Question 1

Currency equals:

Accepted Answer

A)  M₁.
B)  the sum of funds in checking accounts.
C)  the sum of checking accounts and paper money.
D)  the sum of coins and paper money.E) C) and D)
F) A) and D)

Question 2

Demand deposits are funds held in:

Accepted Answer

A)  currency.
B)  certificates of deposit.
C)  checking accounts.
D)  money markets.E) B) and C)
F) A) and D)

Question 3

To reduce the money supply, the Federal Reserve:

Accepted Answer

A)  buys government bonds.
B)  sells government bonds.
C)  creates demand deposits.
D)  destroys demand deposits.E) None of the above
F) All of the above

Question 4

An important factor in the evolution of commodity money to fiat money is:

Accepted Answer

A)  a desire to reduce transaction costs.
B)  a desire to increase transaction costs.
C)  the fact that gold is no longer highly
D)  valued. a desire to use gold for jewelry.E) All of the above
F) C) and D)

Question 5

When a pizza maker lists the price of a pizza as $10, this is an example of using money as a:

Accepted Answer

A)  store of value.
B)  unit of account.
C)  medium of exchange.
D)  flow of value.E) A) and B)
F) B) and D)

Question 6

All of the following assets are included in M₁ except:

Accepted Answer

A)  currency.
B)  demand deposits.
C)  traveler's checks.
D)  money market deposit accounts.E) A) and B)
F) C) and D)

Question 7

The use of fei as money on the island of Yap illustrates the idea of money as a social convention because:

Accepted Answer

A)  only fei physically in the possession of the owner is accepted in transactions.
B)  legal claim to a fei never seen by current generations was accepted in transactions.
C)  the central bank of Yap accepts fei in exchange for paper certificates.
D)  the government of Yap verifies the authenticity of fei used for transactions.E) A) and B)
F) B) and C) B

Question 8

Money that has no value other than as money is called money.

Accepted Answer

A)  fiat
B)  intrinsic
C)  commodity
D)  governmentE) B) and D)
F) All of the above

Question 9

In the United States, monetary policy is controlled by:

Accepted Answer

A)  the President.
B)  the Congress.
C)  the Federal Reserve.
D)  the Treasury Department.E) B) and C)
F) A) and D)

Question 10

In prisoner of war camps during World War II, the "currency" used was:

Accepted Answer

A)  chocolates.
B)  cigarettes.
C)  gold.
D)  IOUs.E) C) and D)
F) None of the above

Question 11

Money's liquidity refers to the ease with which:

Accepted Answer

A)  coins can be melted down.
B)  illegally obtained money can be laundered.
C)  loans can be floated.
D)  money can be converted into goods and services.E) All of the above
F) A) and B)

Question 12

Macroeconomists call assets used to make transactions:

Accepted Answer

A)  real income.
B)  nominal income.
C)  money.
D)  consumption.E) A) and C)
F) B) and C) C

Question 13

The central bank in the United States is the:

Accepted Answer

A)  Bank of America.
B)  U.S. Treasury.
C)  U.S. National Bank.
D)  Federal Reserve.E) A) and B)
F) A) and C)

Question 14

Credit cards:

Accepted Answer

A)  are part of the M₁ money supply.
B)  are part of the M₂ money supply.
C)  are part of both the M₁ and M₂ money
D)  supply. may affect the demand for money.E) A) and B)
F) B) and D) D

Question 15

The quantity of money in the United States is essentially controlled by the:

Accepted Answer

A)  President of the United States.
B)  Department of the Treasury.
C)  Federal Reserve.
D)  system of commercial banks.E) B) and C)
F) A) and C)

Question 16

Credit card balances are included in:

Accepted Answer

A)  M₁ only.
B)  M₂ only.
C)  both M₁ and M₂.
D)  neither M₁ nor M₂.E) B) and D)
F) B) and C)

Question 17

To increase the money supply, the Federal Reserve:

Accepted Answer

A)  buys government bonds.
B)  sells government bonds.
C)  buys corporate stocks.
D)  sells corporate stocks.E) A) and B)
F) A) and C)

Question 18

In a 100-percent-reserve banking system, banks:

Accepted Answer

A)  can increase the money supply.
B)  can decrease the money supply.
C)  can either increase or decrease the money supply.
D)  cannot affect the money supply.E) B) and D)
F) C) and D)

Question 19

People use money as a unit of account when they:

Accepted Answer

A)  hold money to transfer purchasing power into the future.
B)  use money as a measure of economic transactions.
C)  use money to buy goods and services.
D)  hold money to gain power and esteem.E) A) and B)
F) A) and C)

Question 20

People use money as a medium of exchange when they:

Accepted Answer

A)  hold money to transfer purchasing power into the future.
B)  use money as a measure of economic transactions.C) A) and B)
D) undefined

Exam 4: Money and Inflation

Currency equals:

Correct AnswerverifiedShow Answer

Demand deposits are funds held in:

Correct AnswerverifiedShow Answer

To reduce the money supply, the Federal Reserve:

Correct AnswerverifiedShow Answer

An important factor in the evolution of commodity money to fiat money is:

Correct AnswerverifiedShow Answer

When a pizza maker lists the price of a pizza as $10, this is an example of using money as a:

Correct AnswerverifiedShow Answer

All of the following assets are included in M₁ except:

Correct AnswerverifiedShow Answer

The use of fei as money on the island of Yap illustrates the idea of money as a social convention because:

Correct AnswerverifiedB

Money that has no value other than as money is called money.

Correct AnswerverifiedShow Answer

In the United States, monetary policy is controlled by:

Correct AnswerverifiedShow Answer

In prisoner of war camps during World War II, the "currency" used was:

Correct AnswerverifiedShow Answer

Money's liquidity refers to the ease with which:

Correct AnswerverifiedShow Answer

Macroeconomists call assets used to make transactions:

Correct AnswerverifiedC

The central bank in the United States is the:

Correct AnswerverifiedShow Answer

Credit cards:

Correct AnswerverifiedD

The quantity of money in the United States is essentially controlled by the:

Correct AnswerverifiedShow Answer

Credit card balances are included in:

Correct AnswerverifiedShow Answer

To increase the money supply, the Federal Reserve:

Correct AnswerverifiedShow Answer

In a 100-percent-reserve banking system, banks:

Correct AnswerverifiedShow Answer

People use money as a unit of account when they:

Correct AnswerverifiedShow Answer

People use money as a medium of exchange when they:

Correct AnswerverifiedShow Answer

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B

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C

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D

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