Chap015 - Chapter 15 - The Demand for Money Chapter 15 The...

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Chapter 15 - The Demand for Money Chapter 15 The Demand for Money Multiple Choice Questions 1. Any item can function as a medium of exchange a. As long as the item is easily available B . As long as the item is generally accepted in trade for most goods and services and for repayment of debt c. But only if it is backed by some precious metal d. But only if the item has been issued by the Federal Reserve for use as a medium of exchange e. But only if the Treasury Department has designated that item as a medium of exchange Difficulty: Easy 2. Which of the following functions does money NOT serve? a. As a unit of account b. As a standard of deferred payment C . As a protection against inflation d. As a store of value e. As a medium of exchange Difficulty: Easy 3. The monetary aggregate M2 is defined as a. Currency outstanding plus all demand deposits at commercial banks B . M1 plus close substitutes such as saving deposits, small time deposits, and money market mutual funds, which are easily converted into M1 c. M1 plus all assets that can be changed into M1 within 6 months d. M1 plus credit and debit card balances e. All assets which are highly liquid but which themselves cannot be used for day-to-day transactions Difficulty: Easy 15-1
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Chapter 15 - The Demand for Money 4. Money market deposit accounts (MMDAs) a. Are included in M1 since they have check writing privileges b. Are included in M1 since they are bank deposits and federally insured C . Are not included in M1 since they put a limit on the number of checks that can be written d. Are not included in M1 since they are not insured by the FDIC e. Are not included in M1 since they are held at brokerage houses Difficulty: Easy 5. Deposits in passbook savings accounts at an S&L are a. Not counted as money since they are not held at commercial banks b. Included in M1 but not in M2 c. Included in M1 and in M2 D . Not included in M1 but included in M2 e. Not included in M1 or M2, since they are not demand deposits Difficulty: Easy 6. The introduction of NOW-accounts (interest-earning checking accounts. In 1980 led to a. Transfers from passbook saving deposits into NOW-accounts b. An increase in M1, while leaving M2 unchanged c. A decrease in the income velocity of M1 D . All of the above e. None of the above Difficulty: Easy 7. Which of the following affected the demand for M2? a. The introduction of interest-earning checking accounts b. The introduction of ATMs that allow instant withdrawals from saving accounts c. Increased use of credit cards D . An increase in the yield of government bonds e. All of the above Difficulty: Medium 15-2
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Chapter 15 - The Demand for Money 8. People who expect a very high inflation rate may A . Prefer to hold goods instead of money b. Decrease the speed with which they spend their money, thereby decreasing velocity c. Shift their money from time deposits to demand deposits d. Increase their demand for real money balances in order to be able to purchase higher-priced goods later
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This note was uploaded on 12/05/2011 for the course ECON 201 taught by Professor Dr.matin during the Spring '09 term at Charleston.

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Chap015 - Chapter 15 - The Demand for Money Chapter 15 The...

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