Question 1

Which of the following statement is incorrect?

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) An asset doesn't have to be a means of payment to be a part of a person's wealth 
D) All items considered wealth can eventually be converted to 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) An asset doesn't have to be a means of payment to be a part of a person's wealth 
D) All items considered wealth can eventually be converted to a means of payment

Question 2

The money aggregate M2 includes:

Accepted Answer

A) Large denomination time deposits 
B) Stock and bond mutual fund shares 
C) Savings deposits but not money market deposit accounts 
D) M1 
A) Large denomination time deposits 
B) Stock and bond mutual fund shares 
C) Savings deposits but not money market deposit accounts 
D) M1

Question 3

The fact that U.S.currency is legal tender means:

Accepted Answer

A) U.S.currency is good anywhere in the world 
B) The only money the government will accept for settlement of debts is U.S.currency 
C) Private businesses in the U.S.and the U.S.government must accept currency for payment 
D) It cannot be backed by gold or other metals 
A) U.S.currency is good anywhere in the world 
B) The only money the government will accept for settlement of debts is U.S.currency 
C) Private businesses in the U.S.and the U.S.government must accept currency for payment 
D) It cannot be backed by gold or other metals

Question 4

One major difference between a debit card and a credit card is:

Accepted Answer

A) Only the debit card helps you to build a credit history 
B) The debit card has lower minimum monthly payments 
C) You do not need to actually have the funds in your account when you use a debit card 
D) Debit cards have no late fees 
A) Only the debit card helps you to build a credit history 
B) The debit card has lower minimum monthly payments 
C) You do not need to actually have the funds in your account when you use a debit card 
D) Debit cards have no late fees

Question 5

The value of fiat money:

Accepted Answer

A) Comes from its intrinsic value 
B) Is worth more as a commodity than its value as money 
C) Comes from government decree 
D) Means that it is more desirable than currency 
A) Comes from its intrinsic value 
B) Is worth more as a commodity than its value as money 
C) Comes from government decree 
D) Means that it is more desirable than currency

Question 6

Sue uses a credit card to purchase a new pair of jeans.Sue is:

Accepted Answer

A) Using money to buy her jeans since credit cards is money 
B) Creating a liability that she will ultimately have to pay with money 
C) Using an electronic payment form of money 
D) Using a form of money included in M2 
A) Using money to buy her jeans since credit cards is money 
B) Creating a liability that she will ultimately have to pay with money 
C) Using an electronic payment form of money 
D) Using a form of money included in M2

Question 7

How many prices would a trader of a particular good need to know in a barter economy with 5 goods?

Accepted Answer

A) 5 
B) 10 
C) 20 
D) 50 
A) 5 
B) 10 
C) 20 
D) 50

Question 8

In the chapter you read that it cost The U.S.Treasury's Bureau of Engraving and Printing less than six cents to print a note (currency), whether that bill is a one-dollar or one-hundred dollar bill.It seems the Treasury could generate a nice profit for the government by simply printing currency and using this currency to purchase the goods and services the government needs.In fact, this seems to be a way to eliminate the problem of budget deficits for the U.S.government.Comment on this idea.

Accepted Answer

At first it seems the Treasury could buy

Question 9

The amount of currency in the hands of the public is approximately what percentage of M1?

Accepted Answer

A) 50% 
B) 25% 
C) 30% 
D) 90% 
A) 50% 
B) 25% 
C) 30% 
D) 90%

Question 10

Consider the following: there are two countries, A and
B.Each country has the same resources, and produces the same goods.The residents of country A use money; the residents of country B rely on bartering of goods.Will each country produce the same quantity of output? Explain.
No, the residents of Country B will definitely spend more of their time transacting, trying to create a double coincidence of wants, and may have to rely on multiple trades to do so.They will also likely specialize less, reducing the gains to the country from specialization.In country A the residents will be able to transact immediately using money, and will also be able to specialize in what they do well creating a more efficient economy.

Accepted Answer

No, the residents of Country B will defi

Question 11

In a barter economy with "n'' number of goods there will always be:

Accepted Answer

A) Exactly "n'' relative prices 
B) Fewer than "n'' relative prices 
C) More than "n'' relative prices 
D) "n''/2 relative prices 
A) Exactly "n'' relative prices 
B) Fewer than "n'' relative prices 
C) More than "n'' relative prices 
D) "n''/2 relative prices

Question 12

Why are electronic transactions increasingly taking the place of paper transactions?

