Question 1

When the Continental Congress issued currency to finance the Revolutionary War, the Continental Congress:

Accepted Answer

A) issued too many "continentals," eventually making the currency worthless. 
B) tied the value of the "continental" to gold. 
C) tied the value of the "continental" to gold to French "assignats." 
D) made "continentals" legal tender. 
A) issued too many "continentals," eventually making the currency worthless. 
B) tied the value of the "continental" to gold. 
C) tied the value of the "continental" to gold to French "assignats." 
D) made "continentals" legal tender.

Question 2

In comparing money to a U.S.Treasury bond held by an individual, we can say:

Accepted Answer

A) the treasury bond is an asset but money is not. 
B) money is an asset but the U.S.bond is a liability of the individual. 
C) both are stores of value. 
D) money is a store of value but the bond is not. 
A) the treasury bond is an asset but money is not. 
B) money is an asset but the U.S.bond is a liability of the individual. 
C) both are stores of value. 
D) money is a store of value but the bond is not.

Question 3

A policy is time consistent when:

Accepted Answer

A) policymakers have incentives to adhere to a policy decision made today, in the future. 
B) policymakers have incentives to make policy decisions in a time-sensitive fashion. 
C) policymakers consider the future when making current policies. 
D) the timing of a policy is irrelevant. 
A) policymakers have incentives to adhere to a policy decision made today, in the future. 
B) policymakers have incentives to make policy decisions in a time-sensitive fashion. 
C) policymakers consider the future when making current policies. 
D) the timing of a policy is irrelevant.

Question 4

Have the growth rates of the two measures of money moved together over time? Explain.

Accepted Answer

From 1960 to 1980 the growth rates of th

Question 5

A society without any money:

Accepted Answer

A) could never exchange goods and/or services. 
B) would find people doing everything for themselves. 
C) would have to rely on barter. 
D) would be more efficient since people would be more self-sufficient. 
A) could never exchange goods and/or services. 
B) would find people doing everything for themselves. 
C) would have to rely on barter. 
D) would be more efficient since people would be more self-sufficient.

Question 6

Explain the difference(s) between a debit card and a credit card.

Accepted Answer

A debit card works the same way as a che

Question 7

The unit of account characteristic of money:

Accepted Answer

A) makes it difficult to compare the relative prices of goods and services. 
B) refers to how we use money to transfer purchasing power over time. 
C) means prices are expressed in terms of money. 
D) means that money finalizes payments. 
A) makes it difficult to compare the relative prices of goods and services. 
B) refers to how we use money to transfer purchasing power over time. 
C) means prices are expressed in terms of money. 
D) means that money finalizes payments.

Question 8

One major difference between a debit and credit card is:

Accepted Answer

A) you can build a credit history with the credit card but not with the debit card. 
B) you have to pay interest on your purchases if you use a credit card. 
C) credit cards are money and the debit card is not. 
D) debit cards charge late fees. 
A) you can build a credit history with the credit card but not with the debit card. 
B) you have to pay interest on your purchases if you use a credit card. 
C) credit cards are money and the debit card is not. 
D) debit cards charge late fees.

Question 9

In comparing money to a U.S.Treasury bond held by an individual, we can say:

Accepted Answer

A) both are legal tender. 
B) both are units of account. 
C) only the bond is legal tender since it is an obligation of the U.S.government. 
D) both are stores of value. 
A) both are legal tender. 
B) both are units of account. 
C) only the bond is legal tender since it is an obligation of the U.S.government. 
D) both are stores of value.

Question 10

Is the characteristic that distinguishes money from other assets its ability to be a store of value?

Accepted Answer

No; there are many assets that fall into

Question 11

Considering the roughly $1.2 trillion in U.S.currency held by the public:

Accepted Answer

A) over 90% of the amount is held in the form of $1 bills. 
B) more than three-fourths is held in the form of $100 bills. 
C) over half of the currency held in the form of $20 bills. 
D) the Federal Reserve distributes the amount equally across all denominations of bills. 
A) over 90% of the amount is held in the form of $1 bills. 
B) more than three-fourths is held in the form of $100 bills. 
C) over half of the currency held in the form of $20 bills. 
D) the Federal Reserve distributes the amount equally across all denominations of bills.

Question 12

The primary concern of current critics of fiat money is that:

Accepted Answer

A) fiat money is too costly to produce. 
B) governments issue too much money threatening its value. 
C) fiat money is too easy to counterfeit. 
D) government will issue too little threatening economic growth. 
A) fiat money is too costly to produce. 
B) governments issue too much money threatening its value. 
C) fiat money is too easy to counterfeit. 
D) government will issue too little threatening economic growth.

