Chapter 14 Money, Banks, and the Fed Reserve System

Q2: An asset would be usable as a medium of exchange for all the following reasons EXCEPT: A. Asset should be durable and not lose value due to spoilage B. Asset should be a commodity with intrinsic value C. Asset is generally accepted by the public D. Asset is divisible sine goods are valued at different amounts

B. Asset should be a commodity with intrinsic value

Q12: Which of the following is not a correct statement about​ M2? A. M2 includes all of the assets in M1. B. M2 is the best definition of money as a medium of exchange. C. M2 is a broader definition of money compared to M1 and currency. D. M2 includes savings​ accounts, small-denomination time​ deposits, and money market mutual funds

B. M2 is the best definition of money as a medium of exchange.

Q7: Money serves as a standard of deferred payment when A. Sellers are willing to accept it in exchange for goods or services. B. Payments agreed to today but made in the future are in terms of money. C. It can be easily stored today and used for transactions in the future. D. All of the above are examples of money serving as a standard of deferred payment.

B. Payments agreed to today but made in the future are in terms of money.

Q11: Because of​ this ( more currency outside the US) , A. International interest rates are too low. B. The M1 monetary aggregate is a poor measure of the U.S. money supply C. The M2 monetary aggregate is a good measure of the U.S. money supply. D. International interest rates are too high.

B. The M1 monetary aggregate is a poor measure of the U.S. money supply

Q6: The Federal Reserve uses two definitions of the money​ supply, M1 and​ M2, because A. M2 is a narrow definition focusing more on​ liquidity, whereas M1 is a broader definition of the money supply. B. M2 is also known as cash and cash​ equivalent, whereas M1 represents the standard of deferred payment function. C. M1 is a narrow definition focusing more on​ liquidity, whereas M2 is a broader definition of the money supply. D. M2 satisfies the medium of exchange function of​ money, whereas M1 satisfies the store of value function.

C. M1 is a narrow definition focusing more on​ liquidity, whereas M2 is a broader definition of the money supply.

Q3: Money serves as a unit of account when: A. Sellers are willing to accept in exchange B. Easily stored and used for transactions in the future C. Prices of goods/services are stated in terms of money D. All of the above

C. Prices of goods/services are stated in terms of money

Q1: When money is acting as a store of value, it allows an individual to: A. Exchange goods for other goods/services in the economy B. Measure value of goods/ services in the economy C. Transfer dollars, and therefore purchasing power, into the future D. Trade money for goods/services

C. Transfer dollars, and therefore purchasing power, into the future

Q4: The central bank of a country controls the money​ supply, which equals the currency held by A. The public plus their checking and saving account balances B. Banks C. the public plus their checking account balances. Your answer is correct. D. The public.

C. the public plus their checking account balances. Your answer is correct.

Q9: Look carefully at the following list. A. The coins in your pocket. B. The funds in your checking account. C. The funds in your savings account. D. The​ traveler's check that you have left over from a trip. E. Your Citibank Platinum MasterCard. Which of the things above are NOT included in the M1 definition of the money​ supply?

D. c​ & e

Q5: Distinguish among​ money, income, and wealth. A. A​ person's money is the currency held and the earning from​ work, income is equal to the bank balance and wealth is equal to the profit from investment. B. A​ person's money is the currency in the​ pocket, income is the earning and wealth is equal to asset value. C. A​ person's money is the currency plus all bank accounts​ owned, income is equal to the earning from work and wealth is equal to the profit from investment. D. A​ person's money is the currency held and the checking account​ balance, income is the earning and wealth is equal to value of assets minus all debts.

D. A​ person's money is the currency held and the checking account​ balance, income is the earning and wealth is equal to value of assets minus all debts.

Q10: The amount of U.S. currency in circulation is much higher than the amount held by the U.S. population because A. The data the researchers collected was faulty. B. The consumers surveyed did not reveal the large sums they really carried around. C. Most of the currency is in savings accounts. D. More than half of the currency is held outside the borders of the United States.

D. More than half of the currency is held outside the borders of the United States.

Q8: Which of the following would be the least desirable candidate to be a good medium of​ exchange? A. seashells B. dollar bills C. gold D. milk

D. milk