Question 1

Which bank controls the Monetary Base in Australia?

Accepted Answer

A)  The Commonwealth Bank. 
B)  The ANZ Bank. 
C)  The State Bank. 
D)  The Reserve Bank. 
A)  The Commonwealth Bank. 
B)  The ANZ Bank. 
C)  The State Bank. 
D)  The Reserve Bank.

Question 2

Narrbegin Exhibit 15.1 Money market demand and supply curves   
-Beginning from an equilibrium at E1 in Exhibit 15.1, a decrease in the money supply from $150 billion to $100 billion causes people to:

Accepted Answer

A)  sell bonds and drive the price of bonds down. 
B)  sell bonds and drive the price of bonds up. 
C)  buy bonds and drive the price of bonds down. 
D)  buy bonds and drive the price of bonds up. 
A)  sell bonds and drive the price of bonds down. 
B)  sell bonds and drive the price of bonds up. 
C)  buy bonds and drive the price of bonds down. 
D)  buy bonds and drive the price of bonds up.

Question 3

Fiat money has no redeemability or intrinsic value.

Accepted Answer

A) True 
 B)False

Question 4

Other things being equal, an increase in the rate of interest causes a/an:

Accepted Answer

A)  upward movement along the demand for money curve. 
B)  downward movement along the demand for money curve. 
C)  rightward shift of the demand for money curve. 
D)  leftward shift of the demand for money curve. 
A)  upward movement along the demand for money curve. 
B)  downward movement along the demand for money curve. 
C)  rightward shift of the demand for money curve. 
D)  leftward shift of the demand for money curve.

Question 5

If every person is willing to accept money rather than goods and services for payment, money serves as a:

Accepted Answer

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

Question 6

The role of the Reserve Bank of Australia in the economy is to:

Accepted Answer

A)  control prices. 
B)  look into research and development portfolios. 
C)  manage the government's investments. 
D)  control interest rates. 
A)  control prices. 
B)  look into research and development portfolios. 
C)  manage the government's investments. 
D)  control interest rates.

Question 7

Keynesian economists argue that monetary policy works, through its effects on:

Accepted Answer

A)  budget deficits and trade deficits. 
B)  price and wage flexibility. 
C)  interest rates and investment. 
D)  the spending and money multipliers. 
A)  budget deficits and trade deficits. 
B)  price and wage flexibility. 
C)  interest rates and investment. 
D)  the spending and money multipliers.

Question 8

Which one is not a primary function of money?

Accepted Answer

A)  Medium of exchange. 
B)  Unit of exchange. 
C)  Unit of account. 
D)  Store value. 
A)  Medium of exchange. 
B)  Unit of exchange. 
C)  Unit of account. 
D)  Store value.

Question 9

A bank's exchange settlement account must have a negative balance at the end of each trading day.

Accepted Answer

A) True 
 B)False

Question 10

The financial futures market is used to:

Accepted Answer

A)  hedge against future interest rate movements. 
B)  hedge against current interest rate movements. 
C)  influence the money supply. 
D)  allow banks to transact with each other. 
A)  hedge against future interest rate movements. 
B)  hedge against current interest rate movements. 
C)  influence the money supply. 
D)  allow banks to transact with each other.

Question 11

The RBA currently sets a medium-term inflation target of:

Accepted Answer

A)  zero per cent 
B)  1-3 per cent 
C)  2-3 per cent 
D)  0-5 per cent 
A)  zero per cent 
B)  1-3 per cent 
C)  2-3 per cent 
D)  0-5 per cent

Question 12

One hundred dollars on deposit in a cheque account represents the use of money as a:

Accepted Answer

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

Question 13

The only institutions allowed to trade in the foreign exchange market are:

Accepted Answer

A)  banks. 
B)  the RBA. 
C)  publicly listed companies. 
D)  those authorised by the RBA to do so. 
A)  banks. 
B)  the RBA. 
C)  publicly listed companies. 
D)  those authorised by the RBA to do so.

Question 14

If an exporter believes the $A is going to rise in three months when it receives payment for a shipload of its good, it may decide to:

Accepted Answer

A)  enter the short-term money market to hedge against this. 
B)  borrow money in the interim. 
C)  enter the futures market to hedge against this. 
D)  buy Treasury notes in the interim. 
A)  enter the short-term money market to hedge against this. 
B)  borrow money in the interim. 
C)  enter the futures market to hedge against this. 
D)  buy Treasury notes in the interim.

Question 15

The quantity of money demanded to satisfy transaction needs:

Accepted Answer

A)  is intended for unexpected expenditures. 
B)  increases with the level of real GDP. 
C)  decreases with the level of real GDP. 
D)  is unrelated to either national income or the interest rate. 
A)  is intended for unexpected expenditures. 
B)  increases with the level of real GDP. 
C)  decreases with the level of real GDP. 
D)  is unrelated to either national income or the interest rate.

Question 16

Which of the following items does not provide a store of value?

