1) Which of the following can be used as money? 1) A) precious stones B) checks
ID: 1173372 • Letter: 1
Question
1) Which of the following can be used as money? 1)
A) precious stones B) checks C) cigarettes D) all of the above
2) Money solves the dilemma of a double coincidence of wants by serving as a 2)
A) symbol of value. B) medium of exchange.
C) store of value. D) unit of account.
3) When money is used to express the value of goods and services, it is functioning as a 3)
A) unit of account. B) store of purchasing power.
C) medium of exchange. D) store of value.
4) If money is used as a mechanism to hold purchasing power for a period of time it is functioning as
a
4)
A) store of value. B) medium of exchange.
C) standard of value. D) unit of account.
5) Suppose after the semester ends, you take a trip to a tropical island. Upon arriving at the island,
you make a stop at one of the markets and notice that everyone is carrying around jars full of little
turtles. You also notice the person in line in front of you just paid for a bottle of rum with 6 turtles.
Someone else just bought a straw hat for two turtles. Thinking back to your economics class (as
painful as that may be), you would conclude that
5)
A) turtle soup is a delicacy.
B) turtles are valueless.
C) this is a barter economy.
D) those little turtles are serving the function of money.
6) Money that has no intrinsic value and is created by a government decree is called 6)
A) asset money. B) fiat money.
C) barter money. D) commodity money.
7) What gives money value under a fiat system? 7)
A) The supply of fiat money is controlled by the government.
B) Fiat money is also a commodity.
C) Fiat money is backed by gold.
D) Fiat money is the same as Treasury bonds.
8) Checking account balances are included in 8)
A) M1 only. B) M2 only.
C) both M1 and M2. D) neither M1 nor M2.
9) Which of the following is NOT included in M1? 9)
A) deposits in checking accounts that pay interest
B) savings accounts
C) traveler's checks
D) deposits in checking accounts
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10) Which of the following is NOT included in M1 or M2? 10)
A) currency in circulation outside of commercial banks
B) traveler's checks
C) checking account balances
D) credit card balances
Recall the Application about the cities, school boards, and companies that issued their own currency during the Great
Depression to answer the following question(s).
11) According to this Application, at its peak in the 1930s, about $1 billion in currency issued by cities
was in circulation during the Great Depression. When people used this currency to execute
transactions, this currency was being used as a
11)
A) store of value. B) commodity money.
C) unit of account. D) medium of exchange.
12) According to this Application, at its peak in the 1930s, about $1 billion in currency issued by cities
was in circulation during the Great Depression. If people using the currency had enough
confidence in this privately-issued scrip to hold onto it for use in future transactions, the currency
was acting as a
12)
A) store of value. B) commodity money.
C) medium of exchange D) unit of account.
13) According to this Application, some of the currency issued by cities during the Great Depression
looked like regular government-issued money. If this currency had nothing backing its value and
was simply created by decree of the issuing city governments, the city-issued money would be
considered
13)
A) fiat money. B) barter money.
C) gold standard money. D) commodity money.
14) Deposits are examples of a bank's 14)
A) assets. B) balance sheet. C) net worth. D) liabilities.
15) Which of the following is a bank liability? 15)
A) loans made to customers B) required reserves
C) reserve deposits held at the Fed D) demand deposit balances
16) Which one of the following statements is true? 16)
A) A bank's reserves can only be kept as cash in its vault.
B) Assets generate income for a bank.
C) A bank's assets plus its liabilities equals must equal zero.
D) Demand deposits are assets of a bank.
17) By law, banks are required to 17)
A) hold a fraction of their reserves at the Federal Reserve bank.
B) hold a fraction of demand deposits as reserves.
C) lend out no more than the amount of their required reserves.
D) hold 100 percent of customer deposits as reserves.
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18) Logan finds $10 in his jacket pocket and deposits it into a bank. As a result of this single
transaction, M1 has
18)
A) increased by $10. B) not changed.
C) increased by less than $10. D) increased by more than $10.
19) Given the following information about Gotham Bank:
Bank Deposits $50,000
Loans 34,000
Reserves 12,000
Reserve Requirement 20 percent
Gotham Bank is holding ________ in excess reserves.
19)
A) $22,000 B) $12,000 C) $2,000 D) -$2,000
Recall the Application about the Fed increasing bank reserves during the financial crisis in 2008 to answer the following
question(s). During the height of the financial crisis in September 2008, The Fed injected large amounts of reserves into
banks, and in the next month, they started paying interest to banks on these reserves. Prior to this time, banks earned no
interest on either required or excess reserves.
20) According to this Application, the Fed started paying interest to banks on reserves. All else equal,
this would tend to ________ on a bank's balance sheet.
20)
A) increase deposits B) increase reserves
C) increase loans D) all of the above
21) According to this Application, the Fed injected large amounts of reserves into banks during the
2008 financial crisis. The Fed needs to make sure that, in the long run, banks do not loan out too
many of these reserves or the result will be
21)
A) additional unemployment. B) higher interest rates.
C) higher inflation. D) a smaller money multiplier.
22) The group responsible for deciding on monetary policy is the 22)
A) group of 12 Federal Reserve Bank presidents only.
B) Federal Advisory Council.
C) Federal Open Market Committee.
D) Board of Governors only.
23) The voting members of the Federal Open Market Committee are 23)
A) the presidents of the 12 Federal Reserve banks and three members of the Board of Governors.
B) all of the members of the Board of Governors and all of the presidents of the 12 Federal
Reserve banks.
C) only the members of the Board of Governors.
D) all of the members of the Board of Governors and five of the presidents of the 12 Federal
Reserve banks.
24) There are ________ members of the FOMC. 24)
A) 5 B) 7 C) 12 D) 19
25) Studies by economists have tended to show that countries with more independent central banks
have
25)
A) less inflation. B) higher unemployment.
C) more inflation. D) lower unemployment.
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26) In the short run when prices don't have enough time to change, the Federal Reserve 26)
A) can influence the level of interest rates in the economy.
B) can only affect the amount of money in the economy.
C) can influence the level of interest rates in the economy but generally will not because it would
be destabilizing.
D) cannot influence the level of interest rates in the economy.
27) Generally, when the Federal Reserve lowers interest rates, investment spending ________ and GDP
________.
27)
A) increases; decreases B) decreases; increases
C) decreases; decreases D) increases; increases
28) The opportunity cost of holding money is 28)
A) the probability of theft or loss.
B) the return that could have been earned from holding wealth in other assets.
C) heavy and awkward.
D) the ease of conducting everyday business.
29) At higher interest rates the 29)
A) quantity of money demanded is higher. B) money supply is indeterminate.
C) quantity of money demanded is lower. D) money supply is higher.
30) At lower interest rates the 30)
A) quantity of money demanded is higher. B) money supply is lower.
C) money supply is indeterminate. D) quantity of money demanded is lower.
31) An increase in the price level in the economy leads to 31)
A) a rightward movement along the demand for money curve.
B) a leftward shift in the demand for money curve.
C) a leftward movement along the demand for money curve.
D) a rightward shift in the demand for money curve.
32) Which of the following factors does NOT shift the demand curve for money? 32)
A) changes in the interest rate B) changes in the price level in the economy
C) changes in real GDP D) changes in real income
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