ECO315 Money & Banking Final Exam
If an individual moves money from a small-denomination time deposit to a demand deposit account,
M1 increases and M2 stays the same.
Why are most of the U.S. dollars held outside of the United States?
Concern about high inflation eroding the value of their own currency causes many people in foreign countries to hold U.S. dollars as a hedge against inflation risk.
What is included in M1 money?
Demand deposits, checkable deposits, currency, and traveler's checks.
________ is the narrowest monetary aggregate that the Fed reports.
M1
If an individual moves money from a demand deposit account to a money market deposit account,
M1 decreases and M2 stays the same.
If an individual moves money from a savings deposit account to a money market deposit account,
M1 stays the same and M2 stays the same.
If an individual moves money from currency to a demand deposit account,
M1 stays the same and M2 stays the same.
Which of the following is included in M2 but not in M1?
Money market mutual fund shares (retail)
Which of the following is not included in the monetary aggregate M2?
Savings bonds.
Which of the following is not included in the measure of M1?
Savings deposits.
Which of the following is not included in the M1 measure of money but is included in the M2 measure of money?
Small-denomination time deposits.
What factors have slowed down the movement to a system where all payments are made electronically?
The equipment necessary to set up the system is expensive, security of the information, and privacy concerns are issues that need to be addressed before an electronic payments system will be widely accepted.
Which of the following statements accurately describes the two measures of the money supply?
The two measures do not move together, so they cannot be used interchangeably by policymakers.
The components of the U.S. M1 money supply are demand and checkable deposits plus
currency plus travelers checks.
An increase in the time to the promised future payment ________ the present value of the payment.
decreases
The present value of an expected future payment ________ as the interest rate increases.
falls
Generally, the initial money supply data reported by the Fed
is not a reliable guide to the short-run behavior of the money supply.
Monetary aggregates are
measures of the money supply reported by the Federal Reserve.
The initial money supply data reported by the Fed are not a reliable guide to short -run movements in the money supply such as a ________, but are reasonably reliable for longer periods such as a ________.
month; year
Recent financial innovation makes the Federal Reserveʹs job of conducting monetary policy
more difficult, since the Fed no longer knows what to consider money.
In explaining the evolution of money
new forms of money evolve to lower transaction costs.
The concept of ________ is based on the common-sense notion that a dollar paid to you in the future is less valuable to you than a dollar today.
present value
The decade during which the growth rates of monetary aggregates diverged the most is
the 1990s.
The currency component includes paper money and coins held in ________.
the hands of the nonbank public.
The M1 measure of money includes
travelerʹs checks.
If an individual redeems a U.S. savings bond for currency
M1 increases and M2 increases.
If an individual moves money from a money market deposit account to currency,
M1 increases and M2 stays the same.
Small-denomination time deposits refer to certificates of deposit with a denomination of less than ________.
$100,000
With an interest rate of 6 percent, the present value of $100 next year is approximately
$94.
If a security pays $55 in one year and $133 in three years, its present value is $150 if the interest rate is
10 percent.
Which of the following is included in both M1 and M2?
Currency.
