Question 1

What are the five characteristics that make an asset suitable to be used as a medium of exchange?

Accepted Answer

It must be acceptable to most people; standardized in terms of quality; durable so that it doesn't become too worn out to be usable; valuable relative to its weight; divisible since prices of goods and services vary.

Question 2

Hyperinflations are usually caused by large budget deficits financed by

Accepted Answer

A)  selling bonds to private investors. 
B)  selling bonds to the central bank. 
C)  raising taxes. 
D)  borrowing from commercial banks. 
A)  selling bonds to private investors. 
B)  selling bonds to the central bank. 
C)  raising taxes. 
D)  borrowing from commercial banks. B

Question 3

The purchasing power of money

Accepted Answer

A)  rises when prices fall. 
B)  rises when prices rise. 
C)  is set by the Fed in January of each year. 
D)  is constant. 
A)  rises when prices fall. 
B)  rises when prices rise. 
C)  is set by the Fed in January of each year. 
D)  is constant. A

Question 4

If prices increase rapidly

Accepted Answer

A)  money's usefulness as a store of value is diminished. 
B)  money increases in value. 
C)  deflation is likely. 
D)  prices will decline to their normal level. 
A)  money's usefulness as a store of value is diminished. 
B)  money increases in value. 
C)  deflation is likely. 
D)  prices will decline to their normal level.

Question 5

Which of the following is an example of a commodity money?

Accepted Answer

A)  gold coins 
B)  dollar bills 
C)  British pound notes 
D)  Japanese yen notes 
A)  gold coins 
B)  dollar bills 
C)  British pound notes 
D)  Japanese yen notes

Question 6

A system of barter has substantial transactions costs because

Accepted Answer

A)  taxes under such a system are generally a large fraction of the value of output. 
B)  traders must spend considerable time searching for trading partners. 
C)  the uncertainties of trade result in high legal fees being incurred to draw up binding contracts. 
D)  the uncertainties of trade result in high insurance premiums. 
A)  taxes under such a system are generally a large fraction of the value of output. 
B)  traders must spend considerable time searching for trading partners. 
C)  the uncertainties of trade result in high legal fees being incurred to draw up binding contracts. 
D)  the uncertainties of trade result in high insurance premiums.

Question 7

When economists refer to the role of money as a standard of deferred payment,they mean that

Accepted Answer

A)  payments by checks are usually deferred until the checks clear the bank. 
B)  money earns interest while loan payments are deferred. 
C)  money provides a standard for payments that will occur in the future. 
D)  money today is worth less than money tomorrow. 
A)  payments by checks are usually deferred until the checks clear the bank. 
B)  money earns interest while loan payments are deferred. 
C)  money provides a standard for payments that will occur in the future. 
D)  money today is worth less than money tomorrow.

Question 8

The M1 and M2 aggregates

Accepted Answer

A)  have moved very closely together since 1960. 
B)  have moved broadly together since 1960. 
C)  have moved significantly differently during certain periods since 1960. 
D)  have moved broadly together but have also moved very differently during certain periods since 1960. 
A)  have moved very closely together since 1960. 
B)  have moved broadly together since 1960. 
C)  have moved significantly differently during certain periods since 1960. 
D)  have moved broadly together but have also moved very differently during certain periods since 1960.

Question 9

An important reason why economies at an early stage of development tend to operate inefficiently is

Accepted Answer

A)  they tend to be dominated by the agricultural sector, where productivity is usually low. 
B)  they tend to have authoritarian governments that stifle innovation. 
C)  they tend to be plagued by superstitious beliefs that stifle innovation. 
D)  the high transactions costs associated with barter. 
A)  they tend to be dominated by the agricultural sector, where productivity is usually low. 
B)  they tend to have authoritarian governments that stifle innovation. 
C)  they tend to be plagued by superstitious beliefs that stifle innovation. 
D)  the high transactions costs associated with barter.

Question 10

What does research suggest as to the relationship between the independence of the central bank and inflation? What is the rationale for this relationship?

Accepted Answer

Research indicates that the more indepen

Question 11

Automatic teller machines and debit cards are examples of

Accepted Answer

A)  electronic funds transfer systems. 
B)  commodity monies. 
C)  legal tender in the United States. 
D)  modern barter systems. 
A)  electronic funds transfer systems. 
B)  commodity monies. 
C)  legal tender in the United States. 
D)  modern barter systems.

Question 12

Make use of the quantity theory of money to solve the following problem.If the Fed has an inflation target of 2% and the velocity of money is constant,by how much should it increase the money supply each year if economic growth is expected to average 3%?

