Question 1

A fall in the level of prices

Accepted Answer

A) does not affect the value of money. 
B) has an uncertain effect on the value of money. 
C) increases the value of money. 
D) reduces the value of money. 
A) does not affect the value of money. 
B) has an uncertain effect on the value of money. 
C) increases the value of money. 
D) reduces the value of money. C

Question 2

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

Accepted Answer

A) Currency 
B) Traveler's checks 
C) Demand deposits 
D) Small-denomination time deposits 
A) Currency 
B) Traveler's checks 
C) Demand deposits 
D) Small-denomination time deposits D

Question 3

Patrick places his pocket change into his savings bank on his desk each evening.By his actions,Patrick indicates that he believes that money is a

Accepted Answer

A) medium of exchange. 
B) unit of account. 
C) store of value. 
D) unit of specialization. 
A) medium of exchange. 
B) unit of account. 
C) store of value. 
D) unit of specialization. C

Question 4

The payments system is

Accepted Answer

A) the method of conducting transactions in the economy. 
B) used by union officials to set salary caps. 
C) an illegal method of rewarding contracts. 
D) used by your employer to determine salary increases. 
A) the method of conducting transactions in the economy. 
B) used by union officials to set salary caps. 
C) an illegal method of rewarding contracts. 
D) used by your employer to determine salary increases.

Question 5

Of the following assets,the least liquid is

Accepted Answer

A) stocks. 
B) traveler's checks. 
C) checking deposits. 
D) a house. 
A) stocks. 
B) traveler's checks. 
C) checking deposits. 
D) a house.

Question 6

Compared to an economy that uses a medium of exchange,in a barter economy

Accepted Answer

A) transaction costs are higher. 
B) transaction costs are lower. 
C) liquidity costs are higher. 
D) liquidity costs are lower. 
A) transaction costs are higher. 
B) transaction costs are lower. 
C) liquidity costs are higher. 
D) liquidity costs are lower.

Question 7

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

Accepted Answer

A) NOW accounts 
B) Demand deposits 
C) Currency 
D) Money market mutual fund shares (retail) 
A) NOW accounts 
B) Demand deposits 
C) Currency 
D) Money market mutual fund shares (retail)

Question 8

Increasing transactions costs of selling an asset make the asset

Accepted Answer

A) more valuable. 
B) more liquid. 
C) less liquid. 
D) more moneylike. 
A) more valuable. 
B) more liquid. 
C) less liquid. 
D) more moneylike.

Question 9

________ is the narrowest monetary aggregate that the Fed reports.

Accepted Answer

A) M0 
B) M1 
C) M2 
D) M3 
A) M0 
B) M1 
C) M2 
D) M3

Question 10

Which of the following is a true statement?

Accepted Answer

A) Money and income are flow variables. 
B) Money is a flow variable. 
C) Income is a flow variable. 
D) Money and income are stock variables. 
A) Money and income are flow variables. 
B) Money is a flow variable. 
C) Income is a flow variable. 
D) Money and income are stock variables.

Question 11

A person's house is part of her

Accepted Answer

A) money. 
B) income. 
C) liabilities. 
D) wealth. 
A) money. 
B) income. 
C) liabilities. 
D) wealth.

Question 12

Which of the following is not a form of e-money?

Accepted Answer

A) a debit card 
B) a credit card 
C) a stored-value card 
D) a smart card 
A) a debit card 
B) a credit card 
C) a stored-value card 
D) a smart card

Question 13

The Fed estimates initial monetary aggregate reports because ________ depository institutions report the amount of their deposits infrequently.

Accepted Answer

A) all 
B) small 
C) large 
D) state 
A) all 
B) small 
C) large 
D) state

Question 14

What factors have slowed down the movement to a system where all payments are made electronically?

Accepted Answer

The equipment necessary to set up the sy

Question 15

In explaining the evolution of money

Accepted Answer

A) government regulation is the most important factor. 
B) commodity money,because it is valued more highly,tends to drive out paper money. 
C) new forms of money evolve to lower transaction costs. 
D) paper money is always backed by gold and therefore more desirable than checks. 
A) government regulation is the most important factor. 
B) commodity money,because it is valued more highly,tends to drive out paper money. 
C) new forms of money evolve to lower transaction costs. 
D) paper money is always backed by gold and therefore more desirable than checks.

Question 16

All of the following are necessary criteria for a commodity to function as money except

Accepted Answer

A) it must deteriorate quickly. 
B) it must be divisible. 
C) it must be easy to carry. 
D) it must be widely accepted. 
A) it must deteriorate quickly. 
B) it must be divisible. 
C) it must be easy to carry. 
D) it must be widely accepted.

Question 17

Explain how cigarettes could be called "money" in prisoner-of-war camps of World War II.

Accepted Answer

The cigarettes performed the three funct

Question 18

A problem with barter exchange when there are many goods is that in a barter system

Accepted Answer

A) transactions costs are minimized. 
B) there exists a multiple number of prices for each good. 
C) there is only one store of value. 
D) exchange of services is impossible. 
A) transactions costs are minimized. 
B) there exists a multiple number of prices for each good. 
C) there is only one store of value. 
D) exchange of services is impossible.

Question 19

Compared to an electronic payments system,a payments system based on checks has the major drawback that

Accepted Answer

A) checks are less costly to process. 
B) checks take longer to process,meaning that it may take several days before the depositor can get her cash. 
C) fraud may be more difficult to commit when paper receipts are eliminated. 
D) legal liability is more clearly defined. 
A) checks are less costly to process. 
B) checks take longer to process,meaning that it may take several days before the depositor can get her cash. 
C) fraud may be more difficult to commit when paper receipts are eliminated. 
D) legal liability is more clearly defined.

Question 20

Which of the following is not included in the measure of M1?

Accepted Answer

A) NOW accounts. 
B) Demand deposits. 
C) Currency. 
D) Savings deposits. 
A) NOW accounts. 
B) Demand deposits. 
C) Currency. 
D) Savings deposits.

Exam 3: What Is Money

A fall in the level of prices

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

Patrick places his pocket change into his savings bank on his desk each evening.By his actions,Patrick indicates that he believes that money is a

The payments system is

Of the following assets,the least liquid is

Compared to an economy that uses a medium of exchange,in a barter economy

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

Increasing transactions costs of selling an asset make the asset

________ is the narrowest monetary aggregate that the Fed reports.

Which of the following is a true statement?

A person's house is part of her

Which of the following is not a form of e-money?

The Fed estimates initial monetary aggregate reports because ________ depository institutions report the amount of their deposits infrequently.

What factors have slowed down the movement to a system where all payments are made electronically?

In explaining the evolution of money

All of the following are necessary criteria for a commodity to function as money except

Explain how cigarettes could be called "money" in prisoner-of-war camps of World War II.

A problem with barter exchange when there are many goods is that in a barter system

Compared to an electronic payments system,a payments system based on checks has the major drawback that

Which of the following is not included in the measure of M1?

Why Study Money, Banking, and Financial Markets

An Overview of the Financial System

Understanding Interest Rates

The Behavior of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Financial Crises and the Subprime Meltdown

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Central Banks and the Federal Reserve System

The Money Supply Process

Tools for Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

The Demand for Money

The Islm Model

Monetary and Fiscal Policy in the ISLM Model

Aggregate Demand and Supply Analysis

Transmission Mechanisms of Monetary Policy: The Evidence

Money and Inflation

Rational Expectations: Implications for Policy

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