Accepted Answer

Because efficient payments sys

Question 13

The purchasing power of money:

Accepted Answer

A) Rises when inflation rises 
B) Decreases as the price level decreases 
C) Decreases with inflation 
D) Is not impacted by inflation, only by monetary policy 
A) Rises when inflation rises 
B) Decreases as the price level decreases 
C) Decreases with inflation 
D) Is not impacted by inflation, only by monetary policy

Question 14

One major difference between a debit and credit card is:

Accepted Answer

A) You can build a credit history with the credit card but not with the debit card 
B) You have to pay interest on your purchases if you use a credit card 
C) Credit cards are money and the debit card is not 
D) Debit cards charge late fees 
A) You can build a credit history with the credit card but not with the debit card 
B) You have to pay interest on your purchases if you use a credit card 
C) Credit cards are money and the debit card is not 
D) Debit cards charge late fees

Question 15

Comparing checks and currency, we can say:

Accepted Answer

A) Both are money but only currency is legal tender 
B) Only checks are both money and legal tender 
C) A check isn't money but currency is 
D) Both are money and legal tender 
A) Both are money but only currency is legal tender 
B) Only checks are both money and legal tender 
C) A check isn't money but currency is 
D) Both are money and legal tender

Question 16

Has M2 always been a useful tool for forecasting inflation? Explain.

Accepted Answer

From 1960 to 1980 it seemed that growth

Question 17

Consider an island where people use sand dollars (shells) as currency.For simplicity, assume that people consume only one good: fish.Currently, there are 400 sand dollars in circulation and there are 200 fish purchased each year.Based on this information, what is the price of fish?
Now, suppose that a change in climate leads to new sand dollars washing ashore, leaving a total of 500 sand dollars.If there are still 200 fish purchased each year, what is the new price of fish? In order to prevent inflation, what would have to happen to the amount of fish purchased each year?

Accepted Answer

When there are 400 sand dollars and 200

Question 18

Recently, M1 has become:

Accepted Answer

A) A more useful measure of the relationship between the money supply and inflation because it includes the most liquid assets 
B) The money supply the Federal Reserve pays the most attention to in conducting monetary policy 
C) Less useful than M2 for understanding inflation 
D) The fastest growing of all of the money aggregates 
A) A more useful measure of the relationship between the money supply and inflation because it includes the most liquid assets 
B) The money supply the Federal Reserve pays the most attention to in conducting monetary policy 
C) Less useful than M2 for understanding inflation 
D) The fastest growing of all of the money aggregates

Question 19

The introduction of money market substitutes for basic checking accounts was fueled partially by:

Accepted Answer

A) The relatively high rates of inflation that existed in the late 1970s and early 1980s 
B) The reluctance of many retailers to accept checks 
C) The high number of bank failures that were occurring in the 1970s 
D) The higher interest rates banks had to pay on checking accounts 
A) The relatively high rates of inflation that existed in the late 1970s and early 1980s 
B) The reluctance of many retailers to accept checks 
C) The high number of bank failures that were occurring in the 1970s 
D) The higher interest rates banks had to pay on checking accounts

Question 20

Ava buys a $2,000 computer using a paper check.At which step does $2,000 get recorded in M1?

Accepted Answer

A) When Ava hands the $2,000 check to the computer merchant 
B) Once the $2000 is credited to the merchant bank's reserve account and is debited from Ava's bank account 
C) Once the Federal Reserve sends the paper check (or an electronic image) to Ava's bank 
D) The check is never M1.The $2000 is M1 both in Ava's bank account and, later, in the merchant's account.It is the deposit balance that is counted 
A) When Ava hands the $2,000 check to the computer merchant 
B) Once the $2000 is credited to the merchant bank's reserve account and is debited from Ava's bank account 
C) Once the Federal Reserve sends the paper check (or an electronic image) to Ava's bank 
D) The check is never M1.The $2000 is M1 both in Ava's bank account and, later, in the merchant's account.It is the deposit balance that is counted

Which of the following statement is incorrect?

The money aggregate M2 includes:

The fact that U.S.currency is legal tender means:

One major difference between a debit card and a credit card is:

The value of fiat money:

Sue uses a credit card to purchase a new pair of jeans.Sue is:

How many prices would a trader of a particular good need to know in a barter economy with 5 goods?

The amount of currency in the hands of the public is approximately what percentage of M1?

In a barter economy with "n'' number of goods there will always be:

Why are electronic transactions increasingly taking the place of paper transactions?

The purchasing power of money:

One major difference between a debit and credit card is:

Comparing checks and currency, we can say:

Has M2 always been a useful tool for forecasting inflation? Explain.

Recently, M1 has become:

The introduction of money market substitutes for basic checking accounts was fueled partially by:

Ava buys a $2,000 computer using a paper check.At which step does $2,000 get recorded in M1?

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

Exam 2: Money and the Payments System

Which of the following statement is incorrect?

The money aggregate M2 includes:

The fact that U.S.currency is legal tender means:

One major difference between a debit card and a credit card is:

The value of fiat money:

Sue uses a credit card to purchase a new pair of jeans.Sue is:

How many prices would a trader of a particular good need to know in a barter economy with 5 goods?

The amount of currency in the hands of the public is approximately what percentage of M1?

In a barter economy with "n'' number of goods there will always be:

Why are electronic transactions increasingly taking the place of paper transactions?

The purchasing power of money:

One major difference between a debit and credit card is:

Comparing checks and currency, we can say:

Has M2 always been a useful tool for forecasting inflation? Explain.

Recently, M1 has become:

The introduction of money market substitutes for basic checking accounts was fueled partially by:

Ava buys a $2,000 computer using a paper check.At which step does $2,000 get recorded in M1?

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