Question 1

Which of the following is often traded in the short-term money market?

Accepted Answer

A)  Treasury notes. 
B)  Shares. 
C)  Ten-year Commonwealth government securities. 
D)  Foreign exchange. 
A)  Treasury notes. 
B)  Shares. 
C)  Ten-year Commonwealth government securities. 
D)  Foreign exchange.

Question 2

If the money supply increases this will cause the interest rate to rise, investment to fall and GDP to fall.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is not counted as part of M1?

Accepted Answer

A)  Silver coins. 
B)  Reserve Bank notes or 'paper money'. 
C)  Passbook savings deposits. 
D)  Cheque account deposits. 
A)  Silver coins. 
B)  Reserve Bank notes or 'paper money'. 
C)  Passbook savings deposits. 
D)  Cheque account deposits.

Question 4

Which of the following could not serve as commodity money?

Accepted Answer

A)  Gold. 
B)  Cattle. 
C)  Sugar. 
D)  Paper money that is not backed up by a valuable commodity. 
A)  Gold. 
B)  Cattle. 
C)  Sugar. 
D)  Paper money that is not backed up by a valuable commodity.

Question 5

When interest rates rise, the quantity demanded of money held for the:

Accepted Answer

A)  speculative demand rises. 
B)  precautionary demand rises. 
C)  transactions demand falls. 
D)  speculative demand falls. 
A)  speculative demand rises. 
B)  precautionary demand rises. 
C)  transactions demand falls. 
D)  speculative demand falls.

Question 6

Assume a fixed demand for money curve and the RBA increases the money supply. The result is a temporary:

Accepted Answer

A)  excess quantity of money demanded. 
B)  excess quantity of money supplied. 
C)  new equilibrium interest rate. 
D)  decrease in the demand for loans. 
A)  excess quantity of money demanded. 
B)  excess quantity of money supplied. 
C)  new equilibrium interest rate. 
D)  decrease in the demand for loans.

Question 7

Fractional reserve banking is a system that allows:

Accepted Answer

A)  banks to keep all their deposits on reserve as deposits at the central bank. 
B)  banks to create money. 
C)  banks to keep a very large percentage of their deposits on reserve as vault cash or as deposits at the central bank. 
D)  banks to keep all of their deposits on reserve as vault cash or as deposits at the central bank. 
A)  banks to keep all their deposits on reserve as deposits at the central bank. 
B)  banks to create money. 
C)  banks to keep a very large percentage of their deposits on reserve as vault cash or as deposits at the central bank. 
D)  banks to keep all of their deposits on reserve as vault cash or as deposits at the central bank.

Question 8

The expansionary and contractionary policies are the:

Accepted Answer

A)  monetary policies. 
B)  current policies. 
C)  fiscal policies. 
D)  relevant policies. 
A)  monetary policies. 
B)  current policies. 
C)  fiscal policies. 
D)  relevant policies.

Question 9

Fiat money is paper money:

Accepted Answer

A)  backed dollar for dollar by gold. 
B)  backed dollar for dollar by silver. 
C)  produced by an Italian car manufacturer. 
D)  which is not backed by or convertible into any good. 
A)  backed dollar for dollar by gold. 
B)  backed dollar for dollar by silver. 
C)  produced by an Italian car manufacturer. 
D)  which is not backed by or convertible into any good.

Question 10

The Reserve Bank of Australia aims to hold an inflation rate to be:

Accepted Answer

A)  between 2 and 3 per cent per decade. 
B)  between 2 and 3 per cent per annum over the course of the business cycle. 
C)  above 3 per cent per annum. 
D)  between 5 and 7 per cent per annum over the course of the business cycle. 
A)  between 2 and 3 per cent per decade. 
B)  between 2 and 3 per cent per annum over the course of the business cycle. 
C)  above 3 per cent per annum. 
D)  between 5 and 7 per cent per annum over the course of the business cycle.

Question 11

T-note is sold by the Treasury on behalf of the federal government and is considered riskless.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following relationships with respect to banks is correct?

Accepted Answer

A)  assets = liabilities - shareholders' equity. 
B)  shareholders' equity = assets - liabilities. 
C)  shareholders' equity = minimum liquidity requirements + exchange settlement account balance. 
D)  liabilities = assets + shareholders' equity. 
A)  assets = liabilities - shareholders' equity. 
B)  shareholders' equity = assets - liabilities. 
C)  shareholders' equity = minimum liquidity requirements + exchange settlement account balance. 
D)  liabilities = assets + shareholders' equity.

Question 13

Expansionary monetary policy is:

Accepted Answer

A)  reducing interest rates by increasing money supply. 
B)  increasing interest rates by increasing money supply. 
C)  reducing interest rates by decreasing money supply. 
D)  increasing interest rates by decreasing money supply. 
A)  reducing interest rates by increasing money supply. 
B)  increasing interest rates by increasing money supply. 
C)  reducing interest rates by decreasing money supply. 
D)  increasing interest rates by decreasing money supply.

