WorksheetsUnderstanding Money Supply and Value
Total questions: 50
Worksheet time: 25mins
The entire stock of money in an economy primarily consists of:
Bank notes, coins, and government bonds
Bank notes, coins, and bank deposits
Bank deposits, shares, and debentures
Coins, near monies, and treasury bills
Assets that can be converted to cash, even though at a cost, are called:
Liquid assets
Fixed assets
Near monies
Current liabilities
The definition of money supply includes bank deposits because:
They are issued by the central bank
They represent the total wealth of a nation
They can be readily converted to cash for transactions
They are the only form of legal tender
Which of the following is NOT part of the primary definition of money supply given in the note?
Bank notes
Coins
Bank deposits
Treasury bills
The term "entire stock of money" refers to:
The amount of money printed in a year
The total money available in an economy at a point in time
The money held only by the central bank
The money used for international trade
The demand for money means the desire to:
Spend money immediately on goods and services
Hold money in liquid or cash form
Invest money in long-term assets
Lend money to others at high interest rates
Demand for money serves simultaneously as a medium of exchange and:
A measure of inflation
A store of value
A unit of account for international trade
A factor of production
Holding money for everyday transactions like buying food is known as the:
Precautionary motive
Speculative motive
Transaction motive
Investment motive
The desire to hold money to meet needs arising from unplanned circumstances like sickness is the:
Transaction motive
Precautionary motive
Speculative motive
Liquidity preference
Holding money for "the rainy day" refers to which motive?
Speculative motive
Transaction motive
Precautionary motive
Savings motive
The desire to hold money to meet future expectations, such as for investment or expected fall in prices, is the:
Precautionary motive
Transaction motive
Investment motive
Speculative motive
If an individual holds cash anticipating a drop in the price of shares they wish to buy, they are driven by the:
Transaction motive
Precautionary motive
Speculative motive
Income motive
Which of these is NOT a motive for demanding money listed in the note?
Transaction motive
Precautionary motive
Altruistic motive
Speculative motive
Paying transport fares is an example of which motive for holding money?
Speculative
Precautionary
Transaction
Investment
An unexpected accident might lead to expenditure covered by money held for the:
Transaction motive
Speculative motive
Precautionary motive
Barter motive
The value of money refers to:
The interest rate earned on deposits
The quantity of goods or services that a sum of money can buy
The amount of gold backing the currency
The exchange rate of the currency
The value of money is:
Static and never changes
Changes from time to time with price as its indicator
Determined solely by the government
Always increasing
If the price level increases, a naira will:
Buy more
Buy the same amount
Buy less
Become worthless
If prices double, the value of money will be:
Doubled
Halved
Unchanged
Quadrupled
The value or purchasing power of money is ______ related to the level of prices.
Directly
Inversely
Not
Exponentially
Another term for the value of money is:
Interest rate
Exchange rate
Purchasing power of money
Monetary base
The value of money is measured through the use of:
Gross Domestic Product
An index number
The velocity of money
The M1 money supply
Which of the following is a factor that determines the value of money?
The general price level
The level of employment
The balance of payments
The type of government
The supply of money and its ______ in circulation affects the value of money.
Color
Denomination
Speed or velocity
Origin
Inflation and deflation are factors that:
Only affect international trade
Determine the value of money
Are irrelevant to the purchasing power of money
Are solely controlled by consumer behavior
The volume of production of goods and services can influence:
The number of banks
The value of money
The design of currency notes
The choice of the base year for price indices
Which of these is NOT listed as a factor determining the value of money?
General price level
Supply of money and its velocity
Quality of goods produced
Volume of production of goods and services
The value of money and the nation’s cost of living is measured by the use of:
Price index
Consumer confidence index
Stock market index
Human Development Index
Price index is also called:
Index of leading indicators
Index of retail prices
Index of wholesale prices
Index of industrial production
The formula for Price Index given is:
(Price in the previous year / Price in the current year) × 100
(Price in the current year / Price in the previous year) × 100
(Price in the current year - Price in the previous year) × 100
(Price in the previous year + Price in the current year) / 2
If the price of a biscuit was N30 in 2016 and N40 in 2017, the price index for 2017 (base 2016=100) is:
75
100
133.33
140
In the biscuit example, if the index rose from 100 to 133.33, it means the price of the biscuit rose by:
133.33%
33.33%
100%
0.33%
In the biscuit example, a rise in the price index from 100 to 133.33 implies that the value of money:
Rose by 33.33%
Fell by 33.33%
Remained unchanged
Fell by 133.33%
An increase in the price index generally indicates that the cost of living has:
Decreased
Risen
Remained stable
Become unpredictable
Price indices are statistical methods used to measure changes in:
The quantity of money supplied
The velocity of money circulation
The value of money over time
The level of national income
Price indices measure the real changes in the prices of:
All goods and services produced
Certain groups of items
Only imported goods
Only exported goods
One importance of price index is to determine:
The total money supply
How much a unit of money is worth over a particular period
The interest rates for loans
The number of commercial banks
Price index can be used to determine the level of well-being or:
The national debt
The standard of living of the individual
The foreign exchange reserves
The unemployment rate
The government can employ price indices to determine steps concerning:
Foreign policy
Taxation
Military spending
Electoral reforms
Which of the following is NOT listed as an importance of price index?
Determining the worth of money over time
Determining the standard of living
Aiding government taxation decisions
Setting international exchange rates
A limitation of price index is the choice of:
The statistical software to use
Commodities to use in the compilation
The currency for calculation
The government agency to publish it
The choice of the appropriate ______ is a limitation of price index.
Base year
Current year
Font size for the report
Data collection method
The possibility of change in the ______ of goods is a limitation of price index.
Color
Packaging
Quality
Origin
Determining the right ______ to use for different commodities is a challenge in price index compilation.
Price
Weight
Brand
Supplier
Using price indices to measure the ______ of individuals is considered a limitation.
Height
Income
Welfare
Education level
Which of these is NOT a limitation of the price index?
Choice of commodities
Choice of base year
Its use in measuring changes in the value of money
Changes in the quality of goods
The quantity theory of money explains the relationship between the quantity of money in circulation and:
The interest rate
The price level
The employment rate
The balance of trade
The quantity theory of money tries to explain what happens when there is an imbalance between:
Imports and exports
Government revenue and expenditure
The demand for money and the supply of money
Wages and profits
According to the theory, if people hold more money than they require, they will:
Save it all in banks
Invest it all in foreign currency
Spend the surplus on currently produced goods and services
Donate it to charity
An excess supply of money over demand will typically lead to:
A decrease in the price level
An increase in the price level
No change in the price level
A decrease in the velocity of money
