Question 1

Inflation refers to growth in the economy's:

Accepted Answer

A) Gross Domestic Product (GDP). 
B) interest rates. 
C) money. 
D) prices. 
A) Gross Domestic Product (GDP). 
B) interest rates. 
C) money. 
D) prices. D

Question 2

In comparing money to a share of Microsoft stock held by an individual, we can say:

Accepted Answer

A) the share of stock is an asset, but money is a liability. 
B) only the money is a means of payment, but both are stores of value. 
C) only the money is a means of payment, but both are units of account. 
D) both the Microsoft stock and the money are liabilities. 
A) the share of stock is an asset, but money is a liability. 
B) only the money is a means of payment, but both are stores of value. 
C) only the money is a means of payment, but both are units of account. 
D) both the Microsoft stock and the money are liabilities. B

Question 3

Gold would be a superior commodity money compared to wheat because:

Accepted Answer

A) wheat has a high value relative to weight, which gold does not. 
B) it is easier to divide wheat into small units. 
C) wheat has more practical uses than gold. 
D) wheat is perishable. 
A) wheat has a high value relative to weight, which gold does not. 
B) it is easier to divide wheat into small units. 
C) wheat has more practical uses than gold. 
D) wheat is perishable. D

Question 4

Suppose there is an economy that has 100 people each of whom makes a different good, and that they use a barter system for exchange.How many relative prices will there be?

Accepted Answer

The general formula for the number of pr

Question 5

What is included in M2 that is not included in M1?

Accepted Answer

Small denomination time deposi

Question 6

The Consumer Price Index (CPI):

Accepted Answer

A) is calculated using a basket of goods and services adjusted annually by government statisticians. 
B) answers the question, "How much more does it cost today to buy the same basket of goods and services that were purchased at some fixed time in the past?" 
C) does not suffer from substitution bias because the basket used to measure prices changes every year. 
D) understates the impact of price changes. 
A) is calculated using a basket of goods and services adjusted annually by government statisticians. 
B) answers the question, "How much more does it cost today to buy the same basket of goods and services that were purchased at some fixed time in the past?" 
C) does not suffer from substitution bias because the basket used to measure prices changes every year. 
D) understates the impact of price changes.

Question 7

Which of the following could not be commodity money?

Accepted Answer

A) Gold coins 
B) Cigarettes 
C) U.S.Currency 
D) Silk 
A) Gold coins 
B) Cigarettes 
C) U.S.Currency 
D) Silk

Question 8

A cross-country analysis of money growth supports the conclusion that:

Accepted Answer

A) there is no correlation between the growth rate of the quantity of money and the rate of inflation. 
B) the correlation between the money growth rate and inflation in most countries was positive but very small. 
C) the correlation between inflation and money growth in most industrialized countries was actually negative. 
D) the correlation between inflation and the money growth rate was positive and relatively strong. 
A) there is no correlation between the growth rate of the quantity of money and the rate of inflation. 
B) the correlation between the money growth rate and inflation in most countries was positive but very small. 
C) the correlation between inflation and money growth in most industrialized countries was actually negative. 
D) the correlation between inflation and the money growth rate was positive and relatively strong.

Question 9

In a barter system people:

Accepted Answer

A) have to specialize in order to have goods to trade. 
B) cannot specialize because they never know what goods will be desired. 
C) are less likely to specialize as extensively as they would in a monetary economy. 
D) must be self sufficient. 
A) have to specialize in order to have goods to trade. 
B) cannot specialize because they never know what goods will be desired. 
C) are less likely to specialize as extensively as they would in a monetary economy. 
D) must be self sufficient.

Question 10

M1 is:

Accepted Answer

A) less than 25% of GDP. 
B) equal to GDP. 
C) about four times larger than GDP. 
D) about one fourth the amount of GDP. 
A) less than 25% of GDP. 
B) equal to GDP. 
C) about four times larger than GDP. 
D) about one fourth the amount of GDP.

Question 11

The use of money makes us more efficient because:

Accepted Answer

A) we spend more time trading and more time producing. 
B) people can specialize in what they do well. 
C) with money we borrow less. 
D) money increases in value over time. 
A) we spend more time trading and more time producing. 
B) people can specialize in what they do well. 
C) with money we borrow less. 
D) money increases in value over time.

Question 12

An individual who stores wealth in art rather than money will find that he/she:

Accepted Answer

A) suffers larger real losses during periods of high inflation. 
B) has far more liquidity than most savers. 
C) will incur higher transaction costs when he/she ultimately makes purchases. 
D) will have to resort to barter exchanging the art for desired goods. 
A) suffers larger real losses during periods of high inflation. 
B) has far more liquidity than most savers. 
C) will incur higher transaction costs when he/she ultimately makes purchases. 
D) will have to resort to barter exchanging the art for desired goods.

Question 13

The income velocity of money is defined as nominal GDP divided by the money supply.In the first quarter of 2013 the U.S.nominal GDP was estimated to be around $16 trillion annually and M2 was $10460.3 billion.Would the income velocity of M2 be equal to 1;  1? Explain.

Accepted Answer

Greater than one.If you divide

Question 14

Explain how money solves the problem of the "double coincidence of wants."