Question 13

To say an asset is liquid implies that:

Accepted Answer

A) we are focusing on a category of assets that are in a physically liquid form, like oil. 
B) we are considering assets that may be readily converted into a means of payment. 
C) we are considering any asset that can be sold. 
D) we are only considering U.S.currency. 
A) we are focusing on a category of assets that are in a physically liquid form, like oil. 
B) we are considering assets that may be readily converted into a means of payment. 
C) we are considering any asset that can be sold. 
D) we are only considering U.S.currency.

Question 14

M1 is:

Accepted Answer

A) a more useful measure of the relationship between the money supply and inflation because it includes the most liquid assets. 
B) the money supply the Federal Reserve pays the most attention to in conducting monetary policy. 
C) less useful than M2 for understanding inflation. 
D) the fastest growing of all of the money aggregates. 
A) a more useful measure of the relationship between the money supply and inflation because it includes the most liquid assets. 
B) the money supply the Federal Reserve pays the most attention to in conducting monetary policy. 
C) less useful than M2 for understanding inflation. 
D) the fastest growing of all of the money aggregates.

Question 15

Carlos pays his cable bill using his bank's internet banking web site to withdraw funds from his checking account.This transaction is a(n):

Accepted Answer

A) automated clearinghouse transaction (ACH). 
B) digitized-check transaction. 
C) e-money transaction. 
D) fedwire transaction. 
A) automated clearinghouse transaction (ACH). 
B) digitized-check transaction. 
C) e-money transaction. 
D) fedwire transaction.

Question 16

Why do economists claim the Consumer Price Index (CPI) tends to overstate the actual rate of inflation?

Accepted Answer

The CPI is measured using a fixed-expend

Question 17

The money aggregate M1 includes each of the following, except:

Accepted Answer

A) currency in the hands of the public. 
B) travelers checks that have been issued. 
C) currency in the vaults of commercial banks. 
D) demand deposits at commercial banks. 
A) currency in the hands of the public. 
B) travelers checks that have been issued. 
C) currency in the vaults of commercial banks. 
D) demand deposits at commercial banks.

Question 18

The most commonly quoted monetary aggregate is:

Accepted Answer

A) money-market mutual fund shares. 
B) M1 since it is the most liquid. 
C) public currency. 
D) M2 since its movement is most closely related to interest rates and economic growth. 
A) money-market mutual fund shares. 
B) M1 since it is the most liquid. 
C) public currency. 
D) M2 since its movement is most closely related to interest rates and economic growth.

Question 19

During what period was money a better store of value: 1960-1980 or 1990-2009? Explain.

Accepted Answer

The period 1990-2009.During th

Question 20

Suppose that in a barter economy Tom bakes bread and Hans produces chocolates.Tom wants chocolates but Hans doesn't like bread, so Hans is unwilling to trade with Tom.Tom's problem is an example of which problem associated with a barter system?

Accepted Answer

A) Too much specialization 
B) Not enough prices 
C) The law of diminishing returns 
D) The double coincidence of wants problem 
A) Too much specialization 
B) Not enough prices 
C) The law of diminishing returns 
D) The double coincidence of wants problem

Exam 2: Money and the Payments System

When the Continental Congress issued currency to finance the Revolutionary War, the Continental Congress:

In comparing money to a U.S.Treasury bond held by an individual, we can say:

A policy is time consistent when:

Have the growth rates of the two measures of money moved together over time? Explain.

A society without any money:

Explain the difference(s) between a debit card and a credit card.

The unit of account characteristic of money:

One major difference between a debit and credit card is:

In comparing money to a U.S.Treasury bond held by an individual, we can say:

Is the characteristic that distinguishes money from other assets its ability to be a store of value?

Considering the roughly $1.2 trillion in U.S.currency held by the public:

The primary concern of current critics of fiat money is that:

To say an asset is liquid implies that:

M1 is:

Carlos pays his cable bill using his bank's internet banking web site to withdraw funds from his checking account.This transaction is a(n):

Why do economists claim the Consumer Price Index (CPI) tends to overstate the actual rate of inflation?

The money aggregate M1 includes each of the following, except:

The most commonly quoted monetary aggregate is:

During what period was money a better store of value: 1960-1980 or 1990-2009? Explain.

Suppose that in a barter economy Tom bakes bread and Hans produces chocolates.Tom wants chocolates but Hans doesn't like bread, so Hans is unwilling to trade with Tom.Tom's problem is an example of which problem associated with a barter system?

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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