61) Which of the following are included in the M1 deinition of money?
A) currency and checkable deposits
B) currency and savings deposits
C) traveler’s checks and money market mutual funds
D) currency and small time deposits
E) traveler’s checks and savings deposits
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
62) M1 is deined as a measure of money including, in part,
A) checkable deposits and currency.
B) time deposits and currency.
C) currency and savings deposits.
D) time deposits and money market fund deposits.
E) the lines of credit on credit cards and currency.
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
63) Which of the following items is included in the M1 money supply?
A) $10 bills in the Bank of America
B) a $5,000 student loan granted to a U.S. citizen
C) coins in a Pepsi vending machine, waiting to be used as change
D) a $5,000 line of credit on a newly graduated student’s credit card
E) $1,500 in a student’s saving account
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
21
64) Which of the following is NOT a component of M1?
A) demand deposits
B) traveler’s checks
C) savings deposits
D) currency
E) Both answers C and D are correct.
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
65) If Rob deposits $300 in currency into his savings account at Bank of America,
A) M1 decreases.
B) M1 does not change.
C) M2 increases.
D) M2 decreases.
E) M1 and M2 both increase.
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
66) Suppose you use your debit card to buy soda from a soda machine. Which of the
following is true regarding the transaction?
A) The debit card is not money; it’s only an instruction to make a loan.
B) The debit card is money; your use relects the exchange of a good.
C) The debit card is not money; its use is only a tool to cause money to move from your
account.
D) Your use makes the debit card money, as funds are transferred between your account
and the machine owner.
E) Using the debit card is like using a check and is, therefore, money.
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
22
67) When Maria deposits $100 in currency in her checkable deposit at Bank of America,
the immediate efect is that the quantity of M1
A) decreases.
B) does not change.
C) increases.
D) changes, but the direction of the change depends on whether the deposit was accepted
by a thrift institution or a commercial bank.
E) changes only if Bank of America does not have excess reserves.
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
68) When Maria deposits $100 in currency in her checkable deposit at Bank of America,
the immediate efect is that the quantity of M1 ________ because ________.
A) decreases; checkable deposits are included in M2 but are not included in M1
B) does not change; both currency and checkable deposits are included in M1
C) increases; both currency and checkable deposits are included in M1
D) changes, but the direction of the change cannot be determined; the direction of the
change depends on what Bank of America does with the deposit
E) changes only if Bank of America has excess reserves; if the bank does not have excess
reserves, the overall efect to M1 is too small to notice
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: New
AACSB: Relective thinking
69) When people make deposits of currency into a bank, the quantity of M1
A) immediately decreases by the amount of the deposit.
B) immediately increases by the amount of the deposit.
C) does not immediately change.
D) immediately changes but whether it increases or decreases depends on whether the
bank had excess reserves or did not have excess reserves.
E) changes only if the deposit is an open market operation.
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
23
70) If you deposit $1,000 in cash in your checkable deposit at your bank, the quantity of M1
immediately
A) increases by $1,000.
B) decreases by $1,000.
C) increases by $2,000.
D) does not change in size.
E) changes, but more information about the required reserve ratio is necessary to
determine the amount of the change.
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
71) In December 2009, currency was $400 billion, traveler’s checks were $5 billion;
checkable deposits owned by individuals and businesses were $600 billion, saving deposits
were $2,00 billion, time deposits were $1,500 billion; and money market funds were $1,200
billion. What was the M1 in December 2009?
A) M1 = $405 billion
B) M1 = $1,005 billion
C) M1 = $3,005 billion
D) M1 = $3500 billion
E) M1 = $3505 billion
Skill: Level 3: Using models
Section: Checkpoint 11.1
Status: Old
AACSB: Analytical thinking
72) If Joe withdraws a $100 bill from his checking account and Jack deposits another $100
bill in his savings account, by how will M1 and M2 change?
A) M1 will decrease, but M2 will remain the same.
B) M1 will increase, and M2 will increase.
C) M2 will decrease by $100.
D) Both M1 and M2 will remain the same.
E) M1 will remain the same, and M2 will increase.
Skill: Level 3: Using models
Section: Checkpoint 11.1
Status: Old
AACSB: Analytical thinking
24
73) Susan just sold her text books for $200 cash and deposited the cash she received in her
checking account. This transaction has
A) increased the quantity of M1.
B) decreased the quantity of M1.
C) increased the quantity of M2.
D) decreased the quantity of M2.
E) not changed either M1 or M2.
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
74) M2 consists of
A) M1 plus traveler’s checks.
B) M1 plus saving deposits, small time deposits, and money market funds.
