Question 1

Ranking assets from most liquid to least liquid,the correct order is

Accepted Answer

A) savings bonds; house; currency. 
B) currency; savings bonds; house. 
C) currency; house; savings bonds. 
D) house; savings bonds; currency. 
A) savings bonds; house; currency. 
B) currency; savings bonds; house. 
C) currency; house; savings bonds. 
D) house; savings bonds; currency.

Question 2

Which of the following statements accurately describes the two measures of the money supply?

Accepted Answer

A) The two measures do not move together,so they cannot be used interchangeably by policymakers. 
B) The two measures' movements closely parallel each other,even on a month-to-month basis. 
C) Short-run movements in the money supply are extremely reliable. 
D) M2 is the narrowest measure the Fed reports. 
A) The two measures do not move together,so they cannot be used interchangeably by policymakers. 
B) The two measures' movements closely parallel each other,even on a month-to-month basis. 
C) Short-run movements in the money supply are extremely reliable. 
D) M2 is the narrowest measure the Fed reports.

Question 3

During hyperinflations,

Accepted Answer

A) the value of money rises rapidly. 
B) money no longer functions as a good store of value and people may resort to barter transactions on a much larger scale. 
C) middle-class savers benefit as prices rise. 
D) money's value remains fixed to the price level; that is,if prices double so does the value of money. 
A) the value of money rises rapidly. 
B) money no longer functions as a good store of value and people may resort to barter transactions on a much larger scale. 
C) middle-class savers benefit as prices rise. 
D) money's value remains fixed to the price level; that is,if prices double so does the value of money.

Question 4

Money is

Accepted Answer

A) anything that is generally accepted in payment for goods and services or in the repayment of debt. 
B) a flow of earnings per unit of time. 
C) the total collection of pieces of property that are a store of value. 
D) always based on a precious metal like gold or silver. 
A) anything that is generally accepted in payment for goods and services or in the repayment of debt. 
B) a flow of earnings per unit of time. 
C) the total collection of pieces of property that are a store of value. 
D) always based on a precious metal like gold or silver.

Question 5

When paper currency is decreed by governments as legal tender,legally it must be ________.

Accepted Answer

A) paper currency backed by gold 
B) a precious metal such as gold or silver 
C) accepted as payment for debts 
D) convertible into an electronic payment 
A) paper currency backed by gold 
B) a precious metal such as gold or silver 
C) accepted as payment for debts 
D) convertible into an electronic payment

Question 6

The currency component includes paper money and coins held in ________.

Accepted Answer

A) bank vaults 
B) ATMs 
C) the hands of the nonbank public 
D) the central bank 
A) bank vaults 
B) ATMs 
C) the hands of the nonbank public 
D) the central bank

Question 7

Kevin purchasing concert tickets with his debit card is an example of the ________ function of money.

Accepted Answer

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

Question 8

A disadvantage of ________ is that it is very heavy and hard to transport from one place to another.

Accepted Answer

A) commodity money 
B) fiat money 
C) electronic money 
D) paper money 
A) commodity money 
B) fiat money 
C) electronic money 
D) paper money

Question 9

Currency includes

Accepted Answer

A) paper money and coins. 
B) paper money,coins,and checks. 
C) paper money and checks. 
D) paper money,coins,checks,and savings deposits. 
A) paper money and coins. 
B) paper money,coins,and checks. 
C) paper money and checks. 
D) paper money,coins,checks,and savings deposits.

Question 10

Recent financial innovation makes the Federal Reserve's job of conducting monetary policy

Accepted Answer

A) easier,since the Fed now knows what to consider money. 
B) more difficult,since the Fed now knows what to consider money. 
C) easier,since the Fed no longer knows what to consider money. 
D) more difficult,since the Fed no longer knows what to consider money. 
A) easier,since the Fed now knows what to consider money. 
B) more difficult,since the Fed now knows what to consider money. 
C) easier,since the Fed no longer knows what to consider money. 
D) more difficult,since the Fed no longer knows what to consider money.

