Question 1

Money market deposit accounts are included in

Accepted Answer

A) only M1. 
B) only M2. 
C) M1 and M2. 
D) neither M1 nor M2. 
A) only M1. 
B) only M2. 
C) M1 and M2. 
D) neither M1 nor M2.

Question 2

Why do individuals hold money when it does not provide the services that, say, a house does?

Accepted Answer

A) Money is the most liquid asset. 
B) Money is the only form in which wealth may be held. 
C) Money increases in value faster than other assets. 
D) Money is useful in avoiding taxes on certain transactions. 
A) Money is the most liquid asset. 
B) Money is the only form in which wealth may be held. 
C) Money increases in value faster than other assets. 
D) Money is useful in avoiding taxes on certain transactions.

Question 3

Money that has no value other apart from its use as money:

Accepted Answer

A) is known as commodity money 
B) is known as fiat money 
C) will result in a return to a barter system 
D) will result in rapid inflation 
A) is known as commodity money 
B) is known as fiat money 
C) will result in a return to a barter system 
D) will result in rapid inflation

Question 4

Andy can't make a deal with Danny. Andy has a Alex Rodriguez baseball card and would like to trade it to Danny for Danny's Albert Pujols card, but Danny doesn't want a Alex Rodriquez card. Andy's problem illustrates the drawback to a barter system known as

Accepted Answer

A) the specialization problem. 
B) the double coincidence of wants problem. 
C) the many prices problem. 
D) the transactions problem. 
A) the specialization problem. 
B) the double coincidence of wants problem. 
C) the many prices problem. 
D) the transactions problem.

Question 5

By designating Federal Reserve currency as legal tender, the federal government

Accepted Answer

A) has ensured that Federal Reserve currency will serve as money. 
B) has guaranteed that Federal Reserve currency may be exchanged for an equivalent amount of gold or silver. 
C) has mandated that Federal Reserve currency be accepted for payment of debts. 
D) has mandated that Federal Reserve currency be accepted by citizens of foreign countries in exchange for their countries' currencies. 
A) has ensured that Federal Reserve currency will serve as money. 
B) has guaranteed that Federal Reserve currency may be exchanged for an equivalent amount of gold or silver. 
C) has mandated that Federal Reserve currency be accepted for payment of debts. 
D) has mandated that Federal Reserve currency be accepted by citizens of foreign countries in exchange for their countries' currencies.

Question 6

Checks are

Accepted Answer

A) not acceptable for settling transactions in most industrialized countries. 
B) less important than currency as a means of settling transactions. 
C) promises to pay on demand money deposited with a financial institution. 
D) promises to pay coins minted from precious metals on demand. 
A) not acceptable for settling transactions in most industrialized countries. 
B) less important than currency as a means of settling transactions. 
C) promises to pay on demand money deposited with a financial institution. 
D) promises to pay coins minted from precious metals on demand.

Question 7

When economists refer to the role of money as a store of value, they mean that

Accepted Answer

A) money never loses its value, unlike other assets. 
B) money allows value to be stored easily. 
C) the value of money falls only when the quantity of money in circulation falls. 
D) the value of money falls only when the quantity of money in circulation rises. 
A) money never loses its value, unlike other assets. 
B) money allows value to be stored easily. 
C) the value of money falls only when the quantity of money in circulation falls. 
D) the value of money falls only when the quantity of money in circulation rises.

Question 8

In a barter system individuals

Accepted Answer

A) find it impossible to specialize. 
B) must be entirely self-sufficient. 
C) find it difficult to specialize, but may be able to do so. 
D) will almost invariably specialize. 
A) find it impossible to specialize. 
B) must be entirely self-sufficient. 
C) find it difficult to specialize, but may be able to do so. 
D) will almost invariably specialize.

Question 9

As of October 2012, approximately what portion of U.S. currency is held outside of the United States?

Accepted Answer

A) 1/10 
B) 1/3 
C) 1/2 
D) 2/3 
A) 1/10 
B) 1/3 
C) 1/2 
D) 2/3

Question 10

According to the equation of exchange, how can national income grow even though the amount of money does not?

Accepted Answer

A) price level increases 
B) real GDP decrease 
C) velocity increases 
D) velocity decreases 
A) price level increases 
B) real GDP decrease 
C) velocity increases 
D) velocity decreases

Question 11

In what sense do self-fulfilling expectations determine the acceptability of a medium of exchange?

Accepted Answer

A) People like to do what the government expects them to do. 
B) People value something as money only if they believe others will accept it from them as payment. 
C) People expect that money will never lose its value. 
D) People expect that eventually every country will use the same medium of exchange. 
A) People like to do what the government expects them to do. 
B) People value something as money only if they believe others will accept it from them as payment. 
C) People expect that money will never lose its value. 
D) People expect that eventually every country will use the same medium of exchange.

Question 12

Which of the following is NOT an important criterion for whether a good will be usable as a medium of exchange?

Accepted Answer

A) The good must be of standardized quality. 
B) The good must be valuable relative to its weight. 
C) The good must have value even if it were not being used as money. 
D) The good must be durable so that value is not lost through product spoilage. 
A) The good must be of standardized quality. 
B) The good must be valuable relative to its weight. 
C) The good must have value even if it were not being used as money. 
D) The good must be durable so that value is not lost through product spoilage.

Question 13

Which function of money allows for specialization to take place?

Accepted Answer

A) medium of exchange 
B) unit of account 
C) store of value 
D) standard of deferred payment 
A) medium of exchange 
B) unit of account 
C) store of value 
D) standard of deferred payment

Question 14

In what way are other assets less liquid than money?

