63) If Maria buys a latte at Starbucks, her money serves as a
A) unit of accounting.
B) standard of deferred payment.
C) store of value.
D) medium of exchange.
64) When Jack and Jill use dollars to compare the market values of their cellphones, money is
acting as a
A) unit of accounting.
B) standard of deferred payment.
C) store of value.
D) medium of exchange.
65) When Howie puts money under his mattress for purchases later on, money is acting as a
A) unit of accounting.
B) standard of deferred payment.
C) store of value.
D) medium of exchange.
66) A monetary system is preferable over the barter system because of the problems associated
with
A) cash leakages.
B) the double coincidence of wants.
C) the law of diminishing marginal utility.
D) the law of increasing relative costs.
67) A monetary system is preferable over the barter system because it
A) reduces transaction costs.
B) is easier to track by the government.
C) limits cash leakages.
D) is determined by the Congress.
68) The direct exchange of one good or service for another is called
A) a token exchange.
B) a standard of deferred payment.
C) the exchange of purchasing power.
D) barter.
69) For barter to occur there has to be
A) a commodity to serve as a medium of exchange.
B) a formal market where prices are quoted.
C) a double coincidence of wants.
D) a single coincidence of wants.
70) A $200 price tag on a handbag in a department store is an example of money serving as a
A) medium of exchange.
B) unit of accounting.
C) store of value.
D) standard of deferred value.
71) Giving the store clerk a $10 bill for a portable power bank priced at $10 is an example of
money serving as a
A) medium of exchange.
B) unit of accounting.
C) store of value.
D) standard of deferred value.
72) If a friend of yours keeps cash hidden under the mattress, he is using money as a
A) medium of exchange.
B) unit of accounting.
C) store of value.
D) standard of deferred value.
73) You go to work today, but will get your paycheck at the end of the month. This is an
example of money serving as a
A) medium of exchange.
B) unit of accounting.
C) store of value.
D) standard of deferred payment.
74) Which of the following is NOT a function of money?
A) medium of stored value
B) standard of deferred payment
C) unit of accounting
D) store of value
75) The price tag on an Under Armour shirt illustrates how money performs the function of a
A) medium of exchange.
B) unit of accounting.
C) store of value.
D) standard of deferred payment.
76) Perishable goods such as tomatoes and eggs are never used as money, because they cannot
function as a
A) medium of exchange.
B) unit of accounting.
C) store of value.
D) standard of deferred payment.
77) Suppose you are offered a concert ticket in exchange for four hours of your work in your
friend’s garden. This is an example of
A) money as a medium of exchange.
B) money as a store of value.
C) barter.
D) money as a standard of deferred payment.
78) Suppose you pay $450.00 for a new tablet device. This is an example of
A) money as a medium of exchange.
B) money as a store of value.
C) barter.
D) money as a standard of deferred payment.
79) Given the list of assets below, which is the most liquid?
A) $500 worth of Google common stock
B) $500 worth of General Motors bonds
C) A $500 travelers check
D) A bitcoin that is accepted by some stores
80) The degree to which an asset can be acquired or disposed of without much loss of nominal
value or transaction costs is known as
A) fiat money.
B) liquidity.
C) fiducia.
D) credit.
81) An individual who desires the most liquid asset possible will hold
A) currency.
B) a savings account.
C) checkable deposits at a bank.
D) U.S. government bonds.
82) The ability to quickly convert an asset into cash is
A) disintermediation.
B) the standard of deferred payment.
C) financial intermediation.
D) liquidity.
83) When an asset is described as being highly liquid, which one of the following characteristics
does it possess?
A) It earns a high rate of interest, so its purchasing power is maintained when prices rise.
B) It is easily and readily converted into money without any loss in purchasing power.
C) The face value of the asset is somewhat less than its value when converted into currency.
D) The asset holds its value over time.
84) Liquidity refers to
A) the ease with which an asset can be acquired or disposed of without incurring high transaction
costs.
B) the expected return from an asset.
C) the amount of indebtedness held against an asset.
D) the net worth of the individual in question.
