question

The two basic components of the U.S. money supply (M1) are physical money and deposit money.(T/F)

answer

True

question

Representative full-bodied money consists of paper money fully backed by a precious metal.(T/F)

answer

True

question

Fiat money must be backed by a specific amount of gold or silver.(T/F)

answer

False

question

A bimetallic standard is a monetary standard based only on gold.(T/F)

answer

False

question

Demand deposits are issued by commercial banks and savings banks(T/F)

answer

True

question

Our monetary standard today is the paper dollar, issued by the Federal Reserve, and can be exchanged for gold or silver.(T/F)

answer

False

question

No full-bodied or representative full-bodied money is in use in the United States today. (T/F)

answer

True

question

No other asset is as liquid as money, because money is itself, a medium of exchange.(T/F)

answer

True

question

Fiat money is legal tender proclaimed to be money by law.(T/F)

answer

True

question

Physical money includes coin and currency.(T/F)

answer

True

question

"Continentals" were denominated in dollars and were backed by gold(T/F)

answer

False

question

The use of "continentals" led to a long period of distrust of paper money. (T/F)

answer

True

question

The faster velocity of money, the greater an economy's GDP. (T/F)

answer

True

question

Fiat money is a form of credit money(T/F)

answer

True

question

A major objective of the Fed is to regulate and control the supply of money and the availability of credit.(T/F)

answer

True

question

Even though credit card balances and limits are not included in any definition of money supply, these balances and limits can affect the rate of turnover of money supply and contribute to money supply expansion. (T/F)

answer

True

question

According to the Bretton Woods agreement, one ounce of gold is set equal to US $35, and each participating country pegs its currency to gold or the U.S. dollar.(T/F)

answer

True

question

Inflation leads to an increase in the purchasing power of money.(T/F)

answer

Fasle

question

The U.S. dollar was defined in terms of gold until the 1980s.(T/F)

answer

False

question

The bimetallic standard was difficult to maintain because the market ratio between silver and gold changed constantly(T/F)

answer

True

question

Inflation reflects a rise in prices not offset by increases in quality. (T/F)

answer

True

question

Inflation reflects a rise in prices whether or not that rise in prices is offset by an increase in quality.(T/F)

answer

False

question

A central bank defines and regulates the amount of the money supply in the financial system. (T/F)

answer

True

question

he faster the rate of circulation of the money supply, the greater the output of goods and services in an economy(T/F)

answer

True

question

Primitive economies have little occasion to exchange goods or services. (T/F)

answer

True

question

The monetary system is responsible for carrying out the financial functions of creating and transferring money(T/F)

answer

True

question

Money is anything generally accepted as a means of paying for goods and services and for paying off debts.(T/F)

answer

True

question

Money is perfectly liquid.(T/F)

answer

True

question

Fiat money generally becomes worthless if the issuing government - such as the Confederate government of the Civil War -fails. (T/F)

answer

True

question

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. (T/F)

answer

True

question

Deposit money is backed by the creditworthiness of the depository institution that issued the deposit. (T/F)

answer

True

question

Fiat money is paper money fully backed by a precious metal such as gold. (T/F)

answer

False

question

Keynesians believe that when the supply of money exceeds the quantity demanded, the public will spend more rapidly causing inflation. (T/F)

answer

False

question

Keynesians believe that a change in the money supply first causes a change in interest rate levels, which, in turn, alters the demand for goods and services. (T/F)

answer

True

question

A bimetallic standard is a monetary standard based on two metals, usually silver and gold. (T/F)

answer

True

question

Full-bodied money is a monetary standard based on two metals, usually silver and gold.(T/F)

answer

False

question

Representative full-bodied money is paper money fully backed by a precious metal such as gold.(T/F)

answer

True

question

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

answer

representative full-bodied money

question

Fiat money is:

answer

legal tender proclaimed to be money by law

question

With a mint ratio of 15 ounces of silver to 1 ounce of gold and a market ratio of 15.5 ounces of silver to 1 ounce of gold:

answer

gold coins should go out of circulation

question

The U.S. bimetallic standard was based on:

answer

silver and gold

question

Which of the following would not be considered liquid?

