Question 1

The velocity of money measures:

Accepted Answer

A)   the quantity of money in an economy
B)   the rate of circulation of the money supply
C)   the level of inflation caused by the money supply
D)   none of the aboveE) A) and D)
F) A) and B)

Question 2

Most of the financial assets added to the M2 definition of money supply provide their owners with a higher rate of return than do M1 financial assets.

Accepted Answer

A) True 
 B)False

Question 3

Because credit card balances and limits can affect the rate of turnover of money supply and contribute to money supply expansion, these balances and limits are included in the M3 definition of money supply.

Accepted Answer

A) True 
 B)False  False

Question 4

All restrictions on U.S. citizens holding gold in money form were removed by President Obama in 2010.

Accepted Answer

A) True 
 B)False

Question 5

Functions of money include all of the following except

Accepted Answer

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.E) A) and C)
F) C) and D)

Question 6

Inflation is

Accepted Answer

A)   an increase in the purchasing power of money
B)   a decrease in the quality of goods and services
C)   an increase in the prices of goods and services not offset by increases in the quality of those goods and services
D)   a measure of the money supplyE) C) and D)
F) B) and D) C

Question 7

Starting in 1934, U.S. citizens were prohibited from holding monetary gold in the United States.

Accepted Answer

A) True 
 B)False

Question 8

A major objective of the Fed is to regulate and control the supply of money and the availability of credit.

Accepted Answer

A) True 
 B)False

Question 9

"Continentals" were denominated in dollars and were backed by gold.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A)   $3.33 trillion
B)   $13.0 trillion
C)   $7.0 trillion
D)   $30 trillionE) A) and B)
F) A) and C)

Question 11

The banking system creates money.

Accepted Answer

A) True 
 B)False

Question 12

_____________ 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.

Accepted Answer

A)   Monetarists
B)   Supply Siders
C)   Neo Classicalists
D)   KeynesiansE) B) and C)
F) A) and C) A

Question 13

_____________ 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.

Accepted Answer

A)   Monetarists
B)   Keynesians
C)   Neo Classicalists
D)   WalraisiansE) A) and B)
F) B) and D)

Question 14

Fiat money is legal tender proclaimed to be money by law.

Accepted Answer

A) True 
 B)False

Question 15

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) :

Accepted Answer

A)   VM = GDP/MS
B)   VM = MS/GDP
C)   VM = MS x GDP
D)   all of the aboveE) C) and D)
F) None of the above

Question 16

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.

Accepted Answer

A) True 
 B)False

Question 17

The savings-investment process

Accepted Answer

A)   involves the transfer of business funds to individuals for investing in stocks and bonds 
B)  involves the transfer of business funds to individuals for investing in homes
C)   involves the transfer in individual savings to the Federal Government.
D)   involves the transfer in individual savings to business firms in exchange for their securities.E) B) and C)
F) None of the above

Question 18

Functions of money include all of the following except

Accepted Answer

A)   Money serves as a medium of exchange.
B)   Money may be held as a store of value.
C)   Money determines the wealth of a nation.
D)   The quality of goods and services.E) A) and B)
F) C) and D)

Question 19

Which of the following would not be considered liquid?

Accepted Answer

A)   money in savings accounts
B)   coins
C)   currency
D)   all the above are liquidE) A) and C)
F) A) and B)

Question 20

Currently, the international monetary system can best be described as a managed floating exchange rate system.

Accepted Answer

A) True 
 B)False

Exam 2: Money and the Monetary System

The velocity of money measures:

Correct AnswerverifiedShow Answer

Most of the financial assets added to the M2 definition of money supply provide their owners with a higher rate of return than do M1 financial assets.

Correct AnswerverifiedShow Answer

Because credit card balances and limits can affect the rate of turnover of money supply and contribute to money supply expansion, these balances and limits are included in the M3 definition of money supply.

Correct AnswerverifiedFalse

All restrictions on U.S. citizens holding gold in money form were removed by President Obama in 2010.

Correct AnswerverifiedShow Answer

Functions of money include all of the following except

Correct AnswerverifiedShow Answer

Inflation is

Correct AnswerverifiedC

Starting in 1934, U.S. citizens were prohibited from holding monetary gold in the United States.

Correct AnswerverifiedShow Answer

A major objective of the Fed is to regulate and control the supply of money and the availability of credit.

Correct AnswerverifiedShow Answer

"Continentals" were denominated in dollars and were backed by gold.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The banking system creates money.

Correct AnswerverifiedShow Answer

_____________ 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.

Correct AnswerverifiedA

_____________ 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.

Correct AnswerverifiedShow Answer

Fiat money is legal tender proclaimed to be money by law.

Correct AnswerverifiedShow Answer

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) :

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

The savings-investment process

Correct AnswerverifiedShow Answer

Functions of money include all of the following except

Correct AnswerverifiedShow Answer

Which of the following would not be considered liquid?

Correct AnswerverifiedShow Answer

Currently, the international monetary system can best be described as a managed floating exchange rate system.

Correct AnswerverifiedShow Answer

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False

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C

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A

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