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1、Economics of Money, Banking, and Financial Markets, 11e, Global Edition (Mishkin)Chapter 3 What Is Money?3.1 Meaning of Money1) To an economist, is anything that is generally accepted in payment for goods andservices or in the repayment of debt.A) wealthB) incomeC) moneyD) creditAnswer: CAACSB: Appl
2、ication of Knowledge2) Money isA) 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.A
3、nswer: AAACSB: Application of Knowledge3) Currency includesA) paper money and coins.B) paper money, coins, and checks.C) paper money and checks.D) paper money, coins, checks, and savings deposits.Answer: AAACSB: Analytical Thinking4) Even economists have no single, precise definition of money becaus
4、eA) money supply statistics are a state secret.B) the Federal Reserve 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: CAACS
5、B: Reflective Thinking5) The total collection of pieces of property that serve to store value is a personsA) wealth.B) income.C) money.D) credit.Answer: AAACSB: Application of Knowledge6) A persons house is part of herA) money.B) income.C) liabilities.D) wealth.Answer: DAACSB: Analytical Thinking7)
6、is used to make purchases while is the total collection of pieces ofproperty that serve to store value.A) Money; incomeB) Wealth; incomeC) Income; moneyD) Money; wealthAnswer: DAACSB: Reflective Thinking8) is a flow of earnings per unit of time.A) IncomeB) MoneyC) WealthD) CurrencyAnswer: AAACSB: Ap
7、plication of Knowledge9) An individuals annual salary is herA) money.B) income.C) wealth.D) liabilities.Answer: BAACSB: Analytical Thinking10) When we say that money is a stock variable, we mean thatA) the quantity of money is measured at a given point in time.B) we must attach a time period to the
8、measure.C) it is sold in the equity market.D) money never loses purchasing power.Answer: AAACSB: Reflective Thinking11) The difference between money and income is thatA) 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
9、 stocks.D) there is no difference money and income are both flows.Answer: BAACSB: Reflective Thinking12) 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: CAACSB:
10、Reflective Thinking13) 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 ea
11、rn more money.Answer: CAACSB: Analytical Thinking3.2 Functions of Money1) Of moneys three functions, the one that distinguishes money from other assets is its function as aA) store of value.B) unit of account.C) standard of deferred payment.D) medium of exchange.Answer: DAACSB: Reflective Thinking2)
12、 If peanuts serve as a medium of exchange, a unit of account, and a store of value, then peanuts areA) bank deposits.B) reserves.C) money.D) loanable funds.Answer: CAACSB: Reflective Thinking3) are the time and resources spent trying to exchange goods and services.A) Bargaining costsB) Transaction c
13、ostsC) Contracting costsD) Barter costsAnswer: BAACSB: Application of Knowledge4) Compared to an economy that uses a medium of exchange, in a barter economyA) transaction costs are higher.B) transaction costs are lower.C) liquidity costs are higher.D) liquidity costs are lower.Answer: AAACSB: Reflec
14、tive Thinking5) When compared to exchange systems that rely on money, disadvantages of the barter system includeA) 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 special
15、ization and the division of labor.Answer: AAACSB: Reflective Thinking6) The conversion of a barter economy to one that uses moneyA) 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
16、transactions costs.D) does not increase economic efficiency.Answer: CAACSB: Reflective Thinking7) 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 increas
17、es 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: CAACSB: Reflective Thinking8) When economists say that money promotes , they mean that money encou
18、ragesspecialization and the division of labor.A) bargainingB) contractingC) efficiencyD) greedAnswer: CAACSB: Reflective Thinking9) Money transaction costs, allowing people to specialize in what they do best.A) reducesB) increasesC) enhancesD) eliminatesAnswer: AAACSB: Application of Knowledge10) Fo
19、r a commodity to function effectively as money it must beA) 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: AAACSB: Reflective Thinking11) All of the following a
20、re 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: AAACSB: Analytical Thinking12) Whatever a society uses as money, the distinguishing characteristic is that it mus
21、tA) 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: BAACSB: Reflective Thinking13) All but the most primitive societies use money as a medium of exchange, implying thatA) t
22、he 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: AAACSB: Reflective Thinking14) Kevin purchasing concert tickets with his debit card is an example of the functionof money.A)
23、medium of exchangeB) unit of accountC) store of valueD) specializationAnswer: AAACSB: Analytical Thinking15) When money prices are used to facilitate comparisons of value, money is said to function as aA) unit of account.B) medium of exchange.C) store of value.D) payments-system ruler.Answer: AAACSB
24、: Analytical Thinking16) When there are many goods is that in a barter systemA) 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: BAACSB: Reflective Thinking17) In a barter econ
25、omy the number of prices in an economy with N goods isA) N(N - 1)/2.B) N(N/2).C) 2N.D) N(N/2) - 1.Answer: AAACSB: Analytical Thinking18) 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 e
26、conomy, then one needs to know prices in order to exchange one good for another.A) 20B) 25C) 30D) 45Answer: DAACSB: Analytical Thinking19) If there are four goods in a barter economy, then one needs to know prices in orderto exchange one good for another.A) 8B) 6C) 5D) 4Answer: BAACSB: Analytical Th
