exam questions for the chapter 12 PDF

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Economics Today: The Macro View, 5Ce (Miller) Practice Quiz : Chapter 12 Money and the Banking System 1) In a barter system, we would expect to see A) many different units of money. B) money and goods exchanged for each other. C) wide-spread financial institutions. D) goods traded directly for other goods and services. Answer: D 2) Goods traded directly for other goods and services refers to A) commodity money. B) fiat money C) wide-spread trade. D) a barter system. Answer: D 3) Money is defined as A) a person's net worth. B) anything people generally accept in exchange for goods and services. C) a byproduct of a barter economy. D) any financial instrument that is backed by gold. Answer: B 4) For something to serve as money, it must be A) backed by the authority of the government. B) generally accepted by buyers and sellers. C) light, durable, and common. D) convertible to gold. Answer: B 5) For something to serve as ________, it must be generally accepted by buyers and sellers. A) banking authority B) money C) light, durable, and common D) gold Answer: B 6) Cigarettes served as money in some prisoner of war camps during World War II. Given this, we would expect to observe A) no one ever smoking a cigarette. B) people usually resorting to barter rather than using cigarettes as money. C) prices of other goods expressed in terms of cigarettes. D) only government-issued cigarettes being accepted as money. Answer: C

7) If lenders refuse to state the debt in terms of dollars, then dollars are not a A) medium of exchange. B) unit of account. C) store of value. D) standard of deferred payment. Answer: D 8) Why do people often buy gold in times of war? A) They want the unit-of-account function of money and government currencies lack this function in times of war. B) They want a store of value as well as a medium of exchange since it is uncertain what will happen to the value of local currencies or whether they will be accepted. C) They think that gold will be a good investment in the future. D) They want something that can be carried easily in case of flight. Answer: B 9) Given the list of assets below, which is the most liquid? A) $500 worth of General Motors common stock B) $500 worth of General Motors bonds C) a $500 traveler's cheque D) a one-ounce gold coin Answer: C 10) A fiduciary monetary standard exists when the value of a currency A) is determined by law. B) is convertible to a fixed quantity of gold. C) depends upon the public's confidence that the currency can be exchanged for goods and services. D) increases with inflation. Answer: C 11) A ________ when the value of a currency depends upon the public's confidence that the currency can be exchanged for goods and services. A) moral responsibility B) a conversion to a fixed quantity of gold is necessary C) fiduciary monetary standard exists D) monetary union is necessary Answer: C 12) The ________ of money varies inversely with the price level. A) law B) purchasing power C) standard of deferred payment D) medium of exchange Answer: B

13) which of the following statements is TRUE of money during times of inflation. A) Money still retains the characteristic of predictability of value. B) Money can easily be made so people can still purchase the goods and services they want. C) Money is no longer a liquid asset. D) The opportunity cost of money falls as inflation rises. Answer: A 14) Even when a particular monetary asset is not performing one of the functions of money well, people still use the asset because A) it is still easier than relying on barter. B) they have no choice. C) once an asset is defined as money it is always money. D) people expect money will come back at a later date. Answer: A 15) The significance of currency in the Canadian money supply has A) increased in recent years. B) decreased in recent years. C) remained the same in recent years. D) been made legal by the Depository Institutions Deregulation and Monetary Control Act of 1980. Answer: A 16) Currency and chequable deposits are money according to the definition of money A) that is known as M1+. B) that uses the liquidity approach. C) that includes an important near money. D) that is known as M2+. Answer: A 17) Currency and ________ are money according to the definition of money that is known as M1. A) demand deposits B) stocks C) savings deposits D) Canada Savings Bonds Answer: A 18) In Canada, paper currency is properly referred to as A) gold-standard currency. B) bank notes. C) depository tender. D) near-money. Answer: B

19) The amount of money in circulation is referred to as

A) seignorage. B) fiat money C) the money supply D) reserves. Answer: C 20) The best measure of money is A) coins and currency. B) the one based on the transactions approach. C) the one based on the liquidity approach. D) something economists have never agreed on. Answer: D Diff: 1 Type: MC Page Ref: 318 Skill: Recall Objective: L.O. 12.3 Graph: No graph Numerical: Non-numerical 21) Chequable deposit account balances in chartered banks are A) counted in M2. B) considered a near money. C) considered credit, but not money. D) counted in M1+. Answer: D 22) ________ account balances in chartered banks are counted in M1+. A) Chequable deposit B) Saving deposit C) American dollar D) Stock market Answer: A 23) Which of the following is an example of M2++ money? A) a credit card B) savings deposit at a foreign bank C) Canada Savings Bonds D) demand deposits Answer: C 24) Which of the following is an example of M1+ money? A) a credit card B) savings deposits C) coins D) chequing accounts Answer: D 25) Which of the following is TRUE of M2+?

A) It is larger than M1+. B) It excludes savings deposits. C) It does not include the most highly liquid components of the money supply. D) It is less than M1+. Answer: A 26) The process by which financial institutions accept deposits and then lend those deposits is A) financial intermediation. B) racketeering. C) fiduciary clearing. D) a double coincidence. Answer: A 27) The term "financial intermediaries" refers to A) commercial banks only. B) credit unions only. C) savings and loan associations only. D) both commercial banks, credit unions, and trust companies. Answer: D 28) When a person deposits a check into her checking account, A) she owes the bank money. B) the bank owes her money. C) no one owes anybody anything. The deposit is an asset to both the bank and the person. D) no one owes anybody anything. The deposit is an asset to the person, but is neither an asset nor a liability to the bank. Answer: B 29) When a person deposits a check into her savings account, A) she owes the bank money. B) the bank owes her money. C) no one owes anybody anything. The deposit is an asset to both the bank and the person. D) no one owes anybody anything. The deposit is an asset to the person, but is neither an asset nor a liability to the bank. Answer: B 30) Suppose a new customer opens a checking account and a savings account in a commercial bank, placing $200,000 in each. Later, the bank loans the customer $200,000. For this bank, A) assets increased by $200,000 and liabilities increased by $100,000. B) assets increased by $100,000 because the loan is an asset and liabilities increased by $100,000 because the checking deposit is a liability. The savings deposit is neither an asset nor a liability. C) liabilities increased by $200,000 since the checking account and the savings account are liabilities while it generated no new assets. D) assets increased by $200,000 because the loan is an asset and liabilities increased by $400,000 because both the checking deposit and the savings deposit are liabilities to the bank....