Chapter 16 Money and the Banking System

| November 9, 2018

41)
Financial monetary assets which often cannot be readily used in commercial
exchanges are included in
A)
M1.
B)
M2.
C)
credit cards.
D)
prepaid accounts.

42)
Small time deposits of $100,000 or less are classified as
A)
part of M1.
B)
part of M2.
C)
FDIC insured.
D)
highly liquid.

43)
Before they can be used in regular exchanges, the assets that make up M2 must
often
A)
have their interest computed.
B)
be converted to M1 assets.
C)
be paid off if they are credit cards.
D)
have reached term if they are insurance policies.

44)
An example of money is
A)
a dollar bill.
B)
a checking account balance.
C)
a traveler’s check.
D)
all of the above

45)
According to the U.S. Secret Service, approximately $2.6 billion of U.S. paper
currency in circulation is counterfeit.
Undetected counterfeit U.S. currency being held by the public both at
home and abroad will impact the level of
A)
the reserve ratio.
B)
the money multiplier.
C)
M1.
D)
commodity money.

Recall
the Application about the Brazilian city of Silva Jardim that has issued its
own local currency to answer the following question(s). In order to entice
local residents to spend their money on stores in town, the small city of Silva
Jardim in Brazil, hatched a plan for its own currency. The currency is called the capivari
and features a picture of a local rodent on the bills. The capivaris are issued by a local bank,
which holds one unit of official Brazilian currency for each capivari it
issued. Local merchants, however, give
discounts for paying in capivaris so that local residents are therefore
encouraged to make local purchases.

46)
Recall the application. The small city of Silva Jardim in Brazil has issued its
own currency called the capivari. When people use this currency to execute
transactions, this currency is being used as a
A)
medium of exchange.
B)
unit of account.
C)
store of value.
D)
commodity money.

47)
Recall the application. The small city of Silva Jardim in Brazil has issued its
own currency called the capivari. If people using the currency have enough
confidence in this locally-issued scrip to hold onto it for use in future
transactions, the currency will be acting as a
A)
medium of exchange
B)
unit of account.
C)
store of value.
D)
commodity money.

48)
Recall the application. The small city of Silva Jardim in Brazil has issued its
own currency called the capivari. If this currency had nothing backing its
value and was simply created by decree of the issuing city government, the
city-issued money would be considered
A)
commodity money.
B)
fiat money.
C)
barter money.
D)
gold standard money.

49)
Money is the standard of exchange by which any type of goods can be purchased.

50)
In order for money to be an effective medium of exchange, it is important to
have it serve as a unit of account.

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