Monetary theory and policy topic 1

What is the function of financial markets?

• C. To create inflation

• D. To decrease economic efficiency

• B. To transfer funds from person or business without investment opportunities to one who has them

• A. To hoard money

What are the three groups of potential savers and borrowers in the financial system?

• C. Students, retirees, and investors

• B. Households, businesses, and governments

• A. Individuals, corporations, and banks

• D. Non-profit organizations, government agencies, and startups

What is the main function of financial intermediaries?

• D. To decrease asset transformation

• B. To decrease liquidity

• A. To increase transaction costs

• C. To share risk

What is the purpose of monetary policy?

• C. To increase unemployment

• D. To decrease price stability

• B. To control the weather

• A. To control the overall money supply

What are the functions of money?

• D. Medium of exchange, unit of account, store of value, standard of future payment

• A. Medium of exchange, unit of account, store of value, standard of deferred payment

• B. Medium of exchange, unit of account, store of value, standard of immediate payment

• C. Medium of exchange, unit of discount, store of value, standard of deferred payment

What are the criteria for a medium of exchange?

• B. Acceptable to some traders, variable quality, fragile, valuable relative to its size, indivisible

• A. Acceptable to most traders, standardized quality, durable, valuable relative to its weight, divisible

• C. Acceptable to all traders, standardized quantity, perishable, valuable relative to its color, divisible

• D. Acceptable to no traders, standardized shape, indestructible, valuable relative to its age, divisible

What is digital money?

• D. Virtual currency

• C. Cryptocurrency

• B. Electronic currency

• A. Physical currency

What is a Central Bank Digital Currency (CBDC)?

• C. A currency issued by cryptocurrency exchanges

• A. A currency issued by commercial banks

• B. A currency issued by the government

• D. A currency issued by financial institutions

What is the main purpose of stablecoins?

• C. To counter the price volatility of regular cryptocurrencies

• A. To increase price volatility of regular cryptocurrencies

• B. To decrease the stability of regular cryptocurrencies

• D. To increase the stability of regular fiat currencies

What is the main function of the foreign exchange market in international finance?

• C. To facilitate the exchange of different currencies

• D. To decrease the exchange of different currencies

• B. To increase international cooperation

• A. To decrease international trade