Question 1

The primary functions of money are:

Accepted Answer

A)  velocity, liquidity and transactions. 
B)  speculative demand, measure of value and precautionary demand. 
C)  a medium of exchange, a measure of value and a store of value. 
D)  a store of value, heterogeneity and a medium of exchange. 
A)  velocity, liquidity and transactions. 
B)  speculative demand, measure of value and precautionary demand. 
C)  a medium of exchange, a measure of value and a store of value. 
D)  a store of value, heterogeneity and a medium of exchange.

Question 2

Which of the following statements is true?

Accepted Answer

A)  The speculative demand for money at possible interest rates gives the demand for money curve its upward slope. 
B)  There is a direct relationship between the quantity of money demanded and the interest rate. 
C)  According to the quantity theory of money, any change in the money supply will have no effect on the price level. 
D)  People hold money to pay unpredictable expenses or against 'rainy days'. 
A)  The speculative demand for money at possible interest rates gives the demand for money curve its upward slope. 
B)  There is a direct relationship between the quantity of money demanded and the interest rate. 
C)  According to the quantity theory of money, any change in the money supply will have no effect on the price level. 
D)  People hold money to pay unpredictable expenses or against 'rainy days'.

Question 3

The monetary policy transmission mechanism explains changes in:

Accepted Answer

A)  monetary policy, money supply, interest rate, investment, aggregate demand, prices, real GDP and employment. 
B)  monetary policy, money demand, interest rate, investment, aggregate supply, prices, real GDP and employment. 
C)  monetary policy, money supply, interest rate, research and development, aggregate demand, prices, real GDP and employment. 
D)  monetary policy, money supply, interest rate, investment, aggregate demand, prices, nominal GDP and employment. 
A)  monetary policy, money supply, interest rate, investment, aggregate demand, prices, real GDP and employment. 
B)  monetary policy, money demand, interest rate, investment, aggregate supply, prices, real GDP and employment. 
C)  monetary policy, money supply, interest rate, research and development, aggregate demand, prices, real GDP and employment. 
D)  monetary policy, money supply, interest rate, investment, aggregate demand, prices, nominal GDP and employment.

Question 4

Credit cards are:

Accepted Answer

A)  M1 money. 
B)  M2 money. 
C)  M3 money. 
D)  not money. 
A)  M1 money. 
B)  M2 money. 
C)  M3 money. 
D)  not money.

Question 5

Comparison of the price of a cup of coffee and the price of a glass of juice represents the use of money as:

Accepted Answer

A)  a medium of exchange. 
B)  a unit of account. 
C)  a store of value. 
D)  a leverage of your income. 
A)  a medium of exchange. 
B)  a unit of account. 
C)  a store of value. 
D)  a leverage of your income.

Question 6

The relationship between bond prices and the interest rate is:

Accepted Answer

A)  an undefined relationship. 
B)  a steady relationship. 
C)  a direct relationship. 
D)  an inverse relationship. 
A)  an undefined relationship. 
B)  a steady relationship. 
C)  a direct relationship. 
D)  an inverse relationship.

Question 7

In Keynes' view, an excess quantity of money demanded causes people to:

Accepted Answer

A)  sell bonds pushing the interest rate up. 
B)  buy bonds pushing the interest rate down. 
C)  buy bonds pushing the interest rate up. 
D)  increase speculative balances. 
A)  sell bonds pushing the interest rate up. 
B)  buy bonds pushing the interest rate down. 
C)  buy bonds pushing the interest rate up. 
D)  increase speculative balances.

Question 8

The precautionary demand for money:

Accepted Answer

A)  varies inversely with the income level. 
B)  varies inversely with the price level. 
C)  is used as an insurance agent against unexpected needs. 
D)  states that nominal income must exceed real income. 
A)  varies inversely with the income level. 
B)  varies inversely with the price level. 
C)  is used as an insurance agent against unexpected needs. 
D)  states that nominal income must exceed real income.

Question 9

Options markets are designed to:

Accepted Answer

A)  give people choice about where to invest their money. 
B)  give greater flexibility to people in managing their financial risk. 
C)  lock in a return on a financial instrument to avoid interest rate movements. 
D)  increase risks, and hence returns, on financial instruments. 
A)  give people choice about where to invest their money. 
B)  give greater flexibility to people in managing their financial risk. 
C)  lock in a return on a financial instrument to avoid interest rate movements. 
D)  increase risks, and hence returns, on financial instruments.

