Question 1

Rank the following assets from most liquid to least liquid.
a) Common stock
b) Houses
c) Currency
d) Art
e) Savings accounts
f) Checking account deposits.

Accepted Answer

Ranked from most liquid to lea

Question 2

Which of the following statements is most correct?

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) In order to be considered part of a person's wealth, an asset must have a positive return. 
D) Wealth is a store of value and 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) In order to be considered part of a person's wealth, an asset must have a positive return. 
D) Wealth is a store of value and a means of payment.

Question 3

Money eliminates the need for:

Accepted Answer

A) a search for a double coincidence of wants. 
B) government regulation. 
C) specialization of labor. 
D) financial Intermediaries. 
A) a search for a double coincidence of wants. 
B) government regulation. 
C) specialization of labor. 
D) financial Intermediaries.

Question 4

Which of the following assets is the most liquid?

Accepted Answer

A) Art 
B) Demand deposits 
C) Houses 
D) Stocks 
A) Art 
B) Demand deposits 
C) Houses 
D) Stocks

Question 5

You purchase a good by writing a check for $1,000.Considering the financial payments system this check follows, when is the check money? Explain.

Accepted Answer

The check itself is never money; rather

Question 6

The value of fiat money:

Accepted Answer

A) comes from its intrinsic value. 
B) is worth more as a commodity than its value as money. 
C) comes from government decree. 
D) means that it is more desirable than currency. 
A) comes from its intrinsic value. 
B) is worth more as a commodity than its value as money. 
C) comes from government decree. 
D) means that it is more desirable than currency.

Question 7

How has the Bureau of Labor Statistics (BLS) changed the calculation of the CPI in order to take substitution bias into account?

Accepted Answer

Substitution bias is an overstatement of

Question 8

While money is an asset not all assets are money because:

Accepted Answer

A) only money stores value. 
B) money works as a means of payment. 
C) only money is a good asset to hold during times of inflation. 
D) money must be legal tender. 
A) only money stores value. 
B) money works as a means of payment. 
C) only money is a good asset to hold during times of inflation. 
D) money must be legal tender.

Question 9

The high transaction costs associated with a barter system refers to the:

Accepted Answer

A) fact that, often times, these exchanges are taxed by governments. 
B) risk associated with having to carry an inventory of goods to trade. 
C) high cost associated with finding someone with whom to exchange. 
D) cost of drawing up complete contracts. 
A) fact that, often times, these exchanges are taxed by governments. 
B) risk associated with having to carry an inventory of goods to trade. 
C) high cost associated with finding someone with whom to exchange. 
D) cost of drawing up complete contracts.

Question 10

Sue uses a credit card to purchase a new pair of jeans.Sue is:

Accepted Answer

A) using money to buy her jeans since credit cards is money. 
B) creating a liability that she will ultimately have to pay with money. 
C) using an electronic payment form of money. 
D) using a form of money included in M2. 
A) using money to buy her jeans since credit cards is money. 
B) creating a liability that she will ultimately have to pay with money. 
C) using an electronic payment form of money. 
D) using a form of money included in M2.

Question 11

Which of the following would not be considered a characteristic of money?

Accepted Answer

A) It is a store of value. 
B) It is a means of payment. 
C) It must have intrinsic value. 
D) It is a unit of account. 
A) It is a store of value. 
B) It is a means of payment. 
C) It must have intrinsic value. 
D) It is a unit of account.

Question 12

During the Civil War, the North issued currency, known as "greenbacks".Which of the following is true of "greenbacks"?

Accepted Answer

A) Greenbacks are still legal tender in the U.S. 
B) Greenbacks were tied to the value of gold and silver. 
C) The South used "greenbacks" to pay for salaries and supplies. 
D) Greenbacks are a historical example of commodity money. 
A) Greenbacks are still legal tender in the U.S. 
B) Greenbacks were tied to the value of gold and silver. 
C) The South used "greenbacks" to pay for salaries and supplies. 
D) Greenbacks are a historical example of commodity money.

Question 13

Explain why the following statement is true, "money is an asset but not all assets are money."

