Question 1

Explain the difference(s) between a debit card and a credit card.

Accepted Answer

A debit card works the same way as a che

Question 2

The U.S.Treasury estimates that the fraction of U.S.currency held outside the United States is:

Accepted Answer

A) About one-fourth 
B) About half 
C) Between two-thirds and three-quarters 
D) Less than 10% 
A) About one-fourth 
B) About half 
C) Between two-thirds and three-quarters 
D) Less than 10%

Question 3

Explain why credit cards are not considered money even though people seem to use them like money.

Accepted Answer

A credit card isn't money for a few reas

Question 4

Checks and currency function similarly, however:

Accepted Answer

A) Currency is a more effective means of payment 
B) Carrying currency entails greater risk, because it cannot be replaced if lost or stolen 
C) Currency is a better store of value than checking deposits 
D) Checks are not included in measures of money, whereas currency is 
A) Currency is a more effective means of payment 
B) Carrying currency entails greater risk, because it cannot be replaced if lost or stolen 
C) Currency is a better store of value than checking deposits 
D) Checks are not included in measures of money, whereas currency is

Question 5

An automobile is an asset, but it is not liquid because:

Accepted Answer

A) The transactions costs for the used automobile market are high 
B) The owner may still be making payments on the loan 
C) The automobile may not be in good repair 
D) The automobile cannot be sold without a loss in value 
A) The transactions costs for the used automobile market are high 
B) The owner may still be making payments on the loan 
C) The automobile may not be in good repair 
D) The automobile cannot be sold without a loss in value

Question 6

If the income velocity of money is defined as nominal GDP divided by the money supply; which has a greater velocity, M1 or M2?

Accepted Answer

Since M1 is smaller than M2 (in fact, M1

Question 7

One advantage of using checks over a debit card is:

Accepted Answer

A) Checks can be replaced if lost or stolen, a debit card cannot 
B) The bank is responsible if someone steals your checks and uses them; this isn't the case with debit cards 
C) A cancelled paper check is the only generally accepted proof of payment 
D) The person has "float," meaning time between writing the check and depositing funds to cover it 
A) Checks can be replaced if lost or stolen, a debit card cannot 
B) The bank is responsible if someone steals your checks and uses them; this isn't the case with debit cards 
C) A cancelled paper check is the only generally accepted proof of payment 
D) The person has "float," meaning time between writing the check and depositing funds to cover it

Question 8

In comparing money to a U.S.Treasury bond held by an individual, we can say:

Accepted Answer

A) Both are legal tender 
B) Both are units of account 
C) Only the bond is legal tender since it is an obligation of the U.S.Government 
D) Both are stores of value 
A) Both are legal tender 
B) Both are units of account 
C) Only the bond is legal tender since it is an obligation of the U.S.Government 
D) Both are stores of value

Question 9

Which of the following assets is the most liquid?

Accepted Answer

A) Art 
B) Demand deposits 
C) Houses 
D) Stocks 
A) Art 
B) Demand deposits 
C) Houses 
D) Stocks

Question 10

Gold would be a superior commodity money compared to wheat because:

Accepted Answer

A) Wheat has a high value relative to weight, which gold does not 
B) It is easier to divide wheat into small units 
C) Wheat has more practical uses than gold 
D) Wheat is perishable 
A) Wheat has a high value relative to weight, which gold does not 
B) It is easier to divide wheat into small units 
C) Wheat has more practical uses than gold 
D) Wheat is perishable

Question 11

Which of the following lists correctly orders assets from most liquid to least liquid?

Accepted Answer

A) Stocks¼house¼paper currency¼savings deposits 
B) Stocks¼paper currency¼house¼savings deposits 
C) Savings deposits¼paper currency¼house¼stocks 
D) Paper currency¼ savings deposits¼stocks¼house 
A) Stocks¼house¼paper currency¼savings deposits 
B) Stocks¼paper currency¼house¼savings deposits 
C) Savings deposits¼paper currency¼house¼stocks 
D) Paper currency¼ savings deposits¼stocks¼house

Question 12

As an economy produces more different types of goods:

Accepted Answer

A) It is more difficult to quote prices if the economy does not use money 
B) The number of relative prices decreases 
C) Money becomes less useful as a unit of account 
D) Money becomes less useful as a standard of value 
A) It is more difficult to quote prices if the economy does not use money 
B) The number of relative prices decreases 
C) Money becomes less useful as a unit of account 
D) Money becomes less useful as a standard of value

