Question 1

An automobile is an asset, but it is not liquid because:

Accepted Answer

A) the transactions costs for turning it into money are high. 
B) the owner may still be making payments on the loan. 
C) the automobile may not be in good repair. 
D) the automobile cannot be sold without a loss in value. 
A) the transactions costs for turning it into money are high. 
B) the owner may still be making payments on the loan. 
C) the automobile may not be in good repair. 
D) the automobile cannot be sold without a loss in value.

Question 2

Many college campuses use student ID cards as a way for students to pay for on-campus expenses, such as books, photocopies, and food.For convenience, some students will maintain a balance on their ID cards.Are these balances a means of payment? Are they a store of value? Explain why or why not.

Accepted Answer

The balances on the cards serve as both

Question 3

In the chapter you read that it costs the U.S.Treasury's Bureau of Engraving and Printing around nine cents to print a note (currency), whether that bill is a one-dollar or one-hundred dollar bill.It seems the Treasury could generate a nice profit for the government by simply printing currency and using this currency to purchase the goods and services the government needs.In fact, this seems to be a way to eliminate the problem of budget deficits for the U.S.government.Comment on this idea.

Accepted Answer

At first it seems the Treasury could buy

Question 4

Which of the following statements is not true?

Accepted Answer

A) For most of history gold has been the most common commodity money. 
B) The most common form of money in the U.S.is not a commodity money. 
C) Gold is an example of a fiat money. 
D) U.S.currency is legal tender. 
A) For most of history gold has been the most common commodity money. 
B) The most common form of money in the U.S.is not a commodity money. 
C) Gold is an example of a fiat money. 
D) U.S.currency is legal tender.

Question 5

Which of the following statements is correct?

Accepted Answer

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

Question 6

Checks and currency function similarly, however:

Accepted Answer

A) currency is a more effective means of payment. 
B) carrying currency entails greater risk, because it cannot be replaced if lost or stolen. 
C) currency is a better store of value than checking deposits. 
D) checks are not included in measures of money, whereas currency is. 
A) currency is a more effective means of payment. 
B) carrying currency entails greater risk, because it cannot be replaced if lost or stolen. 
C) currency is a better store of value than checking deposits. 
D) checks are not included in measures of money, whereas currency is.

Question 7

Comparing checks and currency, we can say:

Accepted Answer

A) both are money but only currency is legal tender. 
B) only checks are both money and legal tender. 
C) a check isn't money but currency is. 
D) both are money and legal tender. 
A) both are money but only currency is legal tender. 
B) only checks are both money and legal tender. 
C) a check isn't money but currency is. 
D) both are money and legal tender.

Question 8

The amount of currency in the hands of the public is approximately what percentage of M1?

Accepted Answer

A) 45% 
B) 25% 
C) 30% 
D) 90% 
A) 45% 
B) 25% 
C) 30% 
D) 90%

Question 9

One advantage of using checks over a debit card is:

Accepted Answer

A) checks can be replaced if lost or stolen, a debit card cannot. 
B) the bank is responsible if someone steals your checks and uses them; this isn't the case with debit cards. 
C) a cancelled paper check is the only generally accepted proof of payment. 
D) the person has "float," meaning time between writing the check and depositing funds to cover it. 
A) checks can be replaced if lost or stolen, a debit card cannot. 
B) the bank is responsible if someone steals your checks and uses them; this isn't the case with debit cards. 
C) a cancelled paper check is the only generally accepted proof of payment. 
D) the person has "float," meaning time between writing the check and depositing funds to cover it.

Question 10

The purchasing power of money:

Accepted Answer

A) rises when inflation rises. 
B) decreases as the price level decreases. 
C) decreases with inflation. 
D) is not impacted by inflation, only by monetary policy. 
A) rises when inflation rises. 
B) decreases as the price level decreases. 
C) decreases with inflation. 
D) is not impacted by inflation, only by monetary policy.

Question 11

What distinguishes commodity money from fiat money?

