Question 1

The money aggregate M1 includes each of the following, except:

Accepted Answer

A) Currency in the hands of the public 
B) Travelers checks that have been issued 
C) Currency in the vaults of commercial banks 
D) Demand deposits at commercial banks 
A) Currency in the hands of the public 
B) Travelers checks that have been issued 
C) Currency in the vaults of commercial banks 
D) Demand deposits at commercial banks

Question 2

In a barter system:

Accepted Answer

A) People have to specialize in order to have goods to trade 
B) People cannot specialize because they never know what goods will be desired 
C) People are less likely to specialize as extensively as they would in a monetary economy 
D) People must be self sufficient 
A) People have to specialize in order to have goods to trade 
B) People cannot specialize because they never know what goods will be desired 
C) People are less likely to specialize as extensively as they would in a monetary economy 
D) People must be self sufficient

Question 3

Which of the following could not be used as commodity money?

Accepted Answer

A) Gold coins 
B) Cigarettes 
C) U.S.Currency 
D) Silk 
A) Gold coins 
B) Cigarettes 
C) U.S.Currency 
D) Silk

Question 4

Carlos pays his cable bill using his bank's internet banking web site to withdraw funds from his checking account.This transaction is a(n):

Accepted Answer

A) Automated clearinghouse transaction (ACH) 
B) Digitized-check transaction 
C) E-money transaction 
D) Fedwire transaction 
A) Automated clearinghouse transaction (ACH) 
B) Digitized-check transaction 
C) E-money transaction 
D) Fedwire transaction

Question 5

The Consumer Price Index (CPI):

Accepted Answer

A) Tends to understate the impact of price changes 
B) Tends to overstate the impact of price changes due to substitution bias 
C) Is more accurate than the GDP deflator 
D) Assumes that consumers substitute away from cheaper goods 
A) Tends to understate the impact of price changes 
B) Tends to overstate the impact of price changes due to substitution bias 
C) Is more accurate than the GDP deflator 
D) Assumes that consumers substitute away from cheaper goods

Question 6

Rank the following assets from most liquid to least liquid.
a) Common stock
b) Houses
c) Currency
d) Art
e) Savings accounts
f) Checking account deposits.

Accepted Answer

Ranked from most liquid to lea

Question 7

Specialization usually increases the output of a country; however effective specialization requires:

Accepted Answer

A) Everyone in the country producing the same thing 
B) That workers have very similar skills 
C) An effective low-cost means to exchange goods and services 
D) A large stock of capital 
A) Everyone in the country producing the same thing 
B) That workers have very similar skills 
C) An effective low-cost means to exchange goods and services 
D) A large stock of capital

Question 8

A famous American has been visiting the same tropical island for 15 years for vacations.When she goes she pays for everything by writing checks drawn on her U.S.bank.The currency the natives use are not U.S.dollars; they use a currency called a fungo.The natives never cash her checks.She is so well known on the island that the natives simply trade her checks among themselves.The question you need to answer, complete with an explanation, is: who is paying for her vacation? (You can assume her bank would honor the checks if presented for payment even after a considerable period of time has passed.)

Accepted Answer

Obviously neither the famous American no

Question 9

How many prices would a trader of a particular good need to know in a barter economy with 20 goods?

Accepted Answer

A) 190 
B) 100 
C) 20 
D) 40 
A) 190 
B) 100 
C) 20 
D) 40

Question 10

Which best describes money as a means of payment?

Accepted Answer

A) Money provides an immediate double coincidence of wants 
B) Money makes sure a double coincidence of wants never occurs 
C) Money requires at least two transactions to obtain the double coincidence of wants 
D) To obtain a double coincidence of wants without money is impossible 
A) Money provides an immediate double coincidence of wants 
B) Money makes sure a double coincidence of wants never occurs 
C) Money requires at least two transactions to obtain the double coincidence of wants 
D) To obtain a double coincidence of wants without money is impossible

Question 11

When the price level increases, the purchasing power of money:

Accepted Answer

A) Increases by a similar amount 
B) Stays the same since the purchasing power of money is not impacted by price levels 
C) Decreases 
D) First increases and then decreases as people get used to higher prices 
A) Increases by a similar amount 
B) Stays the same since the purchasing power of money is not impacted by price levels 
C) Decreases 
D) First increases and then decreases as people get used to higher prices

Question 12

Which of the following statements is most correct?

Accepted Answer

A) Money is wealth but not all wealth is money 
B) Money is a means of payment but is not part of wealth 
C) In order to be considered part of a person's wealth, an asset must have a positive return 
D) Wealth is a store of value but is not a means of payment 
A) Money is wealth but not all wealth is money 
B) Money is a means of payment but is not part of wealth 
C) In order to be considered part of a person's wealth, an asset must have a positive return 
D) Wealth is a store of value but is not a means of payment

Question 13

Which of the following is not an example of bartering?

