Question 1

Which of the following makes up the largest share of M2?

Accepted Answer

A) M1 
B) savings deposits 
C) small time deposits 
D) money market mutual fund shares 
A) M1 
B) savings deposits 
C) small time deposits 
D) money market mutual fund shares

Question 2

A person's earnings over a period of time is known as

Accepted Answer

A) money 
B) income 
C) wealth 
D) all of the above 
A) money 
B) income 
C) wealth 
D) all of the above

Question 3

All of the following are problems associated with commodity money EXCEPT

Accepted Answer

A) it is a cumbersome form of payments system. 
B) commodities tend to have little value in and of themselves. 
C) its value is dependent on its purity. 
D) costs are incurred in certifying the purity and weight of commodity money. 
A) it is a cumbersome form of payments system. 
B) commodities tend to have little value in and of themselves. 
C) its value is dependent on its purity. 
D) costs are incurred in certifying the purity and weight of commodity money.

Question 4

Make use of the quantity theory of money to solve the following problem. If the Fed has an inflation target of 2% and the velocity of money is constant, by how much should it increase the money supply each year if economic growth is expected to average 3%?

Accepted Answer

Since the percent change in th

Question 5

When an economy relies on specialization,

Accepted Answer

A) the economy will generally produce only one product. 
B) the economy will usually be heavily agricultural. 
C) each individual in the economy produces the goods or services for which he or she has relatively the best ability. 
D) each individual will be assigned by the government to produce that good or service the government believes the economy should specialize in. 
A) the economy will generally produce only one product. 
B) the economy will usually be heavily agricultural. 
C) each individual in the economy produces the goods or services for which he or she has relatively the best ability. 
D) each individual will be assigned by the government to produce that good or service the government believes the economy should specialize in.

Question 6

Suppose the GDP implicit price deflator was 112.7 in 2013 and 116.0 in 2014. Therefore, the inflation rate in 2014 would be

Accepted Answer

A) 2)8%. 
B) 2)9%. 
C) 3)3%. 
D) 16%. 
A) 2)8%. 
B) 2)9%. 
C) 3)3%. 
D) 16%.

Question 7

Hyperinflations are usually caused by large budget deficits financed by

Accepted Answer

A) selling bonds to private investors. 
B) selling bonds to the central bank. 
C) raising taxes. 
D) borrowing from commercial banks. 
A) selling bonds to private investors. 
B) selling bonds to the central bank. 
C) raising taxes. 
D) borrowing from commercial banks.

Question 8

Which of the following is included in M1, but not in M2?

Accepted Answer

A) currency 
B) checking account deposits 
C) travelers checks 
D) Everything in M1 is in M2. 
A) currency 
B) checking account deposits 
C) travelers checks 
D) Everything in M1 is in M2.

Question 9

Fiat money

Accepted Answer

A) is money that would have no value if it were not usable as money. 
B) is illegal in most advanced, industrial countries. 
C) is usually some type of precious metal. 
D) will generally be accepted in trade for less than its face value. 
A) is money that would have no value if it were not usable as money. 
B) is illegal in most advanced, industrial countries. 
C) is usually some type of precious metal. 
D) will generally be accepted in trade for less than its face value.

Question 10

Suppose nominal GDP is $14 trillion and the money supply is $2 trillion. What is the velocity of money?

Accepted Answer

A) 0)143 
B) 7 
C) 12 
D) 28 
A) 0)143 
B) 7 
C) 12 
D) 28

Question 11

The M2 aggregate

Accepted Answer

A) includes M1 plus short-term investment accounts. 
B) includes M1 plus large-denomination time deposits. 
C) equals currency plus checking account deposits at commercial banks. 
D) is the best definition of money purely as a medium of exchange. 
A) includes M1 plus short-term investment accounts. 
B) includes M1 plus large-denomination time deposits. 
C) equals currency plus checking account deposits at commercial banks. 
D) is the best definition of money purely as a medium of exchange.

Question 12

Which of the following is NOT a problem with barter?

Accepted Answer

A) each good has multiple prices 
B) high transactions costs 
C) the commodity money having value for other uses besides money 
D) lack of standardization of products exchanged 
A) each good has multiple prices 
B) high transactions costs 
C) the commodity money having value for other uses besides money 
D) lack of standardization of products exchanged

Question 13

Which function of money enhances the ability of households to accumulate wealth

Accepted Answer

A) medium of exchange 
B) store of value 
C) valuable relative to its weight 
D) does not become worn out too quickly 
A) medium of exchange 
B) store of value 
C) valuable relative to its weight 
D) does not become worn out too quickly

Question 14

Money is a medium of exchange in that

Accepted Answer

A) money is generally accepted for buying and selling goods and services. 
B) currency may be exchanged for gold at any national bank. 
C) other assets may be better or worse in facilitating exchange than money. 
D) it must maintain most of its value over time. 
A) money is generally accepted for buying and selling goods and services. 
B) currency may be exchanged for gold at any national bank. 
C) other assets may be better or worse in facilitating exchange than money. 
D) it must maintain most of its value over time.