Accepted Answer

Commodity money, such as gold or silver,

Question 12

One major difference between a debit card and a credit card is:

Accepted Answer

A) only the debit card helps you to build a credit history. 
B) the debit card has lower minimum monthly payments. 
C) you do not need to actually have the funds in your account when you use a debit card. 
D) debit cards have no late fees. 
A) only the debit card helps you to build a credit history. 
B) the debit card has lower minimum monthly payments. 
C) you do not need to actually have the funds in your account when you use a debit card. 
D) debit cards have no late fees.

Question 13

How useful is M2 in tracking inflation? Explain.

Accepted Answer

Empirical research mentioned in the chap

Question 14

What does it mean to say that an asset is "liquid"?

Accepted Answer

An asset is liquid when it can

Question 15

The Consumer Price Index (CPI):

Accepted Answer

A) tends to understate the impact of price changes. 
B) tends to overstate the impact of price changes due to substitution bias. 
C) is more accurate than the GDP deflator. 
D) assumes that consumers substitute away from cheaper goods. 
A) tends to understate the impact of price changes. 
B) tends to overstate the impact of price changes due to substitution bias. 
C) is more accurate than the GDP deflator. 
D) assumes that consumers substitute away from cheaper goods.

Question 16

Explain why credit cards are not considered money even though people seem to use them like money.

Accepted Answer

A credit card isn't money for a few reas

Question 17

There are three goods produced in an economy by three individuals:

Accepted Answer

@#IMG-DLM& If the orchard owner likes only bread,

Question 18

Specialization usually increases the output of a country; however effective specialization requires:

Accepted Answer

A) everyone in the country producing the same thing. 
B) that workers have very similar skills. 
C) an effective low-cost means to exchange goods and services. 
D) a large stock of capital. 
A) everyone in the country producing the same thing. 
B) that workers have very similar skills. 
C) an effective low-cost means to exchange goods and services. 
D) a large stock of capital.

Question 19

Economists study the link between money and inflation because:

Accepted Answer

A) they want to understand how to keep inflation low and stable. 
B) economists believe that inflation in the 3-6% range is healthy for an economy. 
C) as prices increase money becomes more valuable. 
D) the Fed needs to increase the money supply as prices increase. 
A) they want to understand how to keep inflation low and stable. 
B) economists believe that inflation in the 3-6% range is healthy for an economy. 
C) as prices increase money becomes more valuable. 
D) the Fed needs to increase the money supply as prices increase.

Question 20

The value of money as a means of payment:

Accepted Answer

A) is independent of changes in the amount of money in the economy. 
B) is fixed once relative prices are set. 
C) depends on the amount of money in the economy, among other things. 
D) depends on whether the majority of M1 is in currency or demand deposits. 
A) is independent of changes in the amount of money in the economy. 
B) is fixed once relative prices are set. 
C) depends on the amount of money in the economy, among other things. 
D) depends on whether the majority of M1 is in currency or demand deposits.

Exam 2: Money and the Payments System

An automobile is an asset, but it is not liquid because:

Many college campuses use student ID cards as a way for students to pay for on-campus expenses, such as books, photocopies, and food.For convenience, some students will maintain a balance on their ID cards.Are these balances a means of payment? Are they a store of value? Explain why or why not.

Which of the following statements is not true?

Which of the following statements is correct?

Checks and currency function similarly, however:

Comparing checks and currency, we can say:

The amount of currency in the hands of the public is approximately what percentage of M1?

One advantage of using checks over a debit card is:

The purchasing power of money:

What distinguishes commodity money from fiat money?

One major difference between a debit card and a credit card is:

How useful is M2 in tracking inflation? Explain.

What does it mean to say that an asset is "liquid"?

The Consumer Price Index (CPI):

Explain why credit cards are not considered money even though people seem to use them like money.

There are three goods produced in an economy by three individuals:

Specialization usually increases the output of a country; however effective specialization requires:

Economists study the link between money and inflation because:

The value of money as a means of payment:

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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