(Test Bank) Economics Of Money, Banking, And Financial Markets

Mishkin, 6

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6th Edition

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Test Bank for Economics Of Money, Banking, And Financial Markets, The downloadable file consists of 330 pages, and the total size of the file is 2.47 MB. Purchase now only for highly discounted price.

Author(s): Mishkin

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ECON MISC 2154 TEST BANK FOR EXAM ( Economics of Money, Banking, and Financial Markets 6e (Mishkin) Chapter 3) 2154 TEST BANK FOR EXAM Economics of Money, Banking, and Financial Markets 6e (Mishkin) Chapter 3 What Is Money? Meaning of Money 1) A person's house is part of her . A) money B) income C) liabilities D) wealth Answer: D Diff: 1 Type: MC Skill: Recall Objective: 3.1 Describe what money is 2) Money is . A) anything that is generally accepted in payment for goods and services or in the repayment of debt B) a flow of earnings per unit of time C) the total collection of pieces of property that are a store of value D) always based on a precious metal like gold or silver Answer: A Diff: 1 Type: MC Skill: Recall Objective: 3.1 Describe what money is 3) To an economist, is anything that is generally accepted in payment for goods and services or in the repayment of debt. A) wealth B) income C) money D) credit Answer: C Diff: 1 Type: MC Skill: Recall Objective: 3.1 Describe what money is 4) Currency is defined as . A) anything accepted for payment of goods and services B) paper money and coins C) a unit of account D) foreign exchange Answer: B Diff: 1 Type: MC Skill: Recall Objective: 3.1 Describe what money is 5) Money is . A) the same as currency B) anything that is generally accepted in payment of goods or services or in the repayment of debts C) not used as a unit of account D) defined as paper money and coins Answer: B Diff: 1 Type: MC Skill: Recall Objective: 3.1 Describe what money is 6) Currency includes . A) paper money and coins B) paper money, coins, and cheques C) paper money and cheques D) paper money, coins, cheques, and savings deposits Answer: A Diff: 1 Type: MC Skill: Recall Objective: 3.1 Describe what money is 7) 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) definitions change all the time Answer: B Diff: 2 Type: MC Skill: Recall Objective: 3.1 Describe what money is 8) Even economists have no single, precise definition of money because . A) money supply statistics are a state secret B) the Bank of Canada does not employ or report different measures of the money supply C) the "moneyness" or liquidity of an asset is a matter of degree D) economists find disagreement interesting and refuse to agree for ideological reasons Answer: C Diff: 2 Type: MC Skill: Recall Objective: 3.1 Describe what money is 9) The total collection of pieces of property that serve to store value is a person's . A) wealth B) income C) money D) credit Answer: A Diff: 1 Type: MC Skill: Recall Objective: 3.1 Describe what money is 10) is used to make purchases while is the total collection of pieces of property that serve to store value. A) Money; income B) Wealth; income C) Income; money D) Money; wealth Answer: D Diff: 1 Type: MC Skill: Recall Objective: 3.1 Describe what money is 11) is a flow of earnings per unit of time. A) Income B) Money C) Wealth D) Currency Answer: A Diff: 1 Type: MC Skill: Recall Objective: 3.1 Describe what money is 12) An individual's annual salary is her . A) money B) income C) wealth D) liabilities Answer: B Diff: 1 Type: MC Skill: Recall Objective: 3.1 Describe what money is 13) When we say that money is a stock variable, we mean that . A) the quantity of money is measured at a given point in time B) we must attach a time period to the measure C) it is sold in the equity market D) money never loses purchasing power Answer: A Diff: 2 Type: MC Skill: Recall Objective: 3.1 Describe what money is 14) The difference between money and income is that . A) money is a flow and income is a stock B) money is a stock and income is a flow C) there is no difference —money and income are both stocks D) there is no difference —money and income are both flows Answer: B Diff: 2 Type: MC Skill: Recall Objective: 3.1 Describe what money is 15) Income is a and wealth is a . A) stock; flow B) flow; stock C) variable; constant D) constant; variable Answer: B Diff: 1 Type: MC Skill: Recall Objective: 3.1 Describe what money is 16) Which of the following is a true statement? A) Money and income are flow variables. B) Money is a flow variable. C) Income is a flow variable. D) Money and income are stock variables. Answer: C Diff: 1 Type: MC Skill: Recall Objective: 3.1 Describe what money is 17) Which of the following statements uses the economists' definition of money? A) I plan