Chapter 29

Which of the following is a function of money?

• a unit of account

• a store of value

• medium of exchange

• All of the above are correct.

Which of the following is the correct expression for finding the present value of a $500 payment two years from today if the interest rate is 6 percent?

• 500 ÷ (1 + 0.06)²

• 500(1 + 0.06)²

• 1 ÷ (500 + 0.06)²

• 500 ÷ (1 + 0.02)⁶

What is the formula for the unemployment rate?

• Number of unemployed ÷ Labor Force

• Labor Force ÷ Adult Population

• Number of employed × Labor Force

• Number of unemployed ÷ Adult Population

Liquidity refers to

• the ease with which an asset is converted to the medium of exchange.

• the measurement of the intrinsic value of commodity money.

• the measurement of the durability of a good.

• how many time a dollar circulates in a given year.

Which of the following best represents fiat money?

• The euro

• A gold bar

• Monopoly money

• Baseball cards

Which of the following is included in M2?

• Credit cards

• Money market mutual funds

• Corporate bonds

• Large time deposits

The Federal Reserve

• was created in 1896.

• is part of the executive branch of government.

• is only responsible for controlling the money supply.

• is the central bank of the United States.

When economists say that money serves as a medium of exchange, they mean that it is:

• a way to keep wealth in a readily spendable form for future use.

• a means of payment.

• a monetary unit for measuring and comparing the relative values of goods.

• declared as legal tender by the government.

In the United States, the money supply (M1) is comprised of:

• the currency in your pocket

• currency, demand deposits, and balances in saving accounts

• currency, demand deposits, balances in saving accounts, money market funds, and small time deposits

• currency, demand deposits, balances in saving accounts, money market funds, small time deposits, and retirement accounts.

What is the discount rate?

• Interest rate on the loans that the Fed makes to banks

• Interest rate at which the central banks lend to the U.S. Treasury.

• yield on long-term government bonds.

• rate at which commercial banks lend to the public.