85) Which of the following is the most liquid asset?
A) small denomination time deposits
B) currency
C) short-term treasury bonds
D) shares of stock
86) A highly liquid asset
A) has high transaction costs associated with its sale.
B) must be held for a substantial period of time.
C) generally has a very limited market for its resale.
D) can be disposed of easily without loss of value.
87) The cost of holding money is best described as
A) the cost of printing money.
B) the goods and services that money can buy
C) the yield which is paid to money holders by the U.S. government.
D) the yield that could have been earned had the asset been held in another form.
88) A government bond is NOT as liquid as cash because the bond
A) cannot be converted to spendable dollars either until it matures or is sold to another investor.
B) can be exchanged only for the goods or services produced by the company that issued the
bond.
C) must be exchanged for a stock certificate before it can be converted to spendable funds.
D) always has a face value less than its actual value.
89) If an asset can be disposed of without much risk of losing its nominal value, it is said to be
A) fiduciary.
B) liquid.
C) worthless.
D) valuable.
90) The opportunity cost of holding money is measured by
A) the return from company stock shares that the money can buy.
B) the price of government bonds.
C) the interest yield that could have been earned by holding some other asset.
D) the liquidity of interest-bearing assets.
91) The most liquid asset is
A) gold.
B) a vehicle.
C) money.
D) stocks of a highly profitable company.
92) The reason we are willing to accept money with no intrinsic value is that
A) paper currency may be exchanged for full-bodied money.
B) the money supply is backed by an equal amount of gold and silver.
C) we have a fiduciary monetary system in which currency is widely acceptable.
D) the value of the money varies directly with changes in the price level.
93) In a fiduciary monetary system, the value of the money issued by a government is based on
A) the gold held in that government’s vaults.
B) public confidence in that currency’s acceptability and predictability of value.
C) the ability to convert it to some valuable commodity.
D) its being made out of some material with a market value equal to a bill’s face value.
94) Checkable and debitable accounts in commercial banks and other financial institutions are
classified as money because
A) they are not liabilities of the banks.
B) they sometimes earn an interest income for the depositor.
C) they are generally acceptable in the payment of debt.
D) banks hold currency in their vaults equal to the value of demand deposits.
95) A fiduciary monetary standard exists when the value of a currency
A) cannot be determined.
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.
96) Which of the following is a correct reason for stating that the United States has a fiduciary
monetary system?
I. The U.S. currency is convertible to a fixed amount of silver or gold.
II. The U.S. currency has a predictable value.
A) I only
B) II only
C) Both I and II
D) Neither I nor II
97) A system in which the value of currency issued by the government is based entirely on
public faith that the currency will be acceptable in trade is
A) a fiduciary system.
B) a private property system.
C) a Gresham system.
D) a socialistic system.
98) A checkable account
A) is a very illiquid asset.
B) allows its holder to make transactions by writing checks.
C) must be traded on the stock exchange.
D) cannot serve as a store of value.
99) Which of the following is a checkable and debitable account?
A) a brokerage account with your stockbroker
B) a savings account
C) a checking account
D) All of the above are checkable and debitable accounts.
100) A fiduciary monetary system is
A) fully backed by gold.
B) dependent on barter for exchanges of goods and services.
C) one which cannot have any inflation.
D) dependent on the public’s faith to accept the currency.
101) Transactions deposits include
A) credit cards.
B) certificates of deposit.
C) lines of credit.
D) checkable and debitable accounts.
102) Money in a fiduciary monetary system is backed by
A) a commodity such as gold or silver.
B) the public’s confidence that the assets will continue to serve as money.
C) the intrinsic value of the materials used to make the assets that serve as money.
D) assets owned by the government that are intrinsically valuable.
103) The purchasing power of money
A) is determined by law.
B) varies inversely with the price level.
C) depends on the value of gold.
D) varies inversely with the interest rate.
104) The purchasing power of the dollar
A) varies directly with the price of gold.
B) varies directly with interest rates.
C) varies directly with the price level.
D) varies inversely with the price level.