Accepted Answer

Money is an asset because it r

Question 14

A cross-country analysis of money growth shows that the growth rate in the money supply was:

Accepted Answer

A) lower in countries with lower inflation rates. 
B) higher in countries with lower inflation rates. 
C) lower in countries with higher inflation rates. 
D) the same whether the countries had high or low inflation rates. 
A) lower in countries with lower inflation rates. 
B) higher in countries with lower inflation rates. 
C) lower in countries with higher inflation rates. 
D) the same whether the countries had high or low inflation rates.

Question 15

Consider an island where people use sand dollars (shells) as currency.For simplicity, assume that people consume only one good: fish.Currently, there are 400 sand dollars in circulation and there are 200 fish purchased each year.Based on this information, what is the price of fish?
Now, suppose that a change in climate leads to new sand dollars washing ashore, leaving a total of 500 sand dollars.If there are still 200 fish purchased each year, what is the new price of fish? In order to prevent inflation, what would have to happen to the amount of fish purchased each year?

Accepted Answer

When there are 400 sand dollars and 200

Question 16

How many prices would a trader of a particular good need to know in a barter economy with 20 goods?

Accepted Answer

A) 190 
B) 100 
C) 20 
D) 40 
A) 190 
B) 100 
C) 20 
D) 40

Question 17

After the Revolutionary War, the U.S.monetary system was based on gold.Historically, why did the U.S.adopt the use of gold as a currency? How does this compare with the currency used today?

Accepted Answer

Historically, the U.S.adopted the use of

Question 18

During the U.S.Civil War the Confederate government had to resort to printing currency to obtain the goods they needed.Comment on what you think happened to both prices and the value of this currency at the end of the war.

Accepted Answer

While the Confederate government was pri

Question 19

The U.S.Treasury estimates that the fraction of U.S.currency held outside the United States is:

Accepted Answer

A) about one-fourth. 
B) about half. 
C) between two-thirds and three-quarters. 
D) less than 10%. 
A) about one-fourth. 
B) about half. 
C) between two-thirds and three-quarters. 
D) less than 10%.

Question 20

In countries with low inflation:

Accepted Answer

A) M2 growth is a very strong forecaster of inflation. 
B) there tends to be a greater reliance on checks than electronic payments. 
C) M2 growth is a poor forecaster of inflation. 
D) money stocks are a larger percentage of GDP. 
A) M2 growth is a very strong forecaster of inflation. 
B) there tends to be a greater reliance on checks than electronic payments. 
C) M2 growth is a poor forecaster of inflation. 
D) money stocks are a larger percentage of GDP.

Exam 2: Money and the Payments System

Rank the following assets from most liquid to least liquid. a) Common stock b) Houses c) Currency d) Art e) Savings accounts f) Checking account deposits.

Which of the following statements is most correct?

Money eliminates the need for:

Which of the following assets is the most liquid?

You purchase a good by writing a check for $1,000.Considering the financial payments system this check follows, when is the check money? Explain.

The value of fiat money:

How has the Bureau of Labor Statistics (BLS) changed the calculation of the CPI in order to take substitution bias into account?

While money is an asset not all assets are money because:

The high transaction costs associated with a barter system refers to the:

Sue uses a credit card to purchase a new pair of jeans.Sue is:

Which of the following would not be considered a characteristic of money?

During the Civil War, the North issued currency, known as "greenbacks".Which of the following is true of "greenbacks"?

Explain why the following statement is true, "money is an asset but not all assets are money."

A cross-country analysis of money growth shows that the growth rate in the money supply was:

How many prices would a trader of a particular good need to know in a barter economy with 20 goods?

After the Revolutionary War, the U.S.monetary system was based on gold.Historically, why did the U.S.adopt the use of gold as a currency? How does this compare with the currency used today?

During the U.S.Civil War the Confederate government had to resort to printing currency to obtain the goods they needed.Comment on what you think happened to both prices and the value of this currency at the end of the war.

The U.S.Treasury estimates that the fraction of U.S.currency held outside the United States is:

In countries with low inflation:

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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