27、inking20) Because it is a unit of account, moneyA) increases transaction costs.B) reduces the number of prices that need to be calculated.C) does not earn interest.D) discourages specialization.Answer: BAACSB: Reflective Thinking21) Dennis notices that jackets are on sale for $99. In this case money
28、 is functioning as aA) medium of exchange.B) unit of account.C) store of value.D) payments-system ruler.Answer: BAACSB: Analytical Thinking22) As a store of value, moneyA) does not earn interest.B) cannot be a durable asset.C) must be currency.D) is a way of saving for future purchases.Answer: DAACS
29、B: Analytical Thinking23) 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 aA) medium of exchange.B) unit of account.C) store of value.D) unit of specialization.Answer: CAACSB: Analytical Thinking24) is
30、the relative ease and speed with which an asset can be converted into a mediumof exchange.A) EfficiencyB) LiquidityC) DeflationD) SpecializationAnswer: BAACSB: Application of Knowledge25) Increasing transactions costs of selling an asset make the assetA) more valuable.B) more liquid.C) less liquid.D
31、) more moneylike.Answer: CAACSB: Reflective Thinking26) Since it does not have to be converted into anything else to make purchases, is themost liquid asset.A) moneyB) stockC) artworkD) goldAnswer: AAACSB: Reflective Thinking27) Of the following assets, the least liquid isA) stocks.B) travelers chec
32、ks.C) checking deposits.D) a house.Answer: DAACSB: Analytical Thinking28) Ranking assets from most liquid to least liquid, the correct order isA) savings bonds; house; currency.B) currency; savings bonds; house.C) currency; house; savings bonds.D) house; savings bonds; currency.Answer: BAACSB: Analy
33、tical Thinking29) 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 isA) extremely liquid.B) a unique good for which there are no substitutes.C) the only thing accepted in economic exchange.D) backed
34、 by gold.Answer: AAACSB: Reflective Thinking30) If the price level doubles, the value of moneyA) 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: DAACSB: Analytical Thinking31) A fall in the level of pricesA)
35、 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: CAACSB: Analytical Thinking32) A hyperinflation isA) a period of extreme inflation generally greater than 50% per month.B) a period of anxiety ca
36、used by rising prices.C) an increase in output caused by higher prices.D) impossible today because of tighter regulations.Answer: AAACSB: Analytical Thinking33) During hyperinflationsA) the value of money rises rapidly.B) money no longer functions as a good store of value and people may resort to ba
37、rter transactions on a much larger scale.C) middle-class savers benefit as prices rise.D) moneys value remains fixed to the price level; that is, if prices double so does the value of money.Answer: BAACSB: Reflective Thinking34) Because inflation in Germany after World War I sometimes exceeded 1,000
38、 % per month, one can conclude that the German economy suffered fromA) deflation.B) disinflation.C) hyperinflation.D) superdeflation.Answer: CAACSB: Application of Knowledge35) If merchants in the country Zed choose to close their doors, preferring to be stuck with rotting merchandise rather than wo
39、rthless currency, then one can conclude that Zed is experiencing aA) superdeflation.B) hyperdeflation.C) disinflation.D) hyperinflation.Answer: DAACSB: Reflective Thinking36) Explain how cigarettes could be called money in prisoner-of-war camps of World War II. Answer: The cigarettes performed the t
40、hree functions of money. They served as the medium of exchange because individuals did exchange items for cigarettes. They served as a unit of account because prices were quoted in terms of the number of cigarettes required for the exchange. They served as a store of value because an individual woul
41、d be willing to save their cigarettes even if they did not smoke because they believed that they could exchange the cigarettes for something that they did want at some time in the future.AACSB: Reflective Thinking3.3 Evolution of the Payments System1) The payments system isA) the method of conductin
42、g transactions in the economy.B) used by union officials to set salary caps.C) an illegal method of rewarding contracts.D) used by your employer to determine salary increases.Answer: AAACSB: Reflective Thinking2) As the payments system evolves from barter to a monetary system,A) commodity money is l
43、ikely to precede the use of paper currency.B) transaction costs increase.C) the number of prices that need to be calculated increase rather dramatically.D) specialization decreases.Answer: AAACSB: Reflective Thinking3) money could be used for some other purpose other than as a medium of exchange,for
44、 example, gold coins could be melted down and turned into gold jewelry.A) CommodityB) FiatC) PaperD) ElectronicAnswer: AAACSB: Analytical Thinking4) A disadvantage of made from precious metals is that it is very heavy and hard totransport from one place to another.A) commodity moneyB) fiat moneyC) e
45、lectronic moneyD) paper moneyAnswer: AAACSB: Reflective Thinking5) Paper currency that has been declared legal tender but is not convertible into coins or precious metals is called money.A) commodityB) fiatC) electronicD) funnyAnswer: BAACSB: Analytical Thinking6) When paper currency is decreed by g
46、overnments as legal tender, legally it must beA) paper currency backed by gold.B) a precious metal such as gold or silver.C) accepted as payment for debts.D) convertible into an electronic payment.Answer: CAACSB: Reflective Thinking7) The evolution of the payments system from barter to precious meta
47、ls, then to fiat money, then to checks can best be understood as a consequence of the fact thatA) paper is more costly to produce than precious metals.B) precious metals were not generally acceptable.C) precious metals were difficult to carry and transport.D) paper money is less accepted than checks.Answer: CAACSB: Reflective Thinking8) Compared to checks, paper curr