Accepted Answer

You incur transactio

Question 15

Using a good as a medium of exchange confers the benefit that

Accepted Answer

A) the need to quote so many prices in trade is reduced. 
B) the need for a double coincidence of wants is greatly increased. 
C) the need for specialization is reduced. 
D) transactions costs are increased, but they now may be paid in money terms. 
A) the need to quote so many prices in trade is reduced. 
B) the need for a double coincidence of wants is greatly increased. 
C) the need for specialization is reduced. 
D) transactions costs are increased, but they now may be paid in money terms.

Question 16

Which of the following is NOT a step involved in using checks?

Accepted Answer

A) The recipient must take the check to the bank. 
B) The bank must present the check to the checkwriter's bank. 
C) The funds must be transferred from the checkwriter's bank to the recipient's bank. 
D) The funds must be transferred from the recipient's bank to the checkwriter's bank. 
A) The recipient must take the check to the bank. 
B) The bank must present the check to the checkwriter's bank. 
C) The funds must be transferred from the checkwriter's bank to the recipient's bank. 
D) The funds must be transferred from the recipient's bank to the checkwriter's bank.

Question 17

Money can BEST be described as:

Accepted Answer

A) anything that is generally accepted as payment for goods and services or in the settlement of debts. 
B) paper that can be used to purchase goods and services 
C) commodities that have intrinsic value 
D) any form of wealth possessed by consumers 
A) anything that is generally accepted as payment for goods and services or in the settlement of debts. 
B) paper that can be used to purchase goods and services 
C) commodities that have intrinsic value 
D) any form of wealth possessed by consumers

Question 18

Why does the payments system continue to change over time?

Accepted Answer

New forms of payments are intr

Question 19

A system of barter has substantial transactions costs because

Accepted Answer

A) taxes under such a system are generally a large fraction of the value of output. 
B) traders must spend considerable time searching for trading partners. 
C) the uncertainties of trade result in high legal fees being incurred to draw up binding contracts. 
D) the uncertainties of trade result in high insurance premiums. 
A) taxes under such a system are generally a large fraction of the value of output. 
B) traders must spend considerable time searching for trading partners. 
C) the uncertainties of trade result in high legal fees being incurred to draw up binding contracts. 
D) the uncertainties of trade result in high insurance premiums.

Question 20

In Moscow in 1989, what were taxi drivers using as a medium of exchange?

Accepted Answer

A) Russian rubles 
B) Marlboro cigarettes 
C) gold coins 
D) caviar 
A) Russian rubles 
B) Marlboro cigarettes 
C) gold coins 
D) caviar

Money market deposit accounts are included in

Why do individuals hold money when it does not provide the services that, say, a house does?

Money that has no value other apart from its use as money:

Andy can't make a deal with Danny. Andy has a Alex Rodriguez baseball card and would like to trade it to Danny for Danny's Albert Pujols card, but Danny doesn't want a Alex Rodriquez card. Andy's problem illustrates the drawback to a barter system known as

By designating Federal Reserve currency as legal tender, the federal government

Checks are

When economists refer to the role of money as a store of value, they mean that

In a barter system individuals

As of October 2012, approximately what portion of U.S. currency is held outside of the United States?

According to the equation of exchange, how can national income grow even though the amount of money does not?

In what sense do self-fulfilling expectations determine the acceptability of a medium of exchange?

Which of the following is NOT an important criterion for whether a good will be usable as a medium of exchange?

Which function of money allows for specialization to take place?

In what way are other assets less liquid than money?

Using a good as a medium of exchange confers the benefit that

Which of the following is NOT a step involved in using checks?

Money can BEST be described as:

Why does the payments system continue to change over time?

A system of barter has substantial transactions costs because

In Moscow in 1989, what were taxi drivers using as a medium of exchange?

Introducing Money and the Financial System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, Information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, Asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, Mutual Funds, Hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I: The Aggregate Demand and Aggregate Supply Model

Monetary Theory II: The IS-MP Model

Filters

Exam 2: Money and the Payments System

Money market deposit accounts are included in

Why do individuals hold money when it does not provide the services that, say, a house does?

Money that has no value other apart from its use as money:

Andy can't make a deal with Danny. Andy has a Alex Rodriguez baseball card and would like to trade it to Danny for Danny's Albert Pujols card, but Danny doesn't want a Alex Rodriquez card. Andy's problem illustrates the drawback to a barter system known as

By designating Federal Reserve currency as legal tender, the federal government

Checks are

When economists refer to the role of money as a store of value, they mean that

In a barter system individuals

As of October 2012, approximately what portion of U.S. currency is held outside of the United States?

According to the equation of exchange, how can national income grow even though the amount of money does not?

In what sense do self-fulfilling expectations determine the acceptability of a medium of exchange?

Which of the following is NOT an important criterion for whether a good will be usable as a medium of exchange?

Which function of money allows for specialization to take place?

In what way are other assets less liquid than money?

Using a good as a medium of exchange confers the benefit that

Which of the following is NOT a step involved in using checks?

Money can BEST be described as:

Why does the payments system continue to change over time?

A system of barter has substantial transactions costs because

In Moscow in 1989, what were taxi drivers using as a medium of exchange?

Introducing Money and the Financial System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, Information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, Asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, Mutual Funds, Hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I: The Aggregate Demand and Aggregate Supply Model

Monetary Theory II: The IS-MP Model

Filters