Money
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1. When we say money serves as a medium of exchange, we mean that
a. it serves as a way of paying for any purchases.
b. it serves as a yardstick for the value of other goods.
c. it serves as a means of holding wealth.
d. it can be carried around.
2. When we say that money serves as a measure of value, we mean that
a. it serves as a way of paying for any purchase.
b. it serves as a yardstick for the value of other goods.
c. it serves as a means of holding wealth.
d. it can be carried around.
3. When we say that money serves as a store of value, we mean that
a. it serves as a way of paying for any purchase.
b. it serves as a yardstick for the value of other goods.
c. it serves as a means of holding wealth.
d. it can be carried around.
4. A barter economy is one where
a. money is not convertible into gold.
b. there is only fiat money.
c. all trade is done by exchanging one good for another.
d. the money supply is not stable.
5. The Chairman of the Central Bank of Freedonia announces "From now on, we will use #2 yellow feed corn as money." This idea will not work because a bushel of this type of corn is not
a. portable
b. divisible into smaller units.
c. identical to other bushels.
d. stable in its supply.
6. The Central Bank of Freedonia decides to mint two types of $1 coins, one made of tin and one made of gold. People are willing to use the tin coins to pay for their purchases but hoard the gold coins. This is an illustration of
a. the importance of liquidity.
b. the greater value of fiat currency.
c. Gresham's Law.
d. the importance of money as a store of value.
7. The U.S. mint used to issue what was called a "silver certificate" because it could be taken to the mint and exchanged for silver. The silver certificate was NOT
a. currency.
b. fiat money.
c. a liquid form of currency.
d. a good store of value.
8. It is very difficult to get a mortgage to buy an existing home in Freedonia, so it is difficult for home owners to sell their houses. As a consequence, Freedonian houses are not
a. liquid assets.
b. a good store of value.
c. a durable asset.
d. a measure of wealth.
9. A demand deposit is a deposit that
a. really belongs to the bank.
b. is offered as security for a loan.
c. must be kept in the bank for a period of time.
d. can be withdrawn at any time.
10. The M1 money supply is equal to
a. currency plus savings deposits plus travelers checks.
b. currency plus long-time deposits plus travelers checks.
c. currency plus demand deposits plus travelers checks.
d. currency plus large deposits plus travelers checks.
11. According to the quantity theory of money, the price level is equal to
a. MV / Q
b. M / VQ
c. MQ / V
d. Q / VM
12. A monetarist economist would say that
a. the velocity of money is constant.
b. The velocity of money has slowed over time due to technological improvements in the way we make transactions.
c. the velocity of money has increased over time due to technological improvements in the way we make transactions.
d. there is no relationship between the velocity of money and the price level.
13. Classical and monetarist economists would agree that
a. the economy never reaches full employment.
b. the economy is always at full employment.
c. the velocity of money depends on the money supply.
d. the velocity of money is completely unpredictable.
14. A monetarist economist believes that people's demand for money depends on
a. the amount of money they need to transact the buying and selling of goods.
b. how much money they'll need to cover future unexpected events.
c. what they think is going to happen to the interest rate.
d. all of the above.
15. A Keynesian economist believes that people's demand for money depends on
a. the amount of money they need to transact the buying and selling of goods.
b. how much money they'll need to cover future unexpected events.
c. what they think is going to happen to the interest rate.
d. all of the above.
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