Question 15

The American Civil War lasted from the spring of 1861 to the spring of 1865. During the war the Confederate government issued substantial amounts of fiat paper currency. What do you think happened to the price level (measured in Confederate dollars)in the Confederate states during the final months of the war?

Accepted Answer

During the final months of the war, the

Question 16

Which of the following is an example of fiat money?

Accepted Answer

A) a cowry shell used as money on a South Pacific island 
B) a gold coin used as money in nineteenth century England 
C) a Federal Reserve Note used as money in the twenty-first century United States 
D) a pound of salt used as money in medieval France 
A) a cowry shell used as money on a South Pacific island 
B) a gold coin used as money in nineteenth century England 
C) a Federal Reserve Note used as money in the twenty-first century United States 
D) a pound of salt used as money in medieval France

Question 17

Which of the following is the largest measure of money in the United States?

Accepted Answer

A) Federal Reserve notes 
B) definitive money 
C) M1 
D) M2 
A) Federal Reserve notes 
B) definitive money 
C) M1 
D) M2

Question 18

In quantity theory terms, during a hyperinflation,

Accepted Answer

A) money supply increases rapidly, but velocity does not 
B) velocity increases rapidly, but money supply does not 
C) both the money supply and velocity increase rapidly 
D) neither the money supply nor velocity increase rapidly 
A) money supply increases rapidly, but velocity does not 
B) velocity increases rapidly, but money supply does not 
C) both the money supply and velocity increase rapidly 
D) neither the money supply nor velocity increase rapidly

Question 19

Make use of the quantity equation to answer the following problem. If the Fed increases the money supply by 4%, velocity increases by 1%, and economic growth is 3%, by how much will the price level increase?

Accepted Answer

Since the percent change in the money su

Question 20

Which country experiencing hyperinflation in excess of 15 billion percent in 2008?

Accepted Answer

A) Argentina 
B) Canada 
C) Iceland 
D) Zimbabwe 
A) Argentina 
B) Canada 
C) Iceland 
D) Zimbabwe

Which of the following makes up the largest share of M2?

A person's earnings over a period of time is known as

All of the following are problems associated with commodity money EXCEPT

Make use of the quantity theory of money to solve the following problem. If the Fed has an inflation target of 2% and the velocity of money is constant, by how much should it increase the money supply each year if economic growth is expected to average 3%?

When an economy relies on specialization,

Suppose the GDP implicit price deflator was 112.7 in 2013 and 116.0 in 2014. Therefore, the inflation rate in 2014 would be

Hyperinflations are usually caused by large budget deficits financed by

Which of the following is included in M1, but not in M2?

Fiat money

Suppose nominal GDP is $14 trillion and the money supply is $2 trillion. What is the velocity of money?

The M2 aggregate

Which of the following is NOT a problem with barter?

Which function of money enhances the ability of households to accumulate wealth

Money is a medium of exchange in that

Which of the following is an example of fiat money?

Which of the following is the largest measure of money in the United States?

In quantity theory terms, during a hyperinflation,

Make use of the quantity equation to answer the following problem. If the Fed increases the money supply by 4%, velocity increases by 1%, and economic growth is 3%, by how much will the price level increase?

Which country experiencing hyperinflation in excess of 15 billion percent in 2008?

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

Which of the following makes up the largest share of M2?

A person's earnings over a period of time is known as

All of the following are problems associated with commodity money EXCEPT

Make use of the quantity theory of money to solve the following problem. If the Fed has an inflation target of 2% and the velocity of money is constant, by how much should it increase the money supply each year if economic growth is expected to average 3%?

When an economy relies on specialization,

Suppose the GDP implicit price deflator was 112.7 in 2013 and 116.0 in 2014. Therefore, the inflation rate in 2014 would be

Hyperinflations are usually caused by large budget deficits financed by

Which of the following is included in M1, but not in M2?

Fiat money

Suppose nominal GDP is $14 trillion and the money supply is $2 trillion. What is the velocity of money?

The M2 aggregate

Which of the following is NOT a problem with barter?

Which function of money enhances the ability of households to accumulate wealth

Money is a medium of exchange in that

Which of the following is an example of fiat money?

Which of the following is the largest measure of money in the United States?

In quantity theory terms, during a hyperinflation,

Make use of the quantity equation to answer the following problem. If the Fed increases the money supply by 4%, velocity increases by 1%, and economic growth is 3%, by how much will the price level increase?

Which country experiencing hyperinflation in excess of 15 billion percent in 2008?

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