WorksheetsMoney and Banking chap 1: What is money?
Total questions: 46
Worksheet time: 23mins
To an economist, ___ is anything that is generally accepted in payment for goods and services or in the repayment of debt.
wealth
income
money
credit
Currency includes
paper money, coins
paper money, coins, checks
paper money, checks
paper money, coins, checks, saving deposits
Even economists have no single, precise definition of money because
money supply statistics are a state secret
the FED reserves does not employ or report different measures of money supply
the moneyness or liquidity of an asset is a matter of degree
economists find disagreement interesting and refuse to agree for ideological reasons
The total collection of pieces of property that serve to store value is a person's
wealth
income
money
credit
7. ___ is used to make purchased while ___ is the total collection of pieces of property that serve to store value.
money; income
wealth;income
income;money
money;wealth
8. ___ is a flow of earnings per unit of time.
Income
money
wealth
currency
10. When we say that money is a stock variable, we mean that
the quantity of money is measured at a given point in time
we must attach a time period to the measure
it is sold in the equity market
money never loses purchasing power
1. Of money's three functions, the one that distinguishes money from other assets is its function as
store of value
unit of account
standard of deferred payment
medium of exchange
If peanuts serve as a medium of exchange, a unit of account, and a store of value, then peanuts are
bank deposits
reserves
money
loanable funds
4. Compared to an economy that uses a medium of exchange, in a barter economy,
transaction cost are higher
transaction costs are lower
liquidity costs are higher
liquidity costs are lower
When compared to exchange systems that rely on money, disadvantages of the barter system include
the requirement of a double coincidence of wants
lowering the cost of exchanging goods over time
lowering the cost of exchanging goods over time
encouraging specialization and the division of labor
6. The conversion of a barter economy to one that uses money
increases efficiency by reducing the need to exchange goods and services
increases efficiency by reducing the need to specialize
increases efficiency by reducing transactions costs
does not increase economic efficiency
When money prices are used to facilitate comparisons of value, money is said to function as a
unit of account
medium of exchange
store of value
payments-system ruler
16. A problem with barter exchange when there are many goods is that in a barter system
transactions costs are minimized
there exists a multiple number of prices for each good
there is only one store of value
exchange of services is impossible
In a barter economy, the number of prices in an economy with N goods is
[N(N-1)/2]
N(N-2)
2N
N(N/2)-1
20. Because it is a unit of account, money
increases transaction costs
reduces the number of prices that need to be calculated
does not earn interest
discourages specialization
21. Dennis notices that jackets are on sale for $99. In this case money is functioning as a ____
medium of exchange
unit of account
store of value
payments-system ruler
30. If the price level doubles the value of money
doubles
more than double, due to scale economies
rises but does not double, due to diminishing returns
falls by 50 percent
31. A fall in the level of prices
does not affect the value of money
has an uncertain effect on the value of money
increases the value of money
reduces the value money
33. During hyperinflation,
the value of money rises rapidly
money no longer functions as a good store of value and people may resort to barter transactions on a much larger scale
middle-class savers benefit as prices rise
money's value remains fixed to the price level, that is, if prices double so does the value of money
1. The payments system is
the method of conducting transactions in the economy
used by union officials to set salary caps
an illegal method of rewarding contracts
used by your employer to determine salary increases
Paper currency that has been declared legal tender but is not convertible into coins or precious metals is called ___ money
commodity
fiat
electronic
funny
7. Compared to checks, paper currency and coins have the major drawbacks that they
are easily stolen
are hard to counterfeit
are not the most liquid assets
must be backed by gold
8. Introduction of checks into the payment system reduced the costs of exchanging goods and services. Another advantage of checks is that
they provide convenient receipts for purchases
they can never be stolen
they are more widely accepted than currency
the funds from a deposited check are available for use immediately
10. Compared to an electronic payments system, a payments system based on checks has the major drawback that
checks are less costly to process
checks take longer to process, meaning that it may take several days before the depositor can get her cash
fraud may be more difficult to commit when paper receipts are eliminated
legal liability is more clearly defined
13. Which of the following is not a form of e-money?
a debit card
a credit card
a stored-valued card
a smart card
1. Recent financial innovation makes the FED reserve's job of conducting monetary policy
easier, since the FED knows what to consider money
more difficult, since the FED now knows what to consider money
easier, since the FED no longer knows what to consider money
more difficult, since the FED no longer knows what to consider money
Money aggregates are
measures of the money supply reported by the FED reserve
measures of the wealth of individuals
never redefined since money never changes
reported by the Treasury department annually
5. The currency component includes paper money and coins held in ____.
bank vaults
ATMs
the hands of the nonbank public
the central bank
6. The components of the US M1 money supply are demanded and checkable deposits plus
currency
currency plus saving deposits
currency plus travelers checks
currency plus travelers checks plus money market deposits
7. The M1 measure of money includes
small denomination time deposits
traveler's checks
money market deposit accounts
money market mutual fund shares
8. Which of the following is not included in the measure of M1?
NOW accounts
Demand deposit
Currency
Saving deposits
9. Which of the following is not included in the measure of M1 but in the M2?
NOW accounts
small-denomination time deposits
Currency
traveler's checks
9. Which of the following is included in the measure of M1 and M2?
NOW accounts
small-denomination time deposits
Currency
traveler's checks
9. Which of the following is included in the measure of M2?
NOW accounts
saving bonds
Currency
traveler's checks
9. Which of the following is included in the measure of M2 but not in M1?
NOW accounts
Demand deposits
Currency
Money market mutual fund shares
13. Of the following, the largest is
money market deposit accounts
demand deposits
M1
M2
14. If an individual redeems a US savings bond for currency
M1 stays the same and M2 decreases
M1 increases and M2 increases
M1 increases and M2 stays the same
M1 stays the same and M2 stays the same
15. If an individual moves money from a small-denomination time deposit to a demand deposit account,
M1 stays the same and M2 decreases
M1 increases and M2 increases
M1 increases and M2 stays the same
M1 stays the same and M2 stays the same
16. If an individual moves money from a demand deposit account to a money market deposit account,
M1 stays the same and M2 decreases
M1 increases and M2 increases
M1 decreases and M2 stays the same
M1 stays the same and M2 stays the same
17. If an individual moves money from a saving deposit account to a money market deposit account
M1 stays the same and M2 decreases
M1 increases and M2 increases
M1 increases and M2 stays the same
M1 stays the same and M2 stays the same
18. If an individual moves money from currency to a demand deposit account,
M1 stays the same and M2 decreases
M1 increases and M2 increases
M1 increases and M2 stays the same
M1 stays the same and M2 stays the same
19. If an individual moves money from a money market deposit account to currency,
M1 stays the same and M2 decreases
M1 increases and M2 stays the same
M1 decreases and M2 stays the same
M1 stays the same and M2 stays the same
20. Small-denomination time deposits refer to certificates of deposit with a denomination of less than
1 000
10 000
100 000
1 000 000
21. Which of the following statements accurately describes the 2 measures of the money supply?
The two measures do not move together, so they cannot be used interchangeably by policymakers
The 2 measures' movements closely parallel each other, even on a month-to-month basis
Short-run movements in the money supply are extremely reliable
M2 is the narrowest measure the FED reports
1. The FED revises its estimates of the monetary aggregates, sometimes by large amounts, because
large depository institutions need only report their deposits infrequently
weekly monetary data need to be adjusted for the weekend effect
monthly monetary data need to be adjusted for the payday effect
seasonal adjustments become more precise only as more data becomes available