to earn a lot of money over the summer. B) Betsy is rich—she has a lot of money. C) I hope that I have enough money to buy my lunch today. D) The job with New Company gave me the opportunity to earn more money. Answer: C Diff: 2 Type: MC Skill: Applied Objective: 3.1 Describe what money is 18) In the country of Moneyland the law allows you to repay mortgage in rocks. Thus, . A) Moneyland is a poor country B) rocks in this country are considered as money C) money is scarce D) Moneyland is a developing country Answer: B Diff: 2 Type: MC Skill: Applied Objectiv e: 3.1 Describe what money is 19) Explain the concepts of wealth and income and how they relate to the concept of money. Answer: Non -economists often use money synonymously with wealth or income. Wealth is a stock variable that describes the total collection of property that is used to store value. Income is a flow of earnings over some period of time. Money is a stock variable; it is a certain amount at a point of time and can be used in the payment of goods and services. Diff: 2 Type: ES Skill: Applied Objective: 3.1 Describe what money is Functions of Money 1) If peanuts serve as a medium of exchange, a unit of account, and a store of value, then peanuts are . A) bank deposits B) reserves C) money D) loanable funds Answer: C Diff: 1 Type: MC Skill: Applied Objective: 3.2 List and summarize the functions of money 2) For a commodity to function effectively as money it must be . A) easily standardized, making it easy to ascertain its value B) difficult to make change C) deteriorate quickly so that its supply does not become too large D) hard to carry around Answer: A Diff: 1 Type: MC Skill: Recall Objective: 3.2 List and summarize the functions of money 3) are the time and resources spent trying to exchange goods and services. A) Bargaining costs B) Transaction costs C) Contracting costs D) Barter costs Answer: B Diff: 1 Type: MC Skill: Recall Objective: 3.2 List and summarize the functions of money 4) Compared to an economy that uses a medium of exchange, in a barter economy . A) transaction costs are higher B) transaction costs are lower C) liquidity costs are higher D) liquidity costs are lower Answer: A Diff: 1 Type: MC Skill: Recall Objective: 3.2 List and summarize the functions of money 5) Of money' s three functions, the one that distinguishes money from other assets is its function as a . A) store of value B) unit of account C) standard of deferred payment D) medium of exchange Answer: D Diff: 1 Type: MC Skill: Recall Objective: 3.2 List and summarize the functions of money 6) 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) encouraging specialization and the division of labor Answer: A Diff: 2 Type: MC Skill: Recall Objective: 3.2 List and summarize the functions of money 7) 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 Diff: 2 Type: MC Skill: Recall Objective: 3.2 List and summarize the functions of money 8) 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. Answer: C Diff: 2 Type: MC Skill: Recall Objective: 3.2 List and summarize the functions of money 9) Which of the following is a true statement? A) The conversion of a barter economy to one that uses money increases efficiency by increasing the cost of exchange. B) The conversion of a barter econo my to one that uses money increases efficiency by increasing the cost to those who wish to specialize. C) The conversion of a barter economy to one that uses money increases efficiency by reducing transactions costs. D) The conversion of a barter economy to one that uses money does not increases efficiency. Answer: C Diff: 3 Type: MC Skill: Applied Objective: 3.2 List and summarize the functions of money 10) When economists say that money promotes , they mean that money encourages specialization and the division of labour. A) bargaining B) contracting C) efficiency D) greed Answer: C Diff: 1 Type: MC Skill: Recall Objective: 3.2 List and summarize the functions of money 11) Money transaction costs, allowing people to specialize in what they do best. A) reduces B) increases C) enhances D) eliminates Answer: A Diff: 1 Type: MC Skill: Applied Objective: 3.2 List and summarize the functions of money 12) All of the following are necessary criteria for a commodity to function as money except . A) it must deteriorate quickly B) it must be divisible C) it must be easy to carry D) it must be widely accepted Answer: A Diff: 1 Type: MC Skill: Recall Objective: 3.2 List and summarize the functions of money 13) 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) contain gold D) be produced by the government Answer: B Diff: 2 Type: MC Skill: Recall Objective: 3.2 List and summarize the functions of money 14) 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 efficient C) barter exchange cannot work outside the