Accepted Answer

A)  Currency. 
B)  Bonds. 
C)  Credit cards. 
D)  Gold. 
A)  Currency. 
B)  Bonds. 
C)  Credit cards. 
D)  Gold.

Question 17

A minimum liquidity requirement means that a bank must:

Accepted Answer

A)  cover short-term demands for funds by customers. 
B)  meet their capital adequacy targets. 
C)  keep their exchange settlement accounts with a positive balance. 
D)  ensure they receive the highest possible return from customer deposits. 
A)  cover short-term demands for funds by customers. 
B)  meet their capital adequacy targets. 
C)  keep their exchange settlement accounts with a positive balance. 
D)  ensure they receive the highest possible return from customer deposits.

Question 18

Assume the demand for money curve is stationary and the RBA increases the money supply. The result is that people:

Accepted Answer

A)  increase the supply of bonds, thus driving up the interest rate. 
B)  increase the supply of bonds, thus driving down the interest rate. 
C)  increase the demand for bonds, thus driving up the interest rate. 
D)  increase the demand for bonds, thus driving down the interest rate. 
A)  increase the supply of bonds, thus driving up the interest rate. 
B)  increase the supply of bonds, thus driving down the interest rate. 
C)  increase the demand for bonds, thus driving up the interest rate. 
D)  increase the demand for bonds, thus driving down the interest rate.

Question 19

One reason that people hold money is to pay for unexpected car repairs and other unpredictable expenses. This motive for holding money is called:

Accepted Answer

A)  transactions demand. 
B)  precautionary demand. 
C)  speculative demand. 
D)  non-cyclical demand. 
A)  transactions demand. 
B)  precautionary demand. 
C)  speculative demand. 
D)  non-cyclical demand.

Question 20

Treasury notes issued by the government are:

Accepted Answer

A)  considered to be high risk. 
B)  long-term financial instruments. 
C)  sold by the Treasury at a face value. 
D)  freely traded in financial markets once issued. 
A)  considered to be high risk. 
B)  long-term financial instruments. 
C)  sold by the Treasury at a face value. 
D)  freely traded in financial markets once issued.

Which bank controls the Monetary Base in Australia?

Narrbegin Exhibit 15.1 Money market demand and supply curves -Beginning from an equilibrium at E₁ in Exhibit 15.1, a decrease in the money supply from $150 billion to $100 billion causes people to:

Fiat money has no redeemability or intrinsic value.

Other things being equal, an increase in the rate of interest causes a/an:

If every person is willing to accept money rather than goods and services for payment, money serves as a:

The role of the Reserve Bank of Australia in the economy is to:

Keynesian economists argue that monetary policy works, through its effects on:

Which one is not a primary function of money?

A bank's exchange settlement account must have a negative balance at the end of each trading day.

The financial futures market is used to:

The RBA currently sets a medium-term inflation target of:

One hundred dollars on deposit in a cheque account represents the use of money as a:

The only institutions allowed to trade in the foreign exchange market are:

If an exporter believes the $A is going to rise in three months when it receives payment for a shipload of its good, it may decide to:

The quantity of money demanded to satisfy transaction needs:

Which of the following items does not provide a store of value?

A minimum liquidity requirement means that a bank must:

Assume the demand for money curve is stationary and the RBA increases the money supply. The result is that people:

One reason that people hold money is to pay for unexpected car repairs and other unpredictable expenses. This motive for holding money is called:

Treasury notes issued by the government are:

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 bank controls the Monetary Base in Australia?

Narrbegin Exhibit 15.1 Money market demand and supply curves -Beginning from an equilibrium at E1 in Exhibit 15.1, a decrease in the money supply from $150 billion to $100 billion causes people to:

Fiat money has no redeemability or intrinsic value.

Other things being equal, an increase in the rate of interest causes a/an:

If every person is willing to accept money rather than goods and services for payment, money serves as a:

The role of the Reserve Bank of Australia in the economy is to:

Keynesian economists argue that monetary policy works, through its effects on:

Which one is not a primary function of money?

A bank's exchange settlement account must have a negative balance at the end of each trading day.

The financial futures market is used to:

The RBA currently sets a medium-term inflation target of:

One hundred dollars on deposit in a cheque account represents the use of money as a:

The only institutions allowed to trade in the foreign exchange market are:

If an exporter believes the $A is going to rise in three months when it receives payment for a shipload of its good, it may decide to:

The quantity of money demanded to satisfy transaction needs:

Which of the following items does not provide a store of value?

A minimum liquidity requirement means that a bank must:

Assume the demand for money curve is stationary and the RBA increases the money supply. The result is that people:

One reason that people hold money is to pay for unexpected car repairs and other unpredictable expenses. This motive for holding money is called:

Treasury notes issued by the government are:

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 -Beginning from an equilibrium at E₁ in Exhibit 15.1, a decrease in the money supply from $150 billion to $100 billion causes people to: