Question 1

Which of the following is not included in the monetary aggregate M2?

Accepted Answer

A) Currency 
B) Savings bonds 
C) Traveler's checks 
D) Checking deposits 
A) Currency 
B) Savings bonds 
C) Traveler's checks 
D) Checking deposits

Question 2

________ is the relative ease and speed with which an asset can be converted into a medium of exchange.

Accepted Answer

A) Efficiency 
B) Liquidity 
C) Deflation 
D) Specialization 
A) Efficiency 
B) Liquidity 
C) Deflation 
D) Specialization

Question 3

The initial money supply data reported by the Fed are not a reliable guide to short-run movements in the money supply such as a ________,but are reasonably reliable for longer periods such as a ________.

Accepted Answer

A) month; year 
B) day; month 
C) year; decade 
D) decade; century 
A) month; year 
B) day; month 
C) year; decade 
D) decade; century

Question 4

Which of the following is included in both M1 and M2?

Accepted Answer

A) Currency 
B) Savings deposits 
C) Small-denomination time deposits 
D) Money market deposit accounts 
A) Currency 
B) Savings deposits 
C) Small-denomination time deposits 
D) Money market deposit accounts

Question 5

Which of the following statements uses the economists' definition of money?

Accepted Answer

A) I plan to earn a lot of money over the summer. 
B) Betsy is richshe has a lot of money. 
C) I hope that I have enough money to buy my lunch today. 
D) The job with New Company gave me the opportunity to earn more money. 
A) I plan to earn a lot of money over the summer. 
B) Betsy is richshe has a lot of money. 
C) I hope that I have enough money to buy my lunch today. 
D) The job with New Company gave me the opportunity to earn more money.

Question 6

When money prices are used to facilitate comparisons of value,money is said to function as a

Accepted Answer

A) unit of account. 
B) medium of exchange. 
C) store of value. 
D) payments-system ruler. 
A) unit of account. 
B) medium of exchange. 
C) store of value. 
D) payments-system ruler.

Question 7

The increase in holiday spending is not the same every year causing the Fed's adjustment for ________ to be revised as more data becomes available.

Accepted Answer

A) seasonal variation 
B) reporting discrepancy 
C) market churning 
D) transactions discrepancy 
A) seasonal variation 
B) reporting discrepancy 
C) market churning 
D) transactions discrepancy

Question 8

An electronic payments system has not completely replaced the paper payments system because of all of the following reasons except

Accepted Answer

A) expensive equipment is necessary to set up the system. 
B) security concerns. 
C) privacy concerns. 
D) transportation costs. 
A) expensive equipment is necessary to set up the system. 
B) security concerns. 
C) privacy concerns. 
D) transportation costs.

Question 9

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 the fact that

Accepted Answer

A) paper is more costly to produce than precious metals. 
B) precious metals were not generally acceptable. 
C) precious metals were difficult to carry and transport. 
D) paper money is less accepted than checks. 
A) paper is more costly to produce than precious metals. 
B) precious metals were not generally acceptable. 
C) precious metals were difficult to carry and transport. 
D) paper money is less accepted than checks.

Question 10

If the price level doubles,the value of money

Accepted Answer

A) doubles. 
B) more than doubles,due to scale economies. 
C) rises but does not double,due to diminishing returns. 
D) falls by 50 percent. 
A) doubles. 
B) more than doubles,due to scale economies. 
C) rises but does not double,due to diminishing returns. 
D) falls by 50 percent.

Question 11

Because it is a unit of account,money

Accepted Answer

A) increases transaction costs. 
B) reduces the number of prices that need to be calculated. 
C) does not earn interest. 
D) discourages specialization. 
A) increases transaction costs. 
B) reduces the number of prices that need to be calculated. 
C) does not earn interest. 
D) discourages specialization.