family D) inflation is not a concern Answer: A Diff: 1 Type: MC Skill: Applied Objective: 3.2 List and summarize the functions of money 15) Kevin purchasing concert tickets with his debit card is an example of the function of money. A) medium of exchange B) unit of account C) store of value D) specialization Answer: A Diff: 1 Type: MC Skill: Applied Objective: 3.2 List and summarize the functions of money 16) 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 Diff: 1 Type: MC Skill: Applied Objective: 3.2 List and summarize the functions of money 17) A problem with barter exchange when there are many goods is that in a barter system . A) transactions costs are minimized B) there exists a multiple number of prices for each good C) there is only one store of value D) exchange of services is impossible Answer: B Diff: 1 Type: MC Skill: Applied Objective: 3.2 List and summarize the functions of money 18) In a barter economy the number of prices in an economy with N goods is . A) [N(N - 1)]/2 B) N(N/2) C) 2N D) N(N/2) - 1 Answer: A Diff: 3 Type: MC Skill: Recall Objective: 3.2 List and summarize the functions of money 19) If there are five goods in a barter economy, one needs to know ten prices in order to exchange one good for another. If, however, there are ten goods in a barter economy, then one needs to know prices in order to exchange one good for another. A) 20 B) 25 C) 30 D) 45 Answer: D Diff: 2 Type: MC Skill: Applied Objective: 3.2 List and summarize the functions of money 20) 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 Diff: 2 Type: MC Skill: Applied Objective: 3.2 List and summarize the functions of money 21) Because it is a unit of account, money . A) increases transaction costs B) reduces the number of prices that need to be calculated C) does not earn interest D) discourages specialization Answer: B Diff: 1 Type: MC Skill: Recall Objective: 3.2 List and summarize the functions of money 22) Dennis notices that jackets are on sale for $99. In this case money is functioning as a . A) medium of exchange B) unit of account C) store of value D) payments -system ruler Answer: B Diff: 2 Type: MC Skill: Applied Objective: 3.2 List and summarize the functions of money 23) As a store of value, money . A) does not earn interest B) cannot be a durable asset C) must be currency D) is a way of saving for future purchases Answer: D Diff: 1 Type: MC Skill: Recall Objective: 3.2 List and summarize the functions of money 24) 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) medium of exchange B) unit of account C) store of value D) unit of specialization Answer: C Diff: 2 Type: MC Skill: Applied Objective: 3.2 List and summarize the functions of money 25) is the relative ease and speed with which an asset can be converted into a medium of exchange. A) Efficiency B) Liquidity C) Deflation D) Specialization Answer: B Diff: 1 Type: MC Skill: Recall Objective: 3.2 List and summarize the functions of money 26) Increasing transactions costs of selling an asset make the asset . A) more valuable B) more liquid C) less liquid D) more moneylike Answer: C Diff: 1 Type: MC Skill: Recall Objective: 3.2 List and summarize the functions of money 27) Since it does not have to be converted into anything else to make purchases, is the most liquid asset. A) money B) stock C) artwork D) gold Answer: A Diff: 1 Type: MC Skill: Recall Objective: 3.2 List and summarize the functions of money 28) Of the following assets, the least liquid is . A) stocks B) travellers cheques C) chequing deposits D) a house Answer: D Diff: 1 Type: MC Skill: Applied Objective: 3.2 List and summarize the functions of money 29) Ranking assets from most liquid to least liquid, the correct order is . A) savings bonds; house; currency B) currency; savings bonds; house C) currency; house; savings bonds D) house; savings bonds; currency Answer: B Diff: 1 Type: MC Skill: Applied Objective: 3.2 List and summarize the functions of money 30) People hold money even during inflationary episodes when other assets prove to be better stores of value. This can be explained by the fact that money is all of the following except . A) perfectly liquid B) a unique good for which there are no substitutes C) the only thing accepted in economic exchange D) backed by gold Answer: A Diff: 3 Type: MC Skill: Applied Objective: 3.2 List and summarize the functions of money 31) 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 half Answer: D Diff: 1 Type: MC Skill: Recall Objective: 3.2 List and summarize the functions of money 32) A fall in the level of prices . A) does not affect the value of money B) has an uncertain effect on the value of money C) increases the value of money D) reduces the value of money Answer: C Diff: 1 Type: MC Skill: Recall Objective: 3.2 List and summarize the functions of money