answer

all the above are liquid

question

When it is a means of paying for goods and services and discharging debts, money is referred to as a:

answer

medium of exchange

question

Which of the following statements are correct?

answer

debit cards provide for the immediate direct transfer of deposit accounts

question

Under the Bretton Woods agreement, a fixed exchange rate system tied to gold and the U.S. dollar dominated international trade during:

answer

1944-1971

question

The only paper money of significance in the economy today is:

answer

Federal Reserve notes

question

Token coins are:

answer

coins containing metal of less value than their stated value

question

Which of the following describes the basic function of money?

answer

medium of exchange

question

The M1 definition of the money supply includes which of the following items? a. currency b. demand deposits and other checkable deposits at depository institutions c. travelers' checks d. all of the above

answer

All of the above

question

Which of the following statements is false?

answer

The Bretton Wood System of fixed exchange rates was maintained until 1975.

question

Which of the following are not included in M1?

answer

money market deposit accounts

question

Money market mutual funds do which of the following? a. issue shares to customers b. invest in liquid instruments c. invest in interest-bearing debt instruments d. all the above

answer

All of the above

question

Which of the following statements is most correct?

answer

Both gold and silver have now been completely removed from any monetary role in the U.S. economy.

question

Which of the following statements is false?

answer

Money can always function as a store of purchasing power, even if its value is relatively unstable

question

Fiat money is: a. paper money issued by central banks with full metallic backing b. government notes representing a specific amount of gold in storage c. full-bodied money d. none of the above

answer

None of the above

question

Any circulating money which has little real value relative to its monetary value is called:

answer

credit money

question

Inflation is:

answer

an increase in the prices of goods and services not offset by increases in the quality of those goods and services

question

The function of money that expresses prices and contracts for deferred payments in terms of the monetary unit is referred to as:

answer

standard of value

question

Credit card usage:

answer

may expand money supply

question

Which are included in the money supply? a. outstanding balances on credit cards b. credit card limits c. both the above d. neither the above

answer

Neither of the above

question

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

answer

imports of the issuing country

question

The advantages claimed for a bimetallic standard were not gained in actual practice because:

answer

one of the metals disappeared from circulation because the mint and market ratios were not the same

question

Barter involves the exchange of

answer

goods and services

question

When coins have an intrinsic value equal to the value of the metal they contain, they are referred to as:

answer

full-bodied money

question

Which of the following are not depository institutions?

answer

The Federal Reserve

question

"Continentals" were backed by:

answer

possible future tax revenues

question

Today's Federal Reserve notes are:

answer

fiat money

question

Credit money is backed by:

answer

creditworthiness of the issuer

question

Deposit money is backed by:

answer

creditworthiness of the depository institution

question

The savings-investment process

answer

involves the transfer in individual savings to business firms in exchange for their securities

question

All money should perform the following functions EXCEPT:

answer

guarantee of validity

question

The velocity of money measures:

answer

the rate of circulation of the money supply

question

Three of the functions of money are:

answer

medium of exchange, store of value, and standard of value

question

An increase in the general overall prices of goods and services that is not offset by increases in the quality of those goods and services is the definition for:

answer

inflation

question

Functions of money include all of the following EXCEPT: a. Money serves as a medium of exchange. b. Money may be held as a store of value. c. Money serves as a standard of value. d. All of the above are functions of money.