Question 10

Other things being equal, the quantity of money that people wish to hold can be expected to:

Accepted Answer

A)  increase as the interest rate increases. 
B)  increase as the interest rate decreases. 
C)  decrease as real GDP increases. 
D)  decrease as the fixed interest deposits decrease. 
A)  increase as the interest rate increases. 
B)  increase as the interest rate decreases. 
C)  decrease as real GDP increases. 
D)  decrease as the fixed interest deposits decrease.

Question 11

The statement that Computech's profits totalled $500 million last year represents the use of money as a:

Accepted Answer

A)  medium of exchange. 
B)  store of value. 
C)  unit of account. 
D)  means of coincidence. 
A)  medium of exchange. 
B)  store of value. 
C)  unit of account. 
D)  means of coincidence.

Question 12

Which of the following is the best description of fiat money?

Accepted Answer

A)  Coins made of gold and silver. 
B)  Paper money that can be redeemed for gold or silver. 
C)  Legal tender that has no intrinsic value. 
D)  Cheque accounts and debit cards. 
A)  Coins made of gold and silver. 
B)  Paper money that can be redeemed for gold or silver. 
C)  Legal tender that has no intrinsic value. 
D)  Cheque accounts and debit cards.

Question 13

Assume that Paris First National Bank is a thriving bank with deposits of $20 million. If the minimum liquidity requirement is 20 per cent and the bank is fully loaned out, the bank will keep what amount of required reserves?

Accepted Answer

A)  $2 million. 
B)  $4 million. 
C)  $10 million. 
D)  $16 million. 
A)  $2 million. 
B)  $4 million. 
C)  $10 million. 
D)  $16 million.

Question 14

Keynes called the money that people hold in order to buy bonds, stocks or other non-money financial assets the:

Accepted Answer

A)  transactions demand for spending money. 
B)  precautionary demand for holding money. 
C)  speculative demand for holding money. 
D)  unit of account demand for holding money. 
A)  transactions demand for spending money. 
B)  precautionary demand for holding money. 
C)  speculative demand for holding money. 
D)  unit of account demand for holding money.

Question 15

Using the aggregate supply and demand model, assume the economy is operating along the intermediate portion of the aggregate supply curve. An increase in the money supply will increase the price level and:

Accepted Answer

A)  lower both the interest rate and real GDP. 
B)  raise both the interest rate and nominal GDP. 
C)  lower the interest rate and raise GDP. 
D)  raise the interest rate and lower real GDP. 
A)  lower both the interest rate and real GDP. 
B)  raise both the interest rate and nominal GDP. 
C)  lower the interest rate and raise GDP. 
D)  raise the interest rate and lower real GDP.

Question 16

A decrease in the money supply:

Accepted Answer

A)  raises the interest rate, causing an increase in investment and an increase in GDP. 
B)  lowers the interest rate, causing an increase in investment and an increase in GDP. 
C)  raises the interest rate, causing a decrease in investment and a decrease in GDP. 
D)  lowers the interest rate, causing a decrease in investment and an increase in GDP. 
A)  raises the interest rate, causing an increase in investment and an increase in GDP. 
B)  lowers the interest rate, causing an increase in investment and an increase in GDP. 
C)  raises the interest rate, causing a decrease in investment and a decrease in GDP. 
D)  lowers the interest rate, causing a decrease in investment and an increase in GDP.

Question 17

According to Keynesian economists, which of the following is not a consequence of increasing the money supply?

Accepted Answer

A)  A lower interest rate. 
B)  Greater investment. 
C)  Lower real GDP. 
D)  Higher real GDP. 
A)  A lower interest rate. 
B)  Greater investment. 
C)  Lower real GDP. 
D)  Higher real GDP.

Question 18

If the economy is inflationary, the RBA would most likely:

Accepted Answer

A)  encourage banks to provide loans by buying government securities. 
B)  encourage banks to provide loans by raising the cash rate. 
C)  encourage banks to provide loans by selling government securities. 
D)  restrict bank lending by selling government securities. 
A)  encourage banks to provide loans by buying government securities. 
B)  encourage banks to provide loans by raising the cash rate. 
C)  encourage banks to provide loans by selling government securities. 
D)  restrict bank lending by selling government securities.