Question 14

The currency of Australia is:

Accepted Answer

A)  backed dollar for dollar by gold. 
B)  backed by a gold cover of 50 per cent. 
C)  not backed by any precious metal. 
D)  backed by the government's silver reserves. 
A)  backed dollar for dollar by gold. 
B)  backed by a gold cover of 50 per cent. 
C)  not backed by any precious metal. 
D)  backed by the government's silver reserves.

Question 15

Assume a fixed demand for money curve and the RBA increases the money supply. In response, people will:

Accepted Answer

A)  sell bonds, thus driving up the interest rate. 
B)  sell bonds, thus driving down the interest rate. 
C)  buy bonds, thus driving up the interest rate. 
D)  buy bonds, thus driving down the interest rate. 
A)  sell bonds, thus driving up the interest rate. 
B)  sell bonds, thus driving down the interest rate. 
C)  buy bonds, thus driving up the interest rate. 
D)  buy bonds, thus driving down the interest rate.

Question 16

Currency is:

Accepted Answer

A)  the less liquid of all financial assets. 
B)  the sum of M1 and M3. 
C)  the sum of M3 and the non-deposit borrowings from the private sector by AFIs. 
D)  the sum of coins and paper money. 
A)  the less liquid of all financial assets. 
B)  the sum of M1 and M3. 
C)  the sum of M3 and the non-deposit borrowings from the private sector by AFIs. 
D)  the sum of coins and paper money.

Question 17

Fiat money is:

Accepted Answer

A)  commodity money issued by the central bank that does not have intrinsic value. 
B)  paper money issued by the central bank that does have intrinsic value. 
C)  paper money issued by the central bank. 
D)  paper money issued by the central bank that does not have intrinsic value. 
A)  commodity money issued by the central bank that does not have intrinsic value. 
B)  paper money issued by the central bank that does have intrinsic value. 
C)  paper money issued by the central bank. 
D)  paper money issued by the central bank that does not have intrinsic value.

Question 18

An individual's liability in relation to public companies is:

Accepted Answer

A)  unlimited. 
B)  limited to their investment in that company. 
C)  guaranteed by the Australian Stock Exchange. 
D)  guaranteed by the Reserve Bank. 
E)  guaranteed by the Corporations Law. 
A)  unlimited. 
B)  limited to their investment in that company. 
C)  guaranteed by the Australian Stock Exchange. 
D)  guaranteed by the Reserve Bank. 
E)  guaranteed by the Corporations Law.

Question 19

Assume a simplified banking system subject to a 20 per cent minimum liquidity requirement. If there is an initial increase in excess reserves of $100 000, the money supply:

Accepted Answer

A)  increases $100 000. 
B)  increases $500 000. 
C)  increases $600 000. 
D)  decreases $500 000. 
A)  increases $100 000. 
B)  increases $500 000. 
C)  increases $600 000. 
D)  decreases $500 000.

Question 20

The precautionary demand for money is the demand for money:

Accepted Answer

A)  for normal transactions purposes. 
B)  for normal investment purposes. 
C)  for special stock purchases. 
D)  to cover unexpected events. 
A)  for normal transactions purposes. 
B)  for normal investment purposes. 
C)  for special stock purchases. 
D)  to cover unexpected events.

Which of the following is often traded in the short-term money market?

If the money supply increases this will cause the interest rate to rise, investment to fall and GDP to fall.

Which of the following is not counted as part of M1?

Which of the following could not serve as commodity money?

When interest rates rise, the quantity demanded of money held for the:

Assume a fixed demand for money curve and the RBA increases the money supply. The result is a temporary:

Fractional reserve banking is a system that allows:

The expansionary and contractionary policies are the:

Fiat money is paper money:

The Reserve Bank of Australia aims to hold an inflation rate to be:

T-note is sold by the Treasury on behalf of the federal government and is considered riskless.

Which of the following relationships with respect to banks is correct?

Expansionary monetary policy is:

The currency of Australia is:

Assume a fixed demand for money curve and the RBA increases the money supply. In response, people will:

Currency is:

Fiat money is:

An individual's liability in relation to public companies is:

Assume a simplified banking system subject to a 20 per cent minimum liquidity requirement. If there is an initial increase in excess reserves of $100 000, the money supply:

The precautionary demand for money is the demand for money:

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

Which of the following is often traded in the short-term money market?

If the money supply increases this will cause the interest rate to rise, investment to fall and GDP to fall.

Which of the following is not counted as part of M1?

Which of the following could not serve as commodity money?

When interest rates rise, the quantity demanded of money held for the:

Assume a fixed demand for money curve and the RBA increases the money supply. The result is a temporary:

Fractional reserve banking is a system that allows:

The expansionary and contractionary policies are the:

Fiat money is paper money:

The Reserve Bank of Australia aims to hold an inflation rate to be:

T-note is sold by the Treasury on behalf of the federal government and is considered riskless.

Which of the following relationships with respect to banks is correct?

Expansionary monetary policy is:

The currency of Australia is:

Assume a fixed demand for money curve and the RBA increases the money supply. In response, people will:

Currency is:

Fiat money is:

An individual's liability in relation to public companies is:

Assume a simplified banking system subject to a 20 per cent minimum liquidity requirement. If there is an initial increase in excess reserves of $100 000, the money supply:

The precautionary demand for money is the demand for money:

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