MBF HW 2

________ is the narrowest monetary aggregate that the Fed reports. A. M1 B. M0 C. M2 D. M3

A. M1

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 decreases transactions costs. B. Money increases economic efficiency because it discourages specialization. C. Money cannot have an effect on economic efficiency. D. Money increases economic efficiency because it is costless to produce.

A. Money increases economic efficiency because it decreases transactions costs.

Who produces U.S. coins / who distributes them? A. U.S. Mint /Federal Reserve B. Bureau of Engraving and Printing/ Treasury C. Treasury / Treasury D. Federal Reserve/Federal Reserve

A. U.S. Mint /Federal Reserve

Which of the following is not a form of e-money? A. a credit card B. a smart card C. a stored-value card D. a debit card

A. a credit card

When economists say that money promotes ________, they mean that money encourages specialization and the division of labor. A. efficiency B. contracting C. bargaining D. greed

A. efficiency

Currency includes A. paper money and coins. B. paper money, coins, checks, and savings deposits. C. paper money and checks. D. paper money, coins, and checks.

A. paper money and coins.

Because it is a unit of account, money A. reduces the number of prices that need to be calculated. B. increases transaction costs. C. does not earn interest. D. discourages specialization.

A. reduces the number of prices that need to be calculated.

What's does an ACH do? A. transfers funds electronically B. insures deposits C. makes reserve loans D. none of these

A. transfers funds electronically

Which of the following sequences accurately describes the evolution of the payments system? A. Barter, checks, paper currency, electronic funds transfers B. Barter, coins made of precious metals, paper currency, checks, electronic funds transfers C. Barter, checks, paper currency, coins made of precious metals, electronic funds transfers D. Barter, coins made of precious metals, checks, paper currency, electronic funds transfers

B. Barter, coins made of precious metals, paper currency, checks, electronic funds transfers

Which of the following statements uses the economists' definition of money? A. Betsy is rich she has a lot of money. B. I hope that I have enough money to buy my lunch today. C. I plan to earn a lot of money over the summer. D. The job with New Company gave me the opportunity to earn more money.

B. I hope that I have enough money to buy my lunch today.

Which of the following is included in M2 but not in M1? A. Currency B. Money market mutual fund shares (retail) C. Demand deposits D. NOW accounts

B. Money market mutual fund shares (retail)

Of the following assets, the least liquid is A. traveler's checks. B. a house. C. stocks. D. checking deposits.

B. a house.

Because transactions clear immediately, Fedwire is called A. money B. a real-time payments system C. an inside money D. emoney

B. a real-time payments system

Gresham's Law states that A. the more you make, the more you spend B. bad money drives out good C. supply creates its own demand D. population outstrips food

B. bad money drives out good

Whatever a society uses as money, the distinguishing characteristic is that it must A. be completely inflation proof. B. be generally acceptable as payment for goods and services or in the repayment of debt. C. be produced by the government. D. contain gold.

B. be generally acceptable as payment for goods and services or in the repayment of debt.

A fall in the level of prices A. does not affect the value of money. B. increases the purchasing power of a dollar C. has an uncertain effect on the value of money. D. reduces the value of money.

B. increases the purchasing power of a dollar

All of the following are necessary criteria for a commodity to function as money except A. it must be widely accepted. B. it must deteriorate quickly. C. it must be easy to carry. D. it must be divisible.

B. it must deteriorate quickly.

The evolution of the payments system from barter to precious metals, then to fiat money, then to checks can best be understood as a trend towards A. greater liquidity B. lower transactions costs C. higher returns D. less risk

B. lower transactions costs

Monetary aggregates are A. measures of the wealth of individuals. B. measures of the money supply reported by the Federal Reserve. C. reported by the Treasury Department annually. D. never redefined since "money" never changes.

B. measures of the money supply reported by the Federal Reserve.

Of money's three functions, the one that distinguishes money from other assets is its function as a A. store of value. B. medium of exchange. C. standard of deferred payment. D. unit of account.

