Chapter 2

Which of the following would be considered a characteristic of money:
A) It is a store of value.
B) It pays a higher return than most assets.
C) It is in fixed supply.
D) It is legal tender everywhere in the world.


2
A society without any money:
A) Would likely find people specializing more than they do now.
B) Would find people doing everything for themselves.
C) Would have to rely strictly on barter.
D) Would be more productive since people would be more self-sufficient.


3
Which best describes money as a means of payment:
A) Money requires at least two transactions to obtain the double coincidence of wants.
B) A double coincidence of wants with money never occurs
C) Money provides an immediate double coincidence of wants.
D) To obtain a double coincidence of wants without money is impossible.


4
How many prices would there be in a barter economy with 8 goods?
A) 40
B) 56
C) 64
D) 28
E) None of the above


5
While money is an asset not all assets are money because:
A) Money works as a means of payment.
B) Only money stores value.
C) Only money is a good asset to hold during times of inflation.
D) For something to be money it must be legal tender.


6
In comparing money to a share of Microsoft stock held by an individual we can say:
A) The stock is an asset but money is not.
B) Both are stores of value.
C) Money is an asset but the stock is a liability of the individual
D) The stock is a store of value but the money isn't.


7
Which of the following could be used as commodity money:
A) $20 dollar bills.
B) Gold coins.
C) Checking deposits.
D) All of the above.


8
Checks are:
A) A means of payment.
B) Money.
C) Not a promise of any kind.
D) Not acceptable by the U.S. Government for payment of taxes.


9
Money aggregates can best be defined as:
A) The amount of money the Federal Reserve is targeting for the economy.
B) The amount of money measured at a particular point in time.
C) The average amount of money available to the economy over a year.
D) The amount of U.S. currency the Bureau of Printing and Engraving has produced.


10
The money aggregate M1 does not include:
A) Currency in the hands of the public.
B) Traveler's checks that have been issued.
C) Currency in the vaults of commercial banks.
D) Demand deposits at commercial banks.


11
The money aggregate M2 includes each of the following EXCEPT:
A) Small denomination time deposits.
B) Retail Money Market Mutual fund shares
C) U.S. Treasury bills..
D) M1


12
Recently M2 and M3 have become:
A) A less useful measure of the relationship between the money supply and inflation.
B) The money supply the Federal Reserve pays the most attention to in conducting monetary policy.
C) Less useful than M1 due to new substitutes for standard checking account.
D) The slowest growing of all of the money aggregates.


13
The Consumer Price Index (CPI):
A) Tends to overstate inflation due to substitution bias.
B) Tends to understate actual inflation.
C) Is more accurate than the GDP deflator.
D) Is based on basket of goods that changes monthly with consumer expenditures.


14
Economists study the link between money and inflation because:
A) Research shows that there is some inverse correlation between the supply of money and inflation.
B) Economists believe that inflation in the 3-5% range is healthy for an economy.
C) As prices increase money becomes more valuable.
D) Research shows that there is some direct correlation between the supply of money and inflation.


15
Which of the following statements is correct:
A) If you can buy the same goods this year as you bought last year with less money the money supply decreased.
B) To purchase the same goods today that were purchased one year ago requires more money, there must have been inflation
C) To purchase the same goods today as one year ago requires less money, the money supply must have increased.
D) To purchase the same goods today that were purchased one year ago requires the same amount of money, there must have been inflation.


16
An individual who stores their wealth in stamps rather than money will find:
A) They will suffer larger real losses during periods of high inflation.
B) They have far more liquidity than most savers.
C) Will incur higher transaction costs when they ultimately make purchases.
D) All of the above.


17
An decrease in the number of credit cards issued:
A) Has the same impact on the economy as the Federal Reserve supplying less money.
B) Reduces the money supply since credit cards act like money.
C) Would probably lower the amount in M3 but likely not M1.
D) Decreases the overall wealth of the country.
E) None of the above.


18
Tom uses a credit card to purchase a new pair of jeans, Tom is:
A) Using money to buy his jeans since credit cards are money.
B) Using a form of money included in M3.
C) Is using an electronic payment form of money that is in the category of checking deposits.
D) Creating a liability that he will ultimately have to pay with money.


Answer
A.C.C.D.A.B.B.A.B.C.B.A.D.B.C.E.D