Question 1

What does research suggest as to the relationship between the independence of the central bank and inflation? What is the rationale for this relationship?

Accepted Answer

Research indicates that the more indepen...

Question 2

Which of the following describes the behavior of M1 in recent decades?

Accepted Answer

A)   It soared during the recessions of 1990-91, 2001, and 2007-2009.
B)   It tended to grow more rapidly than M2.
C)   It was more stable than M2.
D)   It has not declined since the 1970s.

Question 3

The introduction of money to an economy results in

Accepted Answer

A)   higher incomes.
B)   higher productivity.
C)   increased specialization.
D)   all of the above.

Question 4

Research has shown that nations with highly independent central banks tend to have low

Accepted Answer

A)   inflation.
B)   interest rates.
C)   economic growth.
D)   unemployment.

Question 5

What is normally the ultimate cause of hyperinflation?

Accepted Answer

The ultimate cause of hyperinflation is ...

Question 6

If fiat money has no value apart from its use as money,how can it be used as a medium of exchange?

Accepted Answer

The most important reason paper currency...

Question 7

Under a system of barter

Accepted Answer

A)   each individual trades output directly with another.
B)   only agricultural goods may be traded.
C)   goods may be traded for money, but money may not be traded for goods.
D)   currency is accepted for purchases, but personal checks are not.

Question 8

Hyperinflations are usually caused by large budget deficits financed by

Accepted Answer

A)   selling bonds to private investors.
B)   selling bonds to the central bank.
C)   raising taxes.
D)   borrowing from commercial banks.

Question 9

Which criterion for suitability as a medium of exchange do Federal Reserve Notes meet?

Accepted Answer

A)   They are of standardized quality.
B)   They are durable.
C)   They are acceptable to most traders.
D)   Federal Reserve Notes meet all of the criteria for suitability as a medium of exchange.

Question 10

According to the quantity theory of money,if the long-run economic growth rate is 2.5%,by how much should the Fed increase the money supply if it wants inflation to be 2%?

Accepted Answer

A)   0.5%
B)   1.25%
C)   4.5%
D)   5%

Question 11

Suppose nominal GDP is $14 trillion and the money supply is $2 trillion.What is the velocity of money?

Accepted Answer

A)   0.143
B)   7
C)   12
D)   28

Question 12

Which of the following is NOT included in M1?

Accepted Answer

A)   currency
B)   savings account deposits
C)   checking account deposits
D)   traveler's checks

Question 13

Which function of money enhances the ability of households to accumulate wealth?

Accepted Answer

A)   medium of exchange
B)   store of value
C)   valuable relative to its weight
D)   does not become worn out too quickly

Question 14

Suppose $100 buys less in the year 2017 than in 2000.Then we can say that

Accepted Answer

A)   money's store of value has decreased.
B)   money's store of value has increased.
C)   the economy must have been growing rapidly between 2000 and 2017.
D)   the economy must have been growing slowly between 2000 and 2017.

Question 15

Which of the following is NOT a problem with barter?

Accepted Answer

A)   Each good has multiple prices.
B)   high transactions costs
C)   the commodity money having value for other uses besides money
D)   lack of standardization of products exchanged

Question 16

A person's earnings over a period of time is known as

Accepted Answer

A)   money.
B)   income.
C)   wealth.
D)   all of the above.

Question 17

All of the following are problems associated with commodity money EXCEPT

Accepted Answer

A)   it is a cumbersome form of payments system.
B)   commodities tend to have little value in and of themselves.
C)   its value is dependent on its purity.
D)   costs are incurred in certifying the purity and weight of commodity money.

Question 18

The payments system is

Accepted Answer

A)   the mechanism for conducting economic transactions.
B)   another name for the system of foreign exchange rates.
C)   the phrase used to describe how transactions are carried out in an economy that does not use money.
D)   the way in which economic transactions are carried out in a government-controlled economy, such as the former Soviet Union.

Question 19

How does the existence of money affect economic growth?

Accepted Answer

It reduces transactions costs ...

Question 20

What is the difference between money,income,and wealth?

Accepted Answer

Income is equal to a person's earnings o...

Exam 2: Money and the Payments System

How does the existence of money affect economic growth?

Correct AnswerverifiedIt reduces transactions costs ...View AnswerShow Answer

Which of the following describes the behavior of M1 in recent decades?

Correct AnswerverifiedShow Answer

Under a system of barter

Correct AnswerverifiedShow Answer

Hyperinflations are usually caused by large budget deficits financed by

Correct AnswerverifiedShow Answer

All of the following are problems associated with commodity money EXCEPT

Correct AnswerverifiedShow Answer

What is normally the ultimate cause of hyperinflation?

Correct AnswerverifiedThe ultimate cause of hyperinflation is ...View AnswerShow Answer

The introduction of money to an economy results in

Correct AnswerverifiedShow Answer

Suppose nominal GDP is $14 trillion and the money supply is $2 trillion.What is the velocity of money?

Correct AnswerverifiedShow Answer

What does research suggest as to the relationship between the independence of the central bank and inflation? What is the rationale for this relationship?

Correct AnswerverifiedResearch indicates that the more indepen...View AnswerShow Answer

Which of the following is NOT included in M1?

Correct AnswerverifiedShow Answer

The payments system is

Correct AnswerverifiedShow Answer

If fiat money has no value apart from its use as money,how can it be used as a medium of exchange?

Correct AnswerverifiedThe most important reason paper currency...View AnswerShow Answer

Research has shown that nations with highly independent central banks tend to have low

Correct AnswerverifiedShow Answer

Which criterion for suitability as a medium of exchange do Federal Reserve Notes meet?

Correct AnswerverifiedShow Answer

Suppose $100 buys less in the year 2017 than in 2000.Then we can say that

Correct AnswerverifiedShow Answer

According to the quantity theory of money,if the long-run economic growth rate is 2.5%,by how much should the Fed increase the money supply if it wants inflation to be 2%?

Correct AnswerverifiedShow Answer

What is the difference between money,income,and wealth?

Correct AnswerverifiedIncome is equal to a person's earnings o...View AnswerShow Answer

Which function of money enhances the ability of households to accumulate wealth?

Correct AnswerverifiedShow Answer

Which of the following is NOT a problem with barter?

Correct AnswerverifiedShow Answer

A person's earnings over a period of time is known as

Correct AnswerverifiedShow Answer

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It reduces transactions costs ...
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The ultimate cause of hyperinflation is ...
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Research indicates that the more indepen...
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Correct Answer
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The most important reason paper currency...
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Income is equal to a person's earnings o...
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Correct Answer
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