Question 19

Narrbegin Exhibit 15.1 Money market demand and supply curves   
-Starting from an equilibrium at E1 in Exhibit 15.1, a leftward shift of the money supply curve from MS1 to MS2 would cause an excess:

Accepted Answer

A)  demand for money, leading people to sell bonds. 
B)  demand for money, leading people to buy bonds. 
C)  supply of money, leading people to sell bonds. 
D)  supply of money, leading people to buy bonds. 
A)  demand for money, leading people to sell bonds. 
B)  demand for money, leading people to buy bonds. 
C)  supply of money, leading people to sell bonds. 
D)  supply of money, leading people to buy bonds.

Question 20

Credit cards fail to meet the store-of-value criterion.

Accepted Answer

A) True 
 B)False

The primary functions of money are:

Which of the following statements is true?

The monetary policy transmission mechanism explains changes in:

Credit cards are:

Comparison of the price of a cup of coffee and the price of a glass of juice represents the use of money as:

The relationship between bond prices and the interest rate is:

In Keynes' view, an excess quantity of money demanded causes people to:

The precautionary demand for money:

Options markets are designed to:

Other things being equal, the quantity of money that people wish to hold can be expected to:

The statement that Computech's profits totalled $500 million last year represents the use of money as a:

Which of the following is the best description of fiat money?

Assume that Paris First National Bank is a thriving bank with deposits of $20 million. If the minimum liquidity requirement is 20 per cent and the bank is fully loaned out, the bank will keep what amount of required reserves?

Keynes called the money that people hold in order to buy bonds, stocks or other non-money financial assets the:

Using the aggregate supply and demand model, assume the economy is operating along the intermediate portion of the aggregate supply curve. An increase in the money supply will increase the price level and:

A decrease in the money supply:

According to Keynesian economists, which of the following is not a consequence of increasing the money supply?

If the economy is inflationary, the RBA would most likely:

Narrbegin Exhibit 15.1 Money market demand and supply curves -Starting from an equilibrium at E₁ in Exhibit 15.1, a leftward shift of the money supply curve from MS₁ to MS₂ would cause an excess:

Credit cards fail to meet the store-of-value criterion.

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

Inflation and Unemployment

A Simple Model of the Macro Economy

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

Filters

Exam 16: The Monetary and Financial System

The primary functions of money are:

Which of the following statements is true?

The monetary policy transmission mechanism explains changes in:

Credit cards are:

Comparison of the price of a cup of coffee and the price of a glass of juice represents the use of money as:

The relationship between bond prices and the interest rate is:

In Keynes' view, an excess quantity of money demanded causes people to:

The precautionary demand for money:

Options markets are designed to:

Other things being equal, the quantity of money that people wish to hold can be expected to:

The statement that Computech's profits totalled $500 million last year represents the use of money as a:

Which of the following is the best description of fiat money?

Assume that Paris First National Bank is a thriving bank with deposits of $20 million. If the minimum liquidity requirement is 20 per cent and the bank is fully loaned out, the bank will keep what amount of required reserves?

Keynes called the money that people hold in order to buy bonds, stocks or other non-money financial assets the:

Using the aggregate supply and demand model, assume the economy is operating along the intermediate portion of the aggregate supply curve. An increase in the money supply will increase the price level and:

A decrease in the money supply:

According to Keynesian economists, which of the following is not a consequence of increasing the money supply?

If the economy is inflationary, the RBA would most likely:

Narrbegin Exhibit 15.1 Money market demand and supply curves -Starting from an equilibrium at E1 in Exhibit 15.1, a leftward shift of the money supply curve from MS1 to MS2 would cause an excess:

Credit cards fail to meet the store-of-value criterion.

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

Inflation and Unemployment

A Simple Model of the Macro Economy

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

Filters

Narrbegin Exhibit 15.1 Money market demand and supply curves -Starting from an equilibrium at E₁ in Exhibit 15.1, a leftward shift of the money supply curve from MS₁ to MS₂ would cause an excess: