Question 1

Which of the following statements is false?

Accepted Answer

A)  Money can always function as a store of purchasing power, even if its value is relatively unstable.
B)  The ease with which an asset can be exchanged for money or other assets is referred to as liquidity.
C)  Credit money is any circulating medium which has little intrinsic value relative to its monetary value.
D)  In the future, electronic funds transfer systems may be used to such an extent that a virtually checkless society may result.E) A) and B)
F) None of the above

Question 2

No other asset is as liquid as money, because money is itself, a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 3

Functions of money include all of the following EXCEPT:

Accepted Answer

A)  	Money serves as a medium of exchange.
B)  	Money may be held as a store of value.
C)  	Money determines the wealth of a nation.
D)  	All of the above are functions of money.E) A) and C)
F) None of the above

Question 4

The price level of goods and services may be expressed as the ratio of _____________.

Accepted Answer

A)  GDP to real output
B)  real output to GDP
C)  Velocity to GDP
D)  real output to velocityE) None of the above
F) A) and B)

Question 5

Money is perfectly liquid.

Accepted Answer

A) True 
 B)False

Question 6

The velocity of money measures the rate of circulation of the money supply and can be expressed by the following equation (note: GDP = gross domestic product and MS = money supply) :

Accepted Answer

A)  VM = GDP/MS
B)  VM = MS/GDP
C)  VM = MS x GDP
D)  all of the above
E)  none of the aboveF) D) and E)
G) A) and B)

Question 7

Paper money fully backed by a precious metal and issued by the government is called:

Accepted Answer

A)  fiat money
B)  representative full-bodied money
C)  full-bodied money
D)  credit moneyE) A) and D)
F) A) and C)

Question 8

A major objective of the Fed is to regulate and control the supply of money and the availability of credit.

Accepted Answer

A) True 
 B)False

Question 9

Money is anything generally accepted as a means of paying for goods and services and for paying off debts.

Accepted Answer

A) True 
 B)False

Question 10

Most of the financial assets added to the M2 definition of money supply provide their owners with a higher rate of return than do M1 financial assets.

Accepted Answer

A) True 
 B)False

Question 11

_______________________issue shares to customers and invest the proceeds in highly liquid, very-short-maturity, interest-bearing debt instruments called money market investments.

Accepted Answer

A)  Commercial banks
B)  Corporations
C)  Insurance companies
D)  none of the aboveE) A) and D)
F) None of the above

Question 12

Credit money includes:

Accepted Answer

A)  checking accounts at commercial banks
B)  checkable deposits at savings and loan associations
C)  checking accounts at credit unions
D)  all the above
E)  none of the aboveF) D) and E)
G) A) and B)

Question 13

A major factor in the severity of the 2007-09 financial crisis was the massive reduction in the level of debt taken on by:

Accepted Answer

A)  individuals
B)  business
C)  government
D)  all of the above
E)  none of the aboveF) A) and D)
G) A) and C)

Question 14

_____________ are very short-term loans, usually with maturities of one day to one week made between depository institutions.

Accepted Answer

A)  Overnight loans
B)  Commercial paper
C)  Federal funds
D)  A banker's acceptance
E)  none of the aboveF) None of the above
G) B) and E)

Question 15

The supply of a currency in international markets depends largely on the:

Accepted Answer

A)  Federal Reserve System
B)  imports of the issuing country
C)  amount of exports that currency will buy from the issuing country
D)  confidence of market participants in the restraint and ability of the monetary authority issuing the currencyE) A) and B)
F) A) and C)

Question 16

Money decreed to be "legal tender" for the payment of debts is money backed by:

Accepted Answer

A)  	precious metals
B)  	commodities
C)  	government creditworthiness
D)  	gold or silverE) B) and D)
F) A) and B)

Question 17

Travelers' checks are included in which of the following money supply definitions?

Accepted Answer

A)  M1
B)  M2
C)  M3
D)  all of the aboveE) All of the above
F) A) and C)

Question 18

A store of purchasing power is the most important function of money.

Accepted Answer

A) True 
 B)False

Question 19

Representative full-bodied money is paper money that is backed by an amount of precious metal equal in value to the face amount of the paper money.

Accepted Answer

A) True 
 B)False

Question 20

The U.S.dollar was defined in terms of gold until the 1980s.

Accepted Answer

A) True 
 B)False

Exam 2: Money and the Monetary System

Money is anything generally accepted as a means of paying for goods and services and for paying off debts.

Correct AnswerverifiedShow Answer

Functions of money include all of the following EXCEPT:

Correct AnswerverifiedShow Answer

Money is perfectly liquid.

Correct AnswerverifiedShow Answer

The velocity of money measures the rate of circulation of the money supply and can be expressed by the following equation (note: GDP = gross domestic product and MS = money supply) :

Correct AnswerverifiedShow Answer

The price level of goods and services may be expressed as the ratio of _____________.

Correct AnswerverifiedShow Answer

The U.S.dollar was defined in terms of gold until the 1980s.

Correct AnswerverifiedShow Answer

Which of the following statements is false?

Correct AnswerverifiedShow Answer

Money decreed to be "legal tender" for the payment of debts is money backed by:

Correct AnswerverifiedShow Answer

Representative full-bodied money is paper money that is backed by an amount of precious metal equal in value to the face amount of the paper money.

Correct AnswerverifiedShow Answer

_______________________issue shares to customers and invest the proceeds in highly liquid, very-short-maturity, interest-bearing debt instruments called money market investments.

Correct AnswerverifiedShow Answer

Most of the financial assets added to the M2 definition of money supply provide their owners with a higher rate of return than do M1 financial assets.

Correct AnswerverifiedShow Answer

Paper money fully backed by a precious metal and issued by the government is called:

Correct AnswerverifiedShow Answer

Credit money includes:

Correct AnswerverifiedShow Answer

A store of purchasing power is the most important function of money.

Correct AnswerverifiedShow Answer

No other asset is as liquid as money, because money is itself, a medium of exchange.

Correct AnswerverifiedShow Answer

Travelers' checks are included in which of the following money supply definitions?

Correct AnswerverifiedShow Answer

A major factor in the severity of the 2007-09 financial crisis was the massive reduction in the level of debt taken on by:

Correct AnswerverifiedShow Answer

The supply of a currency in international markets depends largely on the:

Correct AnswerverifiedShow Answer

A major objective of the Fed is to regulate and control the supply of money and the availability of credit.

Correct AnswerverifiedShow Answer

_____________ are very short-term loans, usually with maturities of one day to one week made between depository institutions.

Correct AnswerverifiedShow Answer

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