Question 11

The total collection of pieces of property that serve to store value is a person's

Accepted Answer

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

Question 12

________ is a flow of earnings per unit of time.

Accepted Answer

A) Income 
B) Money 
C) Wealth 
D) Currency 
A) Income 
B) Money 
C) Wealth 
D) Currency

Question 13

If an individual moves money from a demand deposit account to a money market deposit account,

Accepted Answer

A) M1 decreases and M2 stays the same. 
B) M1 stays the same and M2 increases. 
C) M1 stays the same and M2 stays the same. 
D) M1 increases and M2 decreases. 
A) M1 decreases and M2 stays the same. 
B) M1 stays the same and M2 increases. 
C) M1 stays the same and M2 stays the same. 
D) M1 increases and M2 decreases.

Question 14

The difference between money and income is that

Accepted Answer

A) money is a flow and income is a stock. 
B) money is a stock and income is a flow. 
C) there is no difference-money and income are both stocks. 
D) there is no difference-money and income are both flows. 
A) money is a flow and income is a stock. 
B) money is a stock and income is a flow. 
C) there is no difference-money and income are both stocks. 
D) there is no difference-money and income are both flows.

Question 15

As the payments system evolves from barter to a monetary system,

Accepted Answer

A) commodity money is likely to precede the use of paper currency. 
B) transaction costs increase. 
C) the number of prices that need to be calculated increase rather dramatically. 
D) specialization decreases. 
A) commodity money is likely to precede the use of paper currency. 
B) transaction costs increase. 
C) the number of prices that need to be calculated increase rather dramatically. 
D) specialization decreases.

Question 16

If peanuts serve as a medium of exchange,a unit of account,and a store of value,then peanuts are

Accepted Answer

A) bank deposits. 
B) reserves. 
C) money. 
D) loanable funds. 
A) bank deposits. 
B) reserves. 
C) money. 
D) loanable funds.

Question 17

Paper currency that has been declared legal tender but is not convertible into coins or precious metals is called ________ money.

Accepted Answer

A) commodity 
B) fiat 
C) electronic 
D) funny 
A) commodity 
B) fiat 
C) electronic 
D) funny

Question 18

The evolution of the payments system from barter to precious metals,then to fiat money,then to checks can best be understood as a consequence of

Accepted Answer

A) government regulations designed to improve the efficiency of the payments system. 
B) government regulations designed to promote the safety of the payments system. 
C) innovations that reduced the costs of exchanging goods and services. 
D) competition among firms to make it easier for customers to purchase their products. 
A) government regulations designed to improve the efficiency of the payments system. 
B) government regulations designed to promote the safety of the payments system. 
C) innovations that reduced the costs of exchanging goods and services. 
D) competition among firms to make it easier for customers to purchase their products.

Question 19

Since it does not have to be converted into anything else to make purchases,________ is the most liquid asset.

Accepted Answer

A) money 
B) stock 
C) artwork 
D) gold 
A) money 
B) stock 
C) artwork 
D) gold

Question 20

Generally,the initial money supply data reported by the Fed

Accepted Answer

A) is not a reliable guide to the short-run behavior of the money supply. 
B) is not a reliable guide to the long-run behavior of the money supply. 
C) is a reliable guide to the short-run behavior of the money supply. 
D) usually underestimate the revised statistics. 
A) is not a reliable guide to the short-run behavior of the money supply. 
B) is not a reliable guide to the long-run behavior of the money supply. 
C) is a reliable guide to the short-run behavior of the money supply. 
D) usually underestimate the revised statistics.

Exam 3: What Is Money

Ranking assets from most liquid to least liquid,the correct order is

Which of the following statements accurately describes the two measures of the money supply?

During hyperinflations,

Money is

When paper currency is decreed by governments as legal tender,legally it must be ________.

The currency component includes paper money and coins held in ________.

Kevin purchasing concert tickets with his debit card is an example of the ________ function of money.

A disadvantage of ________ is that it is very heavy and hard to transport from one place to another.

Currency includes

Recent financial innovation makes the Federal Reserve's job of conducting monetary policy

The total collection of pieces of property that serve to store value is a person's

________ is a flow of earnings per unit of time.

If an individual moves money from a demand deposit account to a money market deposit account,

The difference between money and income is that

As the payments system evolves from barter to a monetary system,

If peanuts serve as a medium of exchange,a unit of account,and a store of value,then peanuts are

Paper currency that has been declared legal tender but is not convertible into coins or precious metals is called ________ money.

The evolution of the payments system from barter to precious metals,then to fiat money,then to checks can best be understood as a consequence of

Since it does not have to be converted into anything else to make purchases,________ is the most liquid asset.

Generally,the initial money supply data reported by the Fed

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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