In this case, the money multiplier is _____, and the reserve requirement is _____ percent.

Accepted Answer

A)  10; 10 
B)  5; 10 
C)  10; 20 
D)  5; 20 
A)  10; 10 
B)  5; 10 
C)  10; 20 
D)  5; 20

Question 17

During times of _____, cash acts as a poor:

Accepted Answer

A)  deflation; store of value. 
B)  deflation; unit of account. 
C)  inflation; store of value. 
D)  inflation; unit of account. 
A)  deflation; store of value. 
B)  deflation; unit of account. 
C)  inflation; store of value. 
D)  inflation; unit of account.

Question 18

Suppose that an individual wins a lottery that offers her two ways of collecting the payment. She can either take $3,000 right now or take $3,100 one year from now. The safest interest rate in the economy is on Treasury securities that yield 5 percent interest per year.
A. Which payment should the lottery winner choose under these conditions? Justify your answer.
B. If the interest rate is 3 percent instead of 5 percent, which payment should the lottery winner choose?

Accepted Answer

In part A, the lottery winner should cho

Question 19

Under the current U.S monetary system, _____ are not considered money.

Accepted Answer

A)  credit cards and checks 
B)  credit cards and coins 
C)  coins and paper currency 
D)  coins and checks 
A)  credit cards and checks 
B)  credit cards and coins 
C)  coins and paper currency 
D)  coins and checks

Question 20

All else equal, the _____ the value of Treasury securities purchased by the Federal Reserve and the _____ the amount of cash held by individuals, the higher will be the amount of money created.

Accepted Answer

A)  lower; lower 
B)  lower; higher 
C)  higher; lower 
D)  higher; higher 
A)  lower; lower 
B)  lower; higher 
C)  higher; lower 
D)  higher; higher

Under the current U.S. monetary system, _____ are both considered types of money.

Suppose that a bank receives a $500 deposit and the required reserves are $10. In this case, the excess reserves are _, and the reserve requirement is _ percent.

By allowing people to carry purchasing power over time, money acts as a:

Which of the following statements is NOT true?

According to the principle of time value of money:

The idea that an individual is willing to accept $80 today instead of $90 two years from now is known as:

If an individual moves money from a checking account into a savings account, then the value of M1 _____, and the value of M2:

Under the current U.S. monetary system, _____ are not considered to be money.

Under the current U.S monetary system, ______ are not considered to be money.

Suppose that the reserve requirement is 10 percent and a commercial bank has $500 million in deposits. In this case, the required reserves are _ million, and the maximum amount the banks can lend out is _ million.

Which of the following is NOT considered to be an ideal characteristic of money?

Which of the following is not a function of money?

The gold standard refers to a system where money:

Which of the following statements is NOT true?

An economy uses coins made of gold as money. This is an example of:

Assume that individuals hold no cash and banks hold no excess reserves. The Federal Reserve buys $100 worth of Treasury securities from a bank, and the money supply increases by $500. In this case, the money multiplier is _, and the reserve requirement is _ percent.

During times of _____, cash acts as a poor:

Under the current U.S monetary system, _____ are not considered money.

All else equal, the _ the value of Treasury securities purchased by the Federal Reserve and the _ the amount of cash held by individuals, the higher will be the amount of money created.

Foundations of Economics

Extension: Understanding Graphs

Markets and Economies

Demand

Supply

Market Equilibrium

Elasticity

Consumer Behavior

Production Costs

Perfect Competition

Market Power

Factor Markets

Market Failure and Government Failure

Measuring an Economys Performance

Aggregate Demand and Aggregate Supply

Fiscal Policy

Monetary Policy

Economic Growth and Development

International Trade and Finance

Filters

Exam 16: Money and Banking

Under the current U.S. monetary system, _____ are both considered types of money.

Suppose that a bank receives a $500 deposit and the required reserves are $10. In this case, the excess reserves are _____, and the reserve requirement is _____ percent.

By allowing people to carry purchasing power over time, money acts as a:

Which of the following statements is NOT true?

According to the principle of time value of money:

The idea that an individual is willing to accept $80 today instead of $90 two years from now is known as:

If an individual moves money from a checking account into a savings account, then the value of M1 _____, and the value of M2:

Under the current U.S. monetary system, _____ are not considered to be money.

Under the current U.S monetary system, ______ are not considered to be money.

Suppose that the reserve requirement is 10 percent and a commercial bank has $500 million in deposits. In this case, the required reserves are _____ million, and the maximum amount the banks can lend out is _____ million.

Which of the following is NOT considered to be an ideal characteristic of money?

Which of the following is not a function of money?

The gold standard refers to a system where money:

Which of the following statements is NOT true?

An economy uses coins made of gold as money. This is an example of:

Assume that individuals hold no cash and banks hold no excess reserves. The Federal Reserve buys $100 worth of Treasury securities from a bank, and the money supply increases by $500. In this case, the money multiplier is _____, and the reserve requirement is _____ percent.

During times of _____, cash acts as a poor:

Under the current U.S monetary system, _____ are not considered money.

All else equal, the _____ the value of Treasury securities purchased by the Federal Reserve and the _____ the amount of cash held by individuals, the higher will be the amount of money created.

Foundations of Economics

Extension: Understanding Graphs

Markets and Economies

Demand

Supply

Market Equilibrium

Elasticity

Consumer Behavior

Production Costs

Perfect Competition

Market Power

Factor Markets

Market Failure and Government Failure

Measuring an Economys Performance

Aggregate Demand and Aggregate Supply

Fiscal Policy

Monetary Policy

Economic Growth and Development

International Trade and Finance

Filters

Suppose that a bank receives a $500 deposit and the required reserves are $10. In this case, the excess reserves are _, and the reserve requirement is _ percent.

Suppose that the reserve requirement is 10 percent and a commercial bank has $500 million in deposits. In this case, the required reserves are _ million, and the maximum amount the banks can lend out is _ million.

Assume that individuals hold no cash and banks hold no excess reserves. The Federal Reserve buys $100 worth of Treasury securities from a bank, and the money supply increases by $500. In this case, the money multiplier is _, and the reserve requirement is _ percent.

All else equal, the _ the value of Treasury securities purchased by the Federal Reserve and the _ the amount of cash held by individuals, the higher will be the amount of money created.