Topic 5: Monetary System-Part One

You receive money as payment for babysitting your neighbor's children. This best illustrates which function of money?

• Medium of exchange

• Unit of exchange

• Store of value

• Liquidity

Eliza buried money in the backyard to use in an emergency.

Which of the three functions of money is described here?

• Store of value

• Unit of Account

• Hedge against inflation

• Medium of exchange

Which of the following best defines money?

• Currency that has intrinsic value, such as gold coins

• Paper currency or coins

• Cash held in bank

• Any asset that is accepted as a way of paying for something

The Central Bank does all except which of the following

• It controls the supply of money

• It acts as a lender of last resort for banks

• It makes loans to large business firm

• It tries to ensure the health of the banking system

M1 includes savings deposits

• True

• False

If the Reserve Ratio is 10%, the money multiplier is

• 100

• 10

• 9/10

• 1/10

This term refers to the ease with which you can convert an asset to cash with little or no loss of purchasing power.

• legal tender
• acceptability
• liquidity
• uniformity

Our current money is _______ money. Meaning that it has value because the government has ordered that it is an acceptable means to pay debts.

• Commodity
• Fiat
• Representative
• Funny

The exchange of goods and services without using money is known as...

• near money.
• bartering.
• double coincidence of wants. 
• fiat money.

Which of the following statements is correct?

• All items that are included in M1 are included also in M2.
• All items that are included in M2 are included also in M1.
• Credit cards are included in both M1 and M2.
• Savings deposits are included in both M1 and M2.