Accepted Answer

Since the percent change in th

Question 13

The M2 aggregate

Accepted Answer

A)  includes M1 plus short-term investment accounts. 
B)  includes M1 plus large-denomination time deposits. 
C)  equals currency plus checking account deposits at commercial banks. 
D)  is the best definition of money purely as a medium of exchange. 
A)  includes M1 plus short-term investment accounts. 
B)  includes M1 plus large-denomination time deposits. 
C)  equals currency plus checking account deposits at commercial banks. 
D)  is the best definition of money purely as a medium of exchange.

Question 14

What is the difference between money,income,and wealth?

Accepted Answer

Income is equal to a person's earnings o

Question 15

Approximately what proportion of US dollars are held outside the United States?

Accepted Answer

A)  less than one-tenth 
B)  one-fourth 
C)  one-half 
D)  two-thirds 
A)  less than one-tenth 
B)  one-fourth 
C)  one-half 
D)  two-thirds

Question 16

Which of the following is NOT a significant cost that a barter system imposes on an economy?

Accepted Answer

A)  Many prices must be maintained for each good. 
B)  Only agricultural goods may be traded. 
C)  Specialization of labor is hindered. 
D)  The costs arising from the problem of finding two people who each want what the other produces. 
A)  Many prices must be maintained for each good. 
B)  Only agricultural goods may be traded. 
C)  Specialization of labor is hindered. 
D)  The costs arising from the problem of finding two people who each want what the other produces.

Question 17

How does the existence of money affect economic growth?

Accepted Answer

It reduces transactions costs

Question 18

Barter is

Accepted Answer

A)  another name for money. 
B)  an exchange of goods and services directly for goods and services. 
C)  the basis for economic specialization. 
D)  the main system of exchange in the United States today. 
A)  another name for money. 
B)  an exchange of goods and services directly for goods and services. 
C)  the basis for economic specialization. 
D)  the main system of exchange in the United States today.

Question 19

What are four inefficiencies of a barter system?

Accepted Answer

Under a barter system,there are several

Question 20

Which of the following is an example of a barter transaction?

Accepted Answer

A)  An individual pays her electric bill with a check. 
B)  An individual pays her electric bill with currency. 
C)  An individual provides three light bulbs to her neighbor in exchange for two gallons of milk. 
D)  An individual deposits three twenty-dollar bills in her checking account. 
A)  An individual pays her electric bill with a check. 
B)  An individual pays her electric bill with currency. 
C)  An individual provides three light bulbs to her neighbor in exchange for two gallons of milk. 
D)  An individual deposits three twenty-dollar bills in her checking account.

What are the five characteristics that make an asset suitable to be used as a medium of exchange?

Hyperinflations are usually caused by large budget deficits financed by

The purchasing power of money

If prices increase rapidly

Which of the following is an example of a commodity money?

A system of barter has substantial transactions costs because

When economists refer to the role of money as a standard of deferred payment,they mean that

The M1 and M2 aggregates

An important reason why economies at an early stage of development tend to operate inefficiently is

What does research suggest as to the relationship between the independence of the central bank and inflation? What is the rationale for this relationship?

Automatic teller machines and debit cards are examples of

Make use of the quantity theory of money to solve the following problem.If the Fed has an inflation target of 2% and the velocity of money is constant,by how much should it increase the money supply each year if economic growth is expected to average 3%?

The M2 aggregate

What is the difference between money,income,and wealth?

Approximately what proportion of US dollars are held outside the United States?

Which of the following is NOT a significant cost that a barter system imposes on an economy?

How does the existence of money affect economic growth?

Barter is

What are four inefficiencies of a barter system?

Which of the following is an example of a barter transaction?

Introducing Money and the Financial System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, mutual Funds, hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I: the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters

Exam 2: Money and the Payments System

What are the five characteristics that make an asset suitable to be used as a medium of exchange?

Hyperinflations are usually caused by large budget deficits financed by

The purchasing power of money

If prices increase rapidly

Which of the following is an example of a commodity money?

A system of barter has substantial transactions costs because

When economists refer to the role of money as a standard of deferred payment,they mean that

The M1 and M2 aggregates

An important reason why economies at an early stage of development tend to operate inefficiently is

What does research suggest as to the relationship between the independence of the central bank and inflation? What is the rationale for this relationship?

Automatic teller machines and debit cards are examples of

Make use of the quantity theory of money to solve the following problem.If the Fed has an inflation target of 2% and the velocity of money is constant,by how much should it increase the money supply each year if economic growth is expected to average 3%?

The M2 aggregate

What is the difference between money,income,and wealth?

Approximately what proportion of US dollars are held outside the United States?

Which of the following is NOT a significant cost that a barter system imposes on an economy?

How does the existence of money affect economic growth?

Barter is

What are four inefficiencies of a barter system?

Which of the following is an example of a barter transaction?

Introducing Money and the Financial System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, mutual Funds, hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I: the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters