Question 1

Dennis notices that jackets are on sale for $99.In this case money is functioning as a

Accepted Answer

A)  medium of exchange.
B)  unit of account.
C)  store of value.
D)  payments-system ruler.E) B) and C)
F) All of the above

Question 2

An electronic payments system has not completely replaced the paper payments system because of all of the following reasons EXCEPT

Accepted Answer

A)  expensive equipment is necessary to set up the system.
B)  security concerns.
C)  privacy concerns.
D)  transportation costs.E) A) and D)
F) All of the above

Question 3

Which of the following statements best explains how the use of money in an economy increases economic efficiency?

Accepted Answer

A)  Money increases economic efficiency because it is costless to produce.
B)  Money increases economic efficiency because it discourages specialization.
C)  Money increases economic efficiency because it decreases transactions costs.
D)  Money cannot have an effect on economic efficiency.E) B) and C)
F) C) and D)

Question 4

Because it is a unit of account,money

Accepted Answer

A)  increases transaction costs.
B)  reduces the number of prices that need to be calculated.
C)  does not earn interest.
D)  discourages specialization.E) None of the above
F) A) and B)

Question 5

An individual's annual salary is her

Accepted Answer

A)  money.
B)  income.
C)  wealth.
D)  liabilities.E) C) and D)
F) None of the above

Question 6

The conversion of a barter economy to one that uses money

Accepted Answer

A)  increases efficiency by reducing the need to exchange goods and services.
B)  increases efficiency by reducing the need to specialize.
C)  increases efficiency by reducing transactions costs.
D)  does not increase economic efficiency.E) C) and D)
F) A) and D)

Question 7

________ is the relative ease and speed with which an asset can be converted into a medium of exchange.

Accepted Answer

A)  Efficiency
B)  Liquidity
C)  Deflation
D)  SpecializationE) B) and C)
F) None of the above

Question 8

A disadvantage of ________made from precious metals is that it is very heavy and hard to transport from one place to another.

Accepted Answer

A)  commodity money
B)  fiat money
C)  electronic money
D)  paper moneyE) None of the above
F) B) and D)

Question 9

Which of the following is included in both M1 and M2?

Accepted Answer

A)  currency
B)  savings deposits
C)  small-denomination time deposits
D)  money market deposit accountsE) A) and B)
F) A) and C)

Question 10

Which of the following is NOT included in the M1 measure of money but is included in the M2 measure of money?

Accepted Answer

A)  currency
B)  traveler's checks
C)  demand deposits
D)  small-denomination time depositsE) None of the above
F) A) and C)

Question 11

When money prices are used to facilitate comparisons of value,money is said to function as a

Accepted Answer

A)  unit of account.
B)  medium of exchange.
C)  store of value.
D)  payments-system ruler.E) B) and C)
F) A) and D)

Question 12

Of the following assets,the least liquid is

Accepted Answer

A)  stocks.
B)  traveler's checks.
C)  checking deposits.
D)  a house.E) B) and C)
F) A) and D)

Question 13

All of the following are necessary criteria for a commodity to function as money EXCEPT

Accepted Answer

A)  it must deteriorate quickly.
B)  it must be divisible.
C)  it must be easy to carry.
D)  it must be widely accepted.E) A) and B)
F) A) and C)

Question 14

________ money could be used for some other purpose other than as a medium of exchange,for example,gold coins could be melted down and turned into gold jewelry.

Accepted Answer

A)  Commodity
B)  Fiat
C)  Paper
D)  ElectronicE) A) and C)
F) A) and B)

Question 15

If there are four goods in a barter economy,then one needs to know ________ prices in order to exchange one good for another.

Accepted Answer

A)  8
B)  6
C)  5
D)  4E) B) and C)
F) None of the above

Question 16

The currency component includes paper money and coins held in

Accepted Answer

A)  bank vaults.
B)  ATMs.
C)  the hands of the nonbank public.
D)  the central bank.E) A) and B)
F) All of the above

Question 17

Which of the following is included in M2 but NOT in M1?

Accepted Answer

A)  NOW accounts
B)  demand deposits
C)  currency
D)  money market mutual fund shares (retail) E) A) and B)
F) A) and C)

Question 18

A smart card is the equivalent of

Accepted Answer

A)  cash.
B)  savings bonds.
C)  savings deposits.
D)  certificates of deposit.E) C) and D)
F) A) and B)

Question 19

People hold money even during inflationary episodes when other assets prove to be better stores of value.This can be explained by the fact that money is

Accepted Answer

A)  extremely liquid.
B)  a unique good for which there are no substitutes.
C)  the only thing accepted in economic exchange.
D)  backed by gold.E) C) and D)
F) A) and B)

Question 20

If an individual moves money from currency to a demand deposit account

Accepted Answer

A)  M1 decreases and M2 stays the same.
B)  M1 stays the same and M2 increases.
C)  M1 stays the same and M2 stays the same.
D)  M1 increases and M2 stays the same.E) B) and D)
F) B) and C)

Exam 3: What Is Money

Because it is a unit of account,money

Correct AnswerverifiedShow Answer

If there are four goods in a barter economy,then one needs to know ________ prices in order to exchange one good for another.

Correct AnswerverifiedShow Answer

All of the following are necessary criteria for a commodity to function as money EXCEPT

Correct AnswerverifiedShow Answer

________ money could be used for some other purpose other than as a medium of exchange,for example,gold coins could be melted down and turned into gold jewelry.

Correct AnswerverifiedShow Answer

Which of the following is included in both M1 and M2?

Correct AnswerverifiedShow Answer

The conversion of a barter economy to one that uses money

Correct AnswerverifiedShow Answer

A smart card is the equivalent of

Correct AnswerverifiedShow Answer

Of the following assets,the least liquid is

Correct AnswerverifiedShow Answer

A disadvantage of ________made from precious metals is that it is very heavy and hard to transport from one place to another.

Correct AnswerverifiedShow Answer

Which of the following is included in M2 but NOT in M1?

Correct AnswerverifiedShow Answer

An individual's annual salary is her

Correct AnswerverifiedShow Answer

An electronic payments system has not completely replaced the paper payments system because of all of the following reasons EXCEPT

Correct AnswerverifiedShow Answer

Dennis notices that jackets are on sale for $99.In this case money is functioning as a

Correct AnswerverifiedShow Answer

People hold money even during inflationary episodes when other assets prove to be better stores of value.This can be explained by the fact that money is

Correct AnswerverifiedShow Answer

Which of the following statements best explains how the use of money in an economy increases economic efficiency?

Correct AnswerverifiedShow Answer

If an individual moves money from currency to a demand deposit account

Correct AnswerverifiedShow Answer

________ is the relative ease and speed with which an asset can be converted into a medium of exchange.

Correct AnswerverifiedShow Answer

The currency component includes paper money and coins held in

Correct AnswerverifiedShow Answer

When money prices are used to facilitate comparisons of value,money is said to function as a

Correct AnswerverifiedShow Answer

Which of the following is NOT included in the M1 measure of money but is included in the M2 measure of money?

Correct AnswerverifiedShow Answer

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