Principles of Money
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1. Which of the following is not a function of money?

a. Medium of exchange.
b. Form of credit.
c. Unit of account.
d. Store of value.

2. Barter systems are less efficient than economies with monetary systems because

a. every barter exchange requires a double coincidence of wants.
b. transactions costs are lower for barter systems.
c. people tend to specialize more in barter economies.
d. prices are easier to define and keep consistent in barter systems.

3. Money market deposit accounts (MMDAs)

a. offer unlimited check-writing privileges.
b. earn higher interest rates than most other checking accounts.
c. generally don't require a minimum balance.
d. have been offered by banks since 1970.

4. Which of the following statements about M1 is false?

a. Its composition stays the same over time.
b. All of its components are means of payment.
c. MMDAs are not included in M1.
d. Negotiable order of withdrawal (NOW) accounts are included in M1.

5. Near monies

a. are not very liquid.
b. are included in M1.
c. are easily converted to transactions money without loss of value.
d. were included in M1 until 1982.

6. Which of the following is not included in domestic nonfinancial debt (DNFD)?

a. $10,000 worth of U.S. Savings Bonds bought by Jim and Sandy for their grandchildren.
b. $10,000 worth of General Motors bonds bought by John and Pam.
c. $10,000 of surplus funds borrowed by Fast Eddie's National Bank from passbook savers.
d. $10,000 borrowed from Fast Eddie's National Bank by Mike and Amy to buy a new car.

7. The Fed most commonly uses which of the following as an indicator of changes in economic activity?

a. Changes in M1.
b. Changes in M2.
c. Changes in DNFD.
d. Changes in whatever economic variables seem most closely correlated with economic activity at that time.

8. When writing a check, the third party is

a. the person writing the check.
b. the bank upon which the check is being drawn.
c. the person or business to whom the check is being written.
d. the Federal Reserve Bank in that district.

9. An employer paying a worker's salary by automatically crediting the worker's bank account is an example of

a. a point-of-sale transaction.
b. using an automated teller machine (ATM).
c. an electronic funds transfer.
d. using near monies as a means of payment.

10. Float

a. is the time from when a check is written to a third party until it is actually deducted from the account.
b. is the "paper trail" left by using paper checks instead of electronic methods of payment.
c. is usually at least a week.
d. is increased when automatic payments are used instead of paper checks.

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