Accepted Answer

In an economy that does not rely on the

Question 15

Sophia receives a $400 gift card for her campus bookstore from her parents.Which of the following is true regarding the $400 gift card?

Accepted Answer

A) It is counted only in M1. 
B) It is included in both M1 and M2. 
C) It is counted in only M2. 
D) Stored-value cards are not counted in either M1 or M2. 
A) It is counted only in M1. 
B) It is included in both M1 and M2. 
C) It is counted in only M2. 
D) Stored-value cards are not counted in either M1 or M2.

Question 16

Which of the following is incorrect?

Accepted Answer

A) Money is wealth but not all wealth is money. 
B) Money is a means of payment but is not part of wealth. 
C) An asset doesn't have to be a means of payment to be a part of a person's wealth. 
D) All items considered wealth can eventually be converted to a means of payment. 
A) Money is wealth but not all wealth is money. 
B) Money is a means of payment but is not part of wealth. 
C) An asset doesn't have to be a means of payment to be a part of a person's wealth. 
D) All items considered wealth can eventually be converted to a means of payment.

Question 17

Which of the following statements is incorrect?

Accepted Answer

A) If you can buy the same goods this year as you bought last year with less money there must have been deflation. 
B) If you can buy the same goods this year as you purchased one year ago with the same amount of money, prices are stable. 
C) If purchasing the same goods today that were purchased one year ago requires more money, there must have been inflation. 
D) If you can buy the same goods this year as you bought last year with the same money there must have been deflation. 
A) If you can buy the same goods this year as you bought last year with less money there must have been deflation. 
B) If you can buy the same goods this year as you purchased one year ago with the same amount of money, prices are stable. 
C) If purchasing the same goods today that were purchased one year ago requires more money, there must have been inflation. 
D) If you can buy the same goods this year as you bought last year with the same money there must have been deflation.

Question 18

The introduction of money market substitutes for basic checking accounts was fueled partially by the:

Accepted Answer

A) relatively high rates of inflation that existed in the late 1970s and early 1980s. 
B) reluctance of many retailers to accept checks. 
C) high number of bank failures that were occurring in the 1970s. 
D) higher interest rates banks had to pay on checking accounts. 
A) relatively high rates of inflation that existed in the late 1970s and early 1980s. 
B) reluctance of many retailers to accept checks. 
C) high number of bank failures that were occurring in the 1970s. 
D) higher interest rates banks had to pay on checking accounts.

Question 19

The store of value characteristic of money refers to the fact that:

Accepted Answer

A) people save most of their money. 
B) money allows people to shift purchasing power into the future. 
C) money is not valuable unless it is stored. 
D) money is the only way people have to store value. 
A) people save most of their money. 
B) money allows people to shift purchasing power into the future. 
C) money is not valuable unless it is stored. 
D) money is the only way people have to store value.

Question 20

What was the double liquidity shock that occurred in the U.S.financial system in the summer of 2007?

Accepted Answer

Investors began to doubt the value of a

Exam 2: Money and the Payments System

Inflation refers to growth in the economy's:

In comparing money to a share of Microsoft stock held by an individual, we can say:

Gold would be a superior commodity money compared to wheat because:

Suppose there is an economy that has 100 people each of whom makes a different good, and that they use a barter system for exchange.How many relative prices will there be?

What is included in M2 that is not included in M1?

The Consumer Price Index (CPI):

Which of the following could not be commodity money?

A cross-country analysis of money growth supports the conclusion that:

In a barter system people:

M1 is:

The use of money makes us more efficient because:

An individual who stores wealth in art rather than money will find that he/she:

The income velocity of money is defined as nominal GDP divided by the money supply.In the first quarter of 2013 the U.S.nominal GDP was estimated to be around $16 trillion annually and M2 was $10460.3 billion.Would the income velocity of M2 be equal to 1; < 1; or > 1? Explain.

Explain how money solves the problem of the "double coincidence of wants."

Sophia receives a $400 gift card for her campus bookstore from her parents.Which of the following is true regarding the $400 gift card?

Which of the following is incorrect?

Which of the following statements is incorrect?

The introduction of money market substitutes for basic checking accounts was fueled partially by the:

The store of value characteristic of money refers to the fact that:

What was the double liquidity shock that occurred in the U.S.financial system in the summer of 2007?

An Introduction to Money and the Financial System

Financial Instruments, Financial Markets, and Financial Institutions

Future Value, Present Value, and Interest Rates

Understanding Risk

Bonds, Bond Prices, and the Determination of Interest Rates

The Risk and Term Structure of Interest Rates

Stocks, Stock Markets, and Market Efficiency

Derivatives: Futures, Options, and Swaps

Foreign Exchange

The Economics of Financial Intermediation

Depository Institutions: Banks and Bank Management

Financial Industry Structure

Regulating the Financial System

Central Banks in the World Today

The Structure of Central Banks: The Federal Reserve and the European Central Bank

The Central Bank Balance Sheet and the Money Supply Process

Monetary Policy: Stabilizing the Domestic Economy

Exchange-Rate Policy and the Central Bank

Money Growth, Money Demand, and Modern Monetary Policy

Output, Inflation, and Monetary Policy

Understanding Business Cycle Fluctuations

Modern Monetary Policy and the Challenges Facing Central Bankers

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