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Quiz 2
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1
An item is considered to be money only if it:
A)is generally accepted as a means of payment for goods and services.
B)is used to store wealth over time.
C)is sometimes accepted in exchange for other goods or services.
D)None of the above is correct.
2
Which is the best example of the use of money as a store of value?
A)A student cashes his paycheck and spends all of it on groceries.
B)An individual uses money to buy stocks.
C)A firm constructs its current balance sheet, expressing all credits and debits in dollars.
D)A criminal holds $10,000 in a wall safe to have in case he needs to leave the country quickly.
3
As compared to a barter economy, a monetary economy has:
A)lower information requirements.
B)lower transaction costs.
C)Both of the above are correct.
D)None of the above is correct.
4
Which of the following is the best example of money serving as a unit of account?
A)A student uses money to pay for textbooks.
B)A high school student deposits funds from a summer job into a savings account that will help be used to pay college tuition.
C)A storeowner records all receipts and expenditures in dollars.
D)None of the above is correct.
5
Which of the following is the most liquid asset?
A)a home with a swimming pool
B)a valuable art collection
C)an extensive collection of Barbie dolls
D)savings account balances
6
Wealth may be held in the form of:
A)money.
B)stocks.
C)bonds.
D)real estate.
E)All of the above are correct.
7
Fiat money:
A)is earned only by Italian autoworkers.
B)has an intrinsic value as a commodity equal to its value as currency.
C)is defined to be money by government decree.
D)is always convertible into commodity money through the central bank of an economy.
8
The first form of money adopted by most societies has been a form of:
A)commodity money.
B)fiat money.
C)legal tender.
D)checking account.
9
Which of the following has not served at some time as a form of commodity money?
A)gold
B)paper currency issued by the U.S. government
C)salt
D)copper
10
Over the last few years, the share of payments paid by paper checks has:
A)increased due to a decline in the use of currency.
B)increased due to the government's decision to consider checks to be a form of legal tender.
C)decreased because they are no longer considered to be a form of legal tender.
D)decreased as a result of an increased used of electronic transfers.
11
When an individual uses a credit card to pay for an item purchased from an online vendor:
A)the credit card itself is considered to be a form of money.
B)a loan is initiated and the company issuing the credit card provides an electronic transfer of money to the seller of the item.
C)no monetary payment to the vendor occurs until the credit card statement is paid by the customer.
D)None of the above is correct.
12
An ACH transaction involves:
A)an electronic transfer of funds from one account to another.
B)a payment involving funds that are not considered to be money.
C)a payment made from a stored-value card.
D)All of the above are correct.
13
It is expected that the use of money as a store of value in industrialized economies will:
A)continue to become more important over time due to the risk associated with other assets.
B)remain unchanged.
C)continue to decline as interest-bearing assets become more liquid.
D)None of the above is correct.
14
Which of the monetary aggregates contains only assets that can be directly used to buy goods and services?
A)M1
B)M2
C)currency only
D)checks only
15
Which of the following is not included in M1?
A)coins
B)travelers' checks
C)savings deposits
D)currency
E)demand deposits
16
Suppose that the public shifts funds from checking accounts to savings accounts. Other things equal, this is expected to cause M1 to:
A)increase.
B)decrease
C)remain unchanged.
D)change in an unpredictable manner.
17
Suppose that the public shifts funds from checking accounts to savings accounts. Other things equal, this is expected to cause M2 to:
A)increase.
B)decrease
C)remain unchanged.
D)change in an unpredictable manner.
18
Time deposits are:
A)included in M1, but not M2.
B)included in M2, but not M1.
C)included in both M1 and M2.
D)included in neither M1 nor M2.
19
The change in the relationship between the growth rate in M2 and subsequent inflation since 1990 may be due to:
A)a measure of the money supply that does not take into account changes in the way in which payments are made.
B)the relatively low rates of money growth and inflation that have occurred during this period.
C)Both of the above are correct.
D)None of the above is correct.





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