hw 2

Hyeon purchasing movie tickets with her debit card is an example of the ________ function of money. A) medium of exchange B) unit of account C) store of value D) specialization

a

If Toyota sells a $1000 bond in the United States, the bond is a A) foreign bond. B) Eurobond. C) Honda bond. D) currency bond.

a

A financial market in which previously issued securities can be resold is called a ________ market. A) primary B) secondary C) tertiary D) used securities

b

Hyeon realizes that the living cost at Tokyo is less expensive than Manhattan after she converts the Japanese Yen into USD. This is an example of the ________ function of money. A) medium of exchange B) unit of account C) store of value D) Standard of deferred compensation

b

If Apple sells a bond in London and it is denominated in US dollars, the bond is a A) foreign bond. B) Eurobond. C) British bond. D) domestic bond

b

If bad credit risks are the ones who most actively seek loans and, therefore, receive them from financial intermediaries, then financial intermediaries face the problem of A) moral hazard. B) adverse selection. C) free-riding. D) costly state verification.

b

If an individual moves money from currency to a demand deposit account, A) M1 decreases and M2 stays the same. B) M1 stays the same and M2 increases. C) M1 stays the same and M2 stays the same. D) M1 increases and M2 stays the same.

c

Which of the following statements best explains how the use of money in an economy increases economic efficiency? A) Money increases economic efficiency because it is costless to produce. B) Money increases economic efficiency because it discourages specialization. C) Money increases economic efficiency because it decreases transactions costs. D) Money cannot have an effect on economic efficiency.

c

Because borrowers, once they have a loan, are more likely to invest in high-risk investment projects, banks face the A) adverse selection problem. B) lemon problem. C) adverse credit risk problem. D) moral hazard problem.

d

If the price level doubles, the value of money A) doubles. B) more than doubles, due to scale economies. C) rises but does not double, due to diminishing returns. D) falls by 50 percent.

d