answer

All of the above

question

Functions of money include all of the following EXCEPT

answer

Money determines the wealth of a nation

question

A monetary standard based on two metals, usually silver and gold is called:

answer

a bimetallic standard

question

Paper money backed by a precious metal is called:

answer

representative full-bodied money

question

Legal tender proclaimed to be money by law is called:

answer

fiat money

question

A measure of the output of goods and services in an economy is called:

answer

gross domestic product

question

If the money supply for an economy is $3 trillion and the velocity of money is 4.5, then GDP is:

answer

$13.5 trillion

question

If the money supply for an economy is $3 trillion and GDP is $10 trillion, then the velocity of money is:

answer

3.33

question

A rise in prices not offset by increases in quality is called:

answer

inflation

question

A rise in prices that is fully offset by increases in quality is called:

answer

none of the above

question

A major factor in the severity of the 2007-09 financial crisis was the massive amounts of debt taken on by a. individuals b. business c. government d. all of the above e. none of the above

answer

All of the above

question

A major factor in the severity of the 2007-09 financial crisis was the massive reduction in the level of debt taken on by: a. individuals b. business c. government d. all of the above e. none of the above

answer

None of the above

question

Historically speaking, ___________ taken as a group has/have generally been a surplus economic unit in the past:

answer

individuals

question

____________ include the direct ownership of land, buildings or homes, equipment, inventories, durable goods, and even precious metals.

answer

real assets

question

____________ is money, debt instruments, equity securities, and other financial contracts that are backed by real assets and the earning abilities of issuers.

answer

financial assets

question

____________ is anything generally accepted as a means of paying for goods and services and for paying off debts. It must be easily divisible, so that exchanges can take place in small or large quantities; relatively inexpensive to store and transfer; and reasonably stable in value over time.

answer

money

question

____________ accounts are increasingly used to make direct deposits to, and payments from, checkable deposit accounts.

answer

automatic transfer service (ATS)

question

____________ are debt instruments or securities with maturities of one year or less and have low default risk and high liquidity

answer

money market securities

question

A ____________ is a short-term debt instrument issued by commercial banks in denominations of $100,000 or more with typical maturities ranging from one month to one year that have an active secondary market that allows short-term investors to easily match their cash or liquidity needs when they arise.

answer

negotiable certificate of deposit (NCD)

question

_____________ is a short-term debt instrument issued by commercial banks in denominations of $100,000 or more with typical maturities ranging from one month to one year that have an active secondary market that allows short-term investors to easily match their cash or liquidity needs when they arise.

answer

A negotiable certificate of deposit (NCD)

question

_____________ is a short-term unsecured promissory note issued by a high credit-quality corporation with maturities of one to three months in length with an active secondary money.

answer

Commercial paper

question

_____________ is a promise of future payment issued by a firm and guaranteed by a bank that is used to finance international trade with typical maturities ranging from one to six months.

answer

A banker's acceptance

question

_____________ is a short-term debt security sold by a business firm or financial institution to another business or institution where the seller agrees to buy back the security at a specified price and date.

answer

A repurchase agreement

question

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

answer

Federal funds

question

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):

answer

VM = GDP/MS

question

If annual GDP is $100 billion and the MS is $20 billion, the velocity of money (VM) is ________.

answer

5

question

_____________ believe that when the money supply exceeds the amount of money demanded, the public will spend more rapidly, causing real economic activity or prices to rise. They also believe that a too-rapid rate of growth in the money supply will ultimately result in rising prices or inflation because excess money will be used to bid up the prices of existing goods.

answer

Monetarists

question

_____________ believe that a change in the money supply first causes a change in interest rate levels, which, in turn, alters the demand for goods and services.

answer

Keynesians

question

A major international development occurred on January 1, 1999, when twelve European countries gave up their individual currencies and adopted a unified currency called the _____________.

answer

Euro

question

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

answer

GDP to real output

question

Real output in an economy may be expressed as the ratio of _____________.

answer

GDP to price level

question

. ____________ provide predetermined credit limits to consumers at the time the cards are issued.

answer

credit cards

question

_______________________ is the sum of an individual's money, real assets, and financial assets or claims against others less the individual's debt obligations.

answer

Individual net worth

question

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

answer

real output to velocity

question

. _____________ believe that a change in the money supply first causes a change in interest rate levels, which, in turn, alters the demand for goods and services. a. Monetarists b. Supply Siders c. Neo Classicalists d. none of the above

answer

None of the above

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