Question 12

The Fed revises its estimates of the monetary aggregates,sometimes by large amounts,because

Accepted Answer

A) large depository institutions need only report their deposits infrequently. 
B) weekly monetary data need to be adjusted for the "weekend effect." 
C) monthly monetary data need to be adjusted for the "payday effect." 
D) seasonal adjustments become more precise only as more data becomes available. 
A) large depository institutions need only report their deposits infrequently. 
B) weekly monetary data need to be adjusted for the "weekend effect." 
C) monthly monetary data need to be adjusted for the "payday effect." 
D) seasonal adjustments become more precise only as more data becomes available.

Question 13

Whatever a society uses as money,the distinguishing characteristic is that it must

Accepted Answer

A) be completely inflation proof. 
B) be generally acceptable as payment for goods and services or in the repayment of debt. 
C) contain gold. 
D) be produced by the government. 
A) be completely inflation proof. 
B) be generally acceptable as payment for goods and services or in the repayment of debt. 
C) contain gold. 
D) be produced by the government.

Question 14

In a barter economy the number of prices in an economy with N goods is

Accepted Answer

A) [N(N - 1)]/2. 
B) N(N/2). 
C) 2N. 
D) N(N/2)- 1. 
A) [N(N - 1)]/2. 
B) N(N/2). 
C) 2N. 
D) N(N/2)- 1.

Question 15

An individual's annual salary is her

Accepted Answer

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

Question 16

Compared to checks,paper currency and coins have the major drawbacks that they

Accepted Answer

A) are easily stolen. 
B) are hard to counterfeit. 
C) are not the most liquid assets. 
D) must be backed by gold. 
A) are easily stolen. 
B) are hard to counterfeit. 
C) are not the most liquid assets. 
D) must be backed by gold.

Question 17

The components of the U.S.M1 money supply are demand and checkable deposits plus

Accepted Answer

A) currency. 
B) currency plus savings deposits. 
C) currency plus travelers checks. 
D) currency plus travelers checks plus money market deposits. 
A) currency. 
B) currency plus savings deposits. 
C) currency plus travelers checks. 
D) currency plus travelers checks plus money market deposits.

Question 18

When economists say that money promotes ________,they mean that money encourages specialization and the division of labor.

Accepted Answer

A) bargaining 
B) contracting 
C) efficiency 
D) greed 
A) bargaining 
B) contracting 
C) efficiency 
D) greed

Question 19

When we say that money is a stock variable,we mean that

Accepted Answer

A) the quantity of money is measured at a given point in time. 
B) we must attach a time period to the measure. 
C) it is sold in the equity market. 
D) money never loses purchasing power. 
A) the quantity of money is measured at a given point in time. 
B) we must attach a time period to the measure. 
C) it is sold in the equity market. 
D) money never loses purchasing power.

Question 20

Of money's three functions,the one that distinguishes money from other assets is its function as a

Accepted Answer

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

Exam 3: What Is Money

Which of the following is not included in the monetary aggregate M2?

________ is the relative ease and speed with which an asset can be converted into a medium of exchange.

The initial money supply data reported by the Fed are not a reliable guide to short-run movements in the money supply such as a ________,but are reasonably reliable for longer periods such as a ________.

Which of the following is included in both M1 and M2?

Which of the following statements uses the economists' definition of money?

When money prices are used to facilitate comparisons of value,money is said to function as a

The increase in holiday spending is not the same every year causing the Fed's adjustment for ________ to be revised as more data becomes available.

An electronic payments system has not completely replaced the paper payments system because of all of the following reasons except

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 the fact that

If the price level doubles,the value of money

Because it is a unit of account,money

The Fed revises its estimates of the monetary aggregates,sometimes by large amounts,because

Whatever a society uses as money,the distinguishing characteristic is that it must

In a barter economy the number of prices in an economy with N goods is

An individual's annual salary is her

Compared to checks,paper currency and coins have the major drawbacks that they

The components of the U.S.M1 money supply are demand and checkable deposits plus

When economists say that money promotes ________,they mean that money encourages specialization and the division of labor.

When we say that money is a stock variable,we mean that

Of money's three functions,the one that distinguishes money from other assets is its function as a

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

Filters

The initial money supply data reported by the Fed are not a reliable guide to short-run movements in the money supply such as a ,but are reasonably reliable for longer periods such as a .