Accepted Answer

A) Sue trading candles with Tom for his bread 
B) Mary paying for her new shoes with her credit card 
C) John cutting his neighbor's grass in return for his neighbor washing John's car 
D) Mrs.Smith treating the neighbor children to pizza after they helped clean up her yard 
A) Sue trading candles with Tom for his bread 
B) Mary paying for her new shoes with her credit card 
C) John cutting his neighbor's grass in return for his neighbor washing John's car 
D) Mrs.Smith treating the neighbor children to pizza after they helped clean up her yard

Question 14

Compare two economies: a barter economy versus an economy that uses money.In order to exchange goods and services:

Accepted Answer

A) A double coincidence of wants is necessary in the barter economy 
B) A double coincidence of wants is more likely to occur in the barter economy 
C) Transactions are likely to be smoother in the barter economy because goods and services are exchanged directly 
D) The money economy requires that sellers have more information about buyers' wants 
A) A double coincidence of wants is necessary in the barter economy 
B) A double coincidence of wants is more likely to occur in the barter economy 
C) Transactions are likely to be smoother in the barter economy because goods and services are exchanged directly 
D) The money economy requires that sellers have more information about buyers' wants

Question 15

Explain why the following statement is true, "money is an asset but not all assets are money."

Accepted Answer

Money is an asset because it represents

Question 16

How useful is M2 in tracking inflation? Explain.

Accepted Answer

Empirical research mentioned in the chap

Question 17

A society without any money:

Accepted Answer

A) Could never exchange goods and/or services 
B) Would find people doing everything for themselves 
C) Would have to rely strictly on barter 
D) Would be more efficient since people would be more self-sufficient 
A) Could never exchange goods and/or services 
B) Would find people doing everything for themselves 
C) Would have to rely strictly on barter 
D) Would be more efficient since people would be more self-sufficient

Question 18

A cross-country analysis of money growth supports the conclusion that:

Accepted Answer

A) There is no correlation between the growth rate of the quantity of money and the rate of inflation 
B) The correlation between the money growth rate and inflation in most countries was positive but very small 
C) The correlation between inflation and money growth in most industrialized countries was actually negative 
D) The correlation between inflation and the money growth rate was positive and relatively strong 
A) There is no correlation between the growth rate of the quantity of money and the rate of inflation 
B) The correlation between the money growth rate and inflation in most countries was positive but very small 
C) The correlation between inflation and money growth in most industrialized countries was actually negative 
D) The correlation between inflation and the money growth rate was positive and relatively strong

Question 19

Between 1960 and 1980:

Accepted Answer

A) The growth rates of the money aggregates behaved differently 
B) The growth rate of M1 was negative, but M2 grew rapidly 
C) M1 had the most rapid rate of growth of all money aggregates 
D) The growth rates of the two money aggregates moved together 
A) The growth rates of the money aggregates behaved differently 
B) The growth rate of M1 was negative, but M2 grew rapidly 
C) M1 had the most rapid rate of growth of all money aggregates 
D) The growth rates of the two money aggregates moved together

Question 20

Which of the following statements is incorrect?

Accepted Answer

A) If you can buy the same goods this year as you bought last year with less money there must have been deflation 
B) If you can buy the same goods this year as you purchased one year ago with the same amount of money, prices are stable 
C) If purchasing the same goods today that were purchased one year ago requires more money, there must have been inflation 
D) If you can buy the same goods this year as you bought last year with the same money there must have been deflation 
A) If you can buy the same goods this year as you bought last year with less money there must have been deflation 
B) If you can buy the same goods this year as you purchased one year ago with the same amount of money, prices are stable 
C) If purchasing the same goods today that were purchased one year ago requires more money, there must have been inflation 
D) If you can buy the same goods this year as you bought last year with the same money there must have been deflation

Exam 2: Money and the Payments System

The money aggregate M1 includes each of the following, except:

In a barter system:

Which of the following could not be used as commodity money?

Carlos pays his cable bill using his bank's internet banking web site to withdraw funds from his checking account.This transaction is a(n):

The Consumer Price Index (CPI):

Rank the following assets from most liquid to least liquid. a) Common stock b) Houses c) Currency d) Art e) Savings accounts f) Checking account deposits.

Specialization usually increases the output of a country; however effective specialization requires:

How many prices would a trader of a particular good need to know in a barter economy with 20 goods?

Which best describes money as a means of payment?

When the price level increases, the purchasing power of money:

Which of the following statements is most correct?

Which of the following is not an example of bartering?

Compare two economies: a barter economy versus an economy that uses money.In order to exchange goods and services:

Explain why the following statement is true, "money is an asset but not all assets are money."

How useful is M2 in tracking inflation? Explain.

A society without any money:

A cross-country analysis of money growth supports the conclusion that:

Between 1960 and 1980:

Which of the following statements is incorrect?

An Introduction to Money and the Financial System

Financial Instruments, Financial Markets, and Financial Institutions

Future Value, Present Value, and Interest Rates

Understanding Risk

Bonds, Bond Prices, and the Determination of Interest Rates

The Risk and Term Structure of Interest Rates

Stocks, Stock Markets, and Market Efficiency

Derivatives: Futures, Options, and Swaps

Foreign Exchange

The Economics of Financial Intermediation

Depository Institutions: Banks and Bank Management

Financial Industry Structure

Regulating the Financial System

Central Banks in the World Today

The Structure of Central Banks: the Federal Reserve and the European Central Bank

The Central Bank Balance Sheet and the Money Supply Process

Monetary Policy: Stabilizing the Domestic Economy

Exchange-Rate Policy and the Central Bank

Money Growth, Money Demand, and Modern Monetary Policy

Output, Inflation, and Monetary Policy

Understanding Business Cycle Fluctuations

Modern Monetary Policy and the Challenges Facing Central Bankers

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