105) When the price level goes up, the purchasing power of the dollar
A) also increases.
B) falls.
C) remains constant.
D) varies directly with the interest rate.
106) Money is still useful during times of inflation because
A) it still retains the characteristic of predictability of value.
B) more money can be made so people can still purchase the goods and services they want.
C) it is not a liquid asset.
D) its opportunity cost falls as inflation rises.
107) An asset is liquid if it
A) is of intrinsic value.
B) can be exchanged for other goods and services.
C) is a store of value.
D) can be obtained or disposed of without losing much of its nominal value.
108) Which of the following is the most liquid?
A) certificate of deposit
B) cash
C) checkable and debitable account
D) stocks and bonds
109) The liquidity of money refers to
A) the amount of gold it is backed by.
B) the standard of deferred payments and how quickly those payments can be made.
C) how quickly it can be disposed of without high transaction costs.
D) asymmetric information.
110) The opportunity cost of holding money
A) is measured by the alternative interest yield obtainable by holding some other asset.
B) is based on the fiduciary monetary system.
C) refers to the amount of paper currency held by the Fed.
D) equals the amount paid for renting a house instead of buying it.
111) The cost of holding money is
A) transactions accounts.
B) the opportunity cost.
C) the liquidity approach.
D) capital controls.
112) The opportunity cost of holding a dollar is
A) a dollar.
B) the price of a government bond.
C) less than a dollar.
D) the interest yield that could have been earned by holding some other asset.
113) An increase in the interest rate would induce people to
A) sell shares of stock and buy bonds, but would have no effect on their desire to hold money.
B) get rid of all their money and buy stocks with it.
C) sell their least liquid assets and hold more money in case interest rates go up again.
D) hold a smaller fraction of their wealth in the form of money.
114) The degree to which an asset can be acquired or disposed of without much danger of any
intervening loss in nominal value is known as
A) transaction deposits.
B) a time deposit.
C) liquidity.
D) the opportunity cost of holding cash.
115) An asset that can be easily disposed of without high transactions costs and with relative
certainty as to its value is
A) profitable.
B) liquid.
C) fiduciary.
D) M2.
116) In a fiduciary monetary system, money is backed by
A) the public’s confidence about the general acceptability of the money.
B) the intrinsic value of the materials used to make the assets.
C) the assets of the institutions that issue the various assets used as money.
D) gold.
117) A system in which money is issued by the government and its value is based uniquely on
the public’s faith that the currency represents command over goods and services is the
A) transactions approach.
B) gold standard.
C) fiduciary monetary system.
D) barter system.
118) The U.S. fiduciary monetary system
A) is the one agency responsible for providing coins and paper currency.
B) is one where money is not convertible to a valuable commodity such as gold.
C) puts capital controls in place.
D) controls the private banking system.
119) The main difference between paper money and coins as forms of money is that
A) the metallic content of coins makes them more acceptable as money.
B) paper money issued by the Federal Reserve Board is backed by gold while coins are not.
C) paper money serves as a unit of account while coins do not.
D) the metal in coins is more durable than paper.
120) 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 can always earn interest from holding money.
C) once an asset is defined as money it is always money.
D) people expect money will come back at a later date.
121) A fiduciary monetary system ultimately rests on
A) the power of the government.
B) the public’s confidence in the system.
C) the value of the assets backing up the system.
D) the difficulty of counterfeiting the currency.
122) The value of a dollar
A) is determined only by the U.S. government.
B) varies inversely with the price level.
C) various directly with the price level.
D) varies directly with the purchasing power of other major currencies.
123) Even when people know the purchasing power of the currency is declining, they continue to
use the currency because
A) they have no other choice.
B) the return of holding currency is always higher than the returns of all other assets.
C) its value is still predictable.
D) it still has some intrinsic value.
124) Which of the following would be considered the least liquid asset?
A) currency
B) checkable deposits
C) travelers checks
D) a house
125) Which of the following assets is the most liquid in the United States?
A) U.S. Treasury bonds
B) U.S. currency
C) Google stock shares
D) an antique car