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1 | |
Money has 3 main functions, they are, _________, ____________ and _______________ |
| | A) | IOU, inflation hedge, store of value |
| | B) | Medium of exchange, inflation hedge, store of value |
| | C) | Medium of exchange, unit of account, IOU |
| | D) | Medium of exchange, unit of account, store of value |
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2 | |
The primary function of a bank is to |
| | A) | Control the money supply |
| | B) | Provide notes and coins for trade |
| | C) | Make a profit |
| | D) | Provide a cheque clearing system |
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3 | |
Banks create money by |
| | A) | printing it |
| | B) | issuing debit cards |
| | C) | accepting cheques |
| | D) | lending out part of their deposits |
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4 | |
The size of the money multiplier is determined by the marginal propensity to consume |
| | A) | TRUE |
| | B) | FALSE |
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5 | |
The money supply is ___________ |
| | A) | the Bank of England Issue Department |
| | B) | money + bank cards +credit cards |
| | C) | Cheques + money + bank cards + credit cards |
| | D) | Currency in circulation plus bank deposits |
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6 | |
If banks and the private sector decide to hold less cash the money multiplier will be __________ |
| | A) | unchanged |
| | B) | larger |
| | C) | smaller |
| | D) | unstable |
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7 | |
Three variables affect the demand for money; they are ___________, ___________ and ____________ |
| | A) | bank opening hours, the proportion of weekly paid employees, interest rates |
| | B) | the price level, interest rates, real income |
| | C) | the time of year, bank opening hours, the price level |
| | D) | the proportion of weekly paid employees, the time of year, real income |
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8 | |
If I keep some money available in case I see a bargain, this is an example of _____________ |
| | A) | asset demand for money |
| | B) | transactions demand for money |
| | C) | token demand for money |
| | D) | precautionary demand for money |
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9 | |
An increase in the price level will likely increase the demand for nominal money |
| | A) | TRUE |
| | B) | FALSE |
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10 | |
When interest rate rise, other things equal, we can expect the quantity of real money holdings to _____________ |
| | A) | fall |
| | B) | increase |
| | C) | not change |
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11 | |
When real income increases, other things equal, we can expect the demand for real money holdings to ______________ |
| | A) | fall |
| | B) | not change |
| | C) | increase |
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12 | |
M4 is a _____________ measure of money and includes deposits at both _______ and ____________ |
| | A) | narrow, banks, building societies |
| | B) | wide, banks, insurance companies |
| | C) | narrow, banks, insurance companies |
| | D) | wide, banks, building societies |
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13 | |
The monetary base is ___________ and ________________ |
| | A) | bank deposits, building society deposits |
| | B) | currency in circulation, banks' cash reserves |
| | C) | retail sight deposits, building society deposits |
| | D) | retail deposits, wholesale deposits |
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14 | |
If the central bank buys financial securities in the open market to increase the monetary base, this is an example of ____________ |
| | A) | lender of last resort |
| | B) | financial intermediation |
| | C) | open market operations |
| | D) | financial regulation |
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15 | |
Equilibrium in the money market will change if there is |
| | A) | a change in the real money supply |
| | B) | a change in real income |
| | C) | a change in competition in the banking industry |
| | D) | any of the above |
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16 | |
The money supply is controlled by using open market operations to determine the money multiplier and by using reserve requirements and the discount rate to determine the monetary base |
| | A) | TRUE |
| | B) | FALSE |
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17 | |
Central banks prefer to fix the __________and accept the resulting _____________ |
| | A) | demand for money, interest rate |
| | B) | interest rate, equilibrium money supply |
| | C) | demand for money, equilibrium money supply |
| | D) | interest rate, demand for money |
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18 | |
One of the transmission mechanisms of monetary policy is through consumer demand. When interest rates ___________ household wealth ___________ and consumption _________ |
| | A) | rise, increases, increases |
| | B) | rise, falls, increases |
| | C) | rise, increases, falls |
| | D) | rise, falls, falls |
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19 | |
A reduction in interest rates, causes an increase in the monetary base that results in an __________ in the availability of consumer credit and a _______________ in the cost of consumer credit |
| | A) | reduction, increase |
| | B) | reduction, reduction |
| | C) | increase, reduction |
| | D) | increase, increase |
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20 | |
A fall in investment demand can result from |
| | A) | higher interest rates |
| | B) | lower expected future profits |
| | C) | more expensive capital goods |
| | D) | all of the above |
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