B. medium of exchange.

An electronic payments system has not completely replaced the paper payments system because of all of the following reasons except A. privacy concerns. B. transportation costs. C. expensive equipment is necessary to set up the system. D. security concerns.

B. transportation costs.

The largest denomination bill currently issued in the U.S. is A. $1 B. $50 C. $100 D. $500

C. $100

If an individual moves money from a checking account to a savings account A. M1 stays the same and M2 stays the same. B. M1 increases and M2 decreases. C. M1 decreases and M2 stays the same. D. M1 decreases and M2 increases.

C. M1 decreases and M2 stays the same.

Which of the following is not included in the measure of M1? A. Currency. B. Demand deposits. C. Savings deposits. D. NOW accounts.

C. Savings deposits.

Paper currency that has been declared legal tender but is not convertible into coins or precious metals is called ________ money. A. funny B. commodity C. fiat D. electronic

C. fiat

U.S. currency was originally backed by (convertible into) A. gold B. silver C. gold and/or silver D. nothing

C. gold and/or silver

The return a sovereign (government) earns from creating (minting) money is called A. profit B. backwardation C. seignorage D. basis points

C. seignorage

Paper money was first issued by the U.S. Government A. WW II B. the war of 1812 C. the Civil war D. WW I

C. the Civil war

When we say that money is a stock variable, we mean that A. money never loses purchasing power. B. it is sold in the equity market. C. the quantity of money is measured at a given point in time. D. we must attach a time period to the measure.

C. the quantity of money is measured at a given point in time.

Compared to an economy that uses a medium of exchange, in a barter economy A. transaction costs are lower. B. liquidity costs are lower. C. transaction costs are higher. D. liquidity costs are higher.

C. transaction costs are higher.

Who produces U.S. bills / who distributes them? A. Federal Reserve/Federal Reserve B. Treasury / Treasury C. U.S. Mint /Federal Reserve D. Bureau of Engraving and Printing/ Federal reserve

D. Bureau of Engraving and Printing/ Federal reserve

________ is the relative ease and speed with which an asset can be converted into a medium of exchange. A. Specialization B. Deflation C. Efficiency D. Liquidity

D. Liquidity

________ are the time and resources spent trying to exchange goods and services. A. Bargaining costs. B. Barter costs. C. Contracting costs. D. Transaction costs.

D. Transaction costs.

Money is A. always based on a precious metal like gold or silver. B. the total collection of pieces of property that are a store of value. C. a flow of earnings per unit of time. D. anything that is generally accepted in payment for goods and services or in the repayment of debt.

D. anything that is generally accepted in payment for goods and services or in the repayment of debt.

Which of the following was NEVER used as money in the U.S. A. gold B. silver C. paper currency D. credit cards

D. credit cards

Most U.S. currency is apparently held by A. U.S. citizens B. banks C. the Federal reserve D. foreigners

D. foreigners

The difference between money and income is that A. there is no difference money and income are both stocks. B. money is a flow and income is a stock. C. there is no difference money and income are both flows. D. money is a stock and income is a flow.

D. money is a stock and income is a flow.

Patrick places his pocket change into his savings bank on his desk each evening. By his actions, Patrick indicates that he believes that money is a A. unit of account. B. medium of exchange. C. unit of specialization. D. store of value.

D. store of value.

Even economists have no single, precise definition of money because A. money supply statistics are a state secret. B. the Federal Reserve does not employ or report different measures of the money supply. C. economists find disagreement interesting and refuse to agree for ideological reasons. D. the "moneyness" or liquidity of an asset is a matter of degree.

D. the "moneyness" or liquidity of an asset is a matter of degree.

The payments system is A. used by union officials to set salary caps. B. used by your employer to determine salary increases. C. an illegal method of rewarding contracts. D. the method of conducting transactions in the economy.

D. the method of conducting transactions in the economy.

When money prices are used to facilitate comparisons of value, money is said to function as a A. store of value. B. medium of exchange. C. payments-system ruler. D. unit of account.

D. unit of account.

The total stock of assets, real and financial, make up a person's A. credit. B. income. C. money. D. wealth.

D. wealth.