Question 13

The high transaction costs associated with a barter system refers to:

Accepted Answer

A) The fact that, often times, these exchanges are taxed by governments 
B) The risk associated with having to carry an inventory of goods to trade 
C) The high cost associated with finding someone with whom to exchange 
D) The cost of drawing up complete contracts 
A) The fact that, often times, these exchanges are taxed by governments 
B) The risk associated with having to carry an inventory of goods to trade 
C) The high cost associated with finding someone with whom to exchange 
D) The cost of drawing up complete contracts

Question 14

The Consumer Price Index (CPI):

Accepted Answer

A) Is an example of an index that uses variable expenditure weights 
B) Is a fixed-expenditure-weight index used to measure changes in the GDP Deflator 
C) Is a fixed-expenditure weight-index used to measure changes in purchasing power for households 
D) Is the least commonly used measure of inflation 
A) Is an example of an index that uses variable expenditure weights 
B) Is a fixed-expenditure-weight index used to measure changes in the GDP Deflator 
C) Is a fixed-expenditure weight-index used to measure changes in purchasing power for households 
D) Is the least commonly used measure of inflation

Question 15

A cross-country analysis of money growth shows that:

Accepted Answer

A) The growth rate in the money supply was lower in countries with lower inflation rates 
B) The growth rate in the money supply was higher in countries with lower inflation rates 
C) The growth rate in the money supply was lower in countries with higher inflation rates 
D) The growth rate in the money supply was the same whether the countries had high or low inflation rates 
A) The growth rate in the money supply was lower in countries with lower inflation rates 
B) The growth rate in the money supply was higher in countries with lower inflation rates 
C) The growth rate in the money supply was lower in countries with higher inflation rates 
D) The growth rate in the money supply was the same whether the countries had high or low inflation rates

Question 16

U.S.currency is

Accepted Answer

A) A commodity money 
B) Fiat money 
C) Tied to the value of gold at a fixed rate 
D) The only store of value 
A) A commodity money 
B) Fiat money 
C) Tied to the value of gold at a fixed rate 
D) The only store of value

Question 17

What distinguishes commodity money from fiat money?

Accepted Answer

Commodity money, such as gold or silver,

Question 18

Why do economists claim the Consumer Price Index (CPI) tends to overstate the actual rate of inflation?

Accepted Answer

The CPI is measured using a fixed-expend

Question 19

The value of money as a means of payment:

Accepted Answer

A) Is independent of changes in the amount of money in the economy 
B) Is fixed once relative prices are set 
C) Is dependent on changes in the amount of money in the economy 
D) Depends on whether the majority of M1 is in currency or demand deposits 
A) Is independent of changes in the amount of money in the economy 
B) Is fixed once relative prices are set 
C) Is dependent on changes in the amount of money in the economy 
D) Depends on whether the majority of M1 is in currency or demand deposits

Question 20

All of the following are true about electronic funds transfers except:

Accepted Answer

A) Sometimes involve the Federal Reserve sending electronic images of checks to banks 
B) Occur when banks or individuals deposit/withdraw from one bank account to another electronically 
C) Include automated clearinghouse transactions (ACH) 
D) Include credit card payments made online 
A) Sometimes involve the Federal Reserve sending electronic images of checks to banks 
B) Occur when banks or individuals deposit/withdraw from one bank account to another electronically 
C) Include automated clearinghouse transactions (ACH) 
D) Include credit card payments made online

Exam 2: Money and the Payments System

Explain the difference(s) between a debit card and a credit card.

The U.S.Treasury estimates that the fraction of U.S.currency held outside the United States is:

Explain why credit cards are not considered money even though people seem to use them like money.

Checks and currency function similarly, however:

An automobile is an asset, but it is not liquid because:

If the income velocity of money is defined as nominal GDP divided by the money supply; which has a greater velocity, M1 or M2?

One advantage of using checks over a debit card is:

In comparing money to a U.S.Treasury bond held by an individual, we can say:

Which of the following assets is the most liquid?

Gold would be a superior commodity money compared to wheat because:

Which of the following lists correctly orders assets from most liquid to least liquid?

As an economy produces more different types of goods:

The high transaction costs associated with a barter system refers to:

The Consumer Price Index (CPI):

A cross-country analysis of money growth shows that:

U.S.currency is

What distinguishes commodity money from fiat money?

Why do economists claim the Consumer Price Index (CPI) tends to overstate the actual rate of inflation?

The value of money as a means of payment:

All of the following are true about electronic funds transfers except:

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

Filters