1) There
is no single precise measure of money or the money supply for economists
because
A)
the government considers money supply statistics to be confidential and refuses
to publish them.
B)
deciding what is generally accepted in payment for goods and services or in the
repayment of debt is difficult to determine.
C)
economists cannot agree if currency should be considered money.
D)
of each of the above.
E)
of both (a) and (b) of the above.
Answer:
B
5) The
conversion of a barter economy to one that uses money
A)
increases efficiency by reducing the need to exchange goods and services.
B)
increases efficiency by reducing the need to specialize.
C)
increases efficiency by reducing transactions costs.
D)
does not increase economic efficiency.
Answer:
C
10) When
compared to exchange systems that rely on money, disadvantages of the barter
system include:
A)
the requirement of a double coincidence of wants.
B)
lowering the cost of exchanging goods over time.
C)
lowering the cost of exchange to those who would specialize.
D)
all of the above.
Answer:
A
15) Some of
the forms money has taken throughout history include
A)
tobacco. B) cigarettes. C) stone wheels. D) all of the above.
Answer:
D
20) 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.
Answer:
D
25) In
explaining the evolution of money, the text claims that
A)
government regulation is the most important factor.
B)
commodity money, because it is valued more highly, tends to drive out paper
money.
C)
new forms of money evolve to lower transaction costs.
D)
all of the above are true.
Answer:
C
30) Although
it can have a number of characteristics and serves more than one role, money
must
A)
be backed in gold. B) have a nonmonetary value.
C)
be generally acceptable. D) be inexpensive to produce.
Answer:
C
35) Which
of the following is not included in the measure of M1?
A)
Traveler's checks B) demand deposits
C)
currency D) gold coins issued by the U.S. Treasury
Answer:
D
40) As of
December 1999, the checkable deposit component of U.S. M1 money supply amounted
to ______ of the total.
A)
about 77%.
B)
about 72%
C)
more than 90%
D)
about 63%
E)
less than 50%
Answer:
D
45) Which
of the following are true statements?
A)
Wealth is the total collection of pieces of property that are a store of value.
B)
Money is frequently confused with income.
C)
Income is a flow of earnings per unit of time.
D)
All of the above are true.
E)
Only (a) and (b) of the above are true.
Answer:
D
50) For a
commodity to function effectively as money it must be
A)
easily standardized, making it easy to ascertain its value.
B)
widely accepted.
C)
deteriorate quickly so that its supply does not become to large.
D)
all of the above.
E)
only (a) and (b) of the above.
Answer:
E
55) Which
of the following is included in the M1 measure of money but is not included in
the M2 measure of money?
A)
currency
B)
checkable deposits
C)
traveler's checks
D)
all of the above
E)
none of the above
Answer:
E
60) The M1
measure of money includes
A)
small denomination time deposits. B) money market deposit accounts.
C)
money market mutual fund shares. D) demand deposits.
Answer:
D
65) Compared
to an EFTS system, a payments system based on checks has the major drawback
that
A)
checks are more costly to process.
B)
checks take longer to process, meaning that it may take several days before the
depositor can get her cash.
C)
fraud may be more difficult to commit when paper receipts are eliminated.
D)
all of the above.
E)
both (a) and (b) of the above.
Answer:
E
70) All but
the most primitive societies use money as a medium of exchange, implying that
A)
the use of money is economically efficient.
B)
barter exchange is economically inefficient.
C)
barter exchange cannot work outside the family.
D)
all of the above.
E)
only (a) and (b) of the above.
Answer:
E
75) If
merchants in the country Zed choose to close their doors, preferring to be
stuck with rotting merchandise rather than worthless currency, then one can
conclude that Zed is experiencing a
A)
superdeflation. B) hyperdeflation.
C) disinflation. D) hyperinflation.
Answer:
D
80) When
money prices are used to facilitate comparisons of value, money is said to
function as a
A)
unit of account. B) medium of exchange.
C)
store of value. D) payments-system ruler.
Answer:
A
85) If
there are four goods in a barter economy, then one needs to know _____ prices
in order to exchange one good for another.
A)
8 B) 6 C) 5 D) 4
Answer:
B
90) Because
it is a medium of exchange, money
A)
eliminates the requirement for a double coincidence of wants.
B)
encourages specialization.
C)
reduces transaction costs.
D)
does all of the above.
E)
does only (a) and (b) of the above.
Answer:
D
95) Because
it is a unit of account, money
A)
reduces transaction costs.
B)
reduces the number of prices that need to be calculated.
C)
does not earn interest.
D)
does all of the above.
E)
does only (a) and (b) of the above.
Answer:
E
100) Which of the following
statements accurately describes the three different measures of the money
supply--M1, M2, and M3?
A) M1
is the narrowest measure.
B) Initial
estimates of the money supply are not a reliable guide to what is happening to
the money supply in the short run.
C)
The three measures do not move together, so they cannot be used interchangeably
by policymakers.
D)
All of the above.
E)
Only (a) and (b) of the above.
Answer:
D
105) The
time and resources spent trying to exchange goods and services are called
A)
bargaining costs. B) transaction costs.
C)
contracting costs. D) barter costs.
Answer:
B
110) Money
reduces transaction costs, allowing people to specialize in what they do
best. Money, therefore, promotes
A)
greed and avarice. B) inefficiency.
C)
the division of labor. D) competition.
Answer:
C
115) Because
money reduces transaction costs, it
A)
encourages greed and avarice.
B)
improves economic efficiency.
C)
encourages specialization and exchange.
D)
does only (a) and (b) of the above.
E)
does only (b) and (c) of the above.
Answer:
E
120) If
an individual moves money from a small-denomination time deposit to a money
market deposit account,
A)
M1 increases 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 decreases.
Answer:
C
125) If
an individual moves money from a (noninstitutional) money market mutual fund to
a savings deposit account,
A)
M1 increases 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 decreases.
Answer:
C
130) If
an individual moves money from a (noninstitutional) money market mutual fund to
a money market deposit account,
A)
M2 decreases and M3 stays the same.
B)
M2 stays the same and M3 increases.
C)
M2 stays the same and M3 stays the same.
D)
M2 increases and M3 decreases.
Answer:
C