C) M1 plus checkable deposits.
D) M1 plus currency at the banks.
E) M1 plus Federal Reserve notes.
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
75) Which of the following are included in the M2 deinition of money?
A) currency outside of banks and checkable deposits
B) currency outside of banks and credit lines on credit cards
C) time deposits and the value of prime grade bonds
D) currency both inside and outside of banks
E) currency inside of banks and banks’ reserves
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
25
76) If we look at the components of M2, we ind that
A) money market funds are the largest component.
B) savings deposits are the largest component.
C) currency is the largest component.
D) banks’ reserves are the largest component.
E) loans are the largest component.
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
77) In December 2009, currency outside of banks was $400 billion, traveler’s checks were
$5 billion; checkable deposits owned by individuals and businesses were $600 billion,
saving deposits were $2,000 billion, time deposits were $1,500 billion; and money market
funds were $1,200 billion. What was the M2 in December 2009?
A) M2 = $5,705 billion
B) M2 = $3705 billion
C) M2 = $1,005 billion
D) M2 = $2,505 billion
E) M2 = $5,700 billion
Skill: Level 3: Using models
Section: Checkpoint 11.1
Status: Old
AACSB: Analytical thinking
78) If currency outside of banks is $800 billion; traveler’s checks are $10 billion; checkable
deposits owned by individuals and businesses are $700 billion; savings deposits are $4,000
billion; small time deposits are $1,000 billion; and money market funds and other deposits
are $800 billion, then M2 equals ________ billion.
A) $7,310
B) $5,800
C) $2,510
D) $1,510
E) $710
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
79) The above table has information about the hypothetical economy of Robotica. Based on
26
the data, the size of M1 is
A) $610 billion.
B) $1,510 billion.
C) $600 billion.
D) $1,110 billion.
E) $2,600 billion.
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Analytical thinking
80) The above table has information about the hypothetical economy of Robotica. Based on
the data, the size of M2 is
A) $2,600 billion.
B) $2,610 billion.
C) $610 billion.
D) $600 billion.
E) $1,710 billion.
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Analytical thinking
81) Physical currency is ________ popular than e-cash, ________.
A) less; and both are portable and recognizable
B) more; and both are portable and recognizable
C) more; but only physical currency is portable and recognizable
D) more; and both are portable, untraceable and anonymous
E) less; but both are portable, untraceable and anonymous
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
82) ________ like a check and ________ considered money.
A) Debit cards work; are not
B) Debit cards work; are
C) E-checks work; are
D) E-cash works; is not
E) E-cash works; is
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
83) Which of the following best deines what money is now and what it has been in the
past?
A) currency
27
B) currency plus checking deposits
C) currency plus credit cards
D) anything accepted as a means of payment
E) anything used as a store of value
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
84) Which of the following is NOT a function of money?
i. unit of account
ii. store of value
iii. unit of debt
A) i only
B) ii only
C) iii only
D) both ii and iii
E) both i and ii
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
28
85) Barter is
A) the exchange of goods and services for money.
B) the pricing of goods and services with one agreed upon standard.
C) the exchange of goods and services directly for other goods and services.
D) a generally accepted means of payment.
E) storing money for use at a later date.
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
86) If someone buries money in a tin can beneath a tree, the money is functioning as a
A) medium of exchange.
B) unit of account.
C) means of payment.
D) store of value.
E) bartering tool.
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
87) Credit cards, debit cards, and e-checks are
A) always counted as money.
B) not money.
C) sometimes counted as money, depending on how they are used.
D) sometimes counted as money, depending on what is purchased.
E) sometimes counted as money, depending on what measure of money is being used.
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
29
88) Which of the following counts as part of M1?
A) $5,000 worth of gold
B) $5,000 worth of government bonds
C) $5,000 in a checking account
D) $5,000 credit line on a credit card
E) $5,000 of real estate
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
89) M2 equals
A) M1 and is just another name for currency outside of banks.
B) M1 plus savings deposits, small time deposits, and money market fund deposits.
C) M1 minus traveler’s checks because they are not really money.
D) currency plus savings deposits, all time deposits, and money market funds and other
deposits.
E) M1 plus savings deposits and small time deposits minus money market fund deposits.
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
90) If currency outside of banks is $800 billion; traveler’s checks are $10 billion; checkable
deposits owned by individuals and businesses are $700 billion; savings deposits are $4,000
billion; small time deposits are $1,000 billion; and money market funds and other deposits
are $800 billion, then M1 equals ________ billion.
A) $7,310
B) $5,800
C) $2,510
D) $1,510
E) $710
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
30