Chapter 16 Money and the Banking System

| November 9, 2018

11)
Suppose after the semester ends, you take a trip to a tropical island. Upon
arriving at the island, you make a stop at one of the markets and notice that
everyone is carrying around jars full of little turtles. You also notice the
person in line in front of you just paid for a bottle of rum with 6 turtles.
Someone else just bought a straw hat for two turtles. Thinking back to your
economics class (as painful as that may be), you would conclude that
A)
this is a barter economy.
B)
those little turtles are serving as money.
C)
turtles are valueless.
D)
turtle soup is a delicacy.

12)
Which of the following are examples of “mediums of exchange”?
A)
money used to buy goods
B)
goods used to obtain other goods
C)
pigs used to obtain chickens
D)
all of the above

13)
In order for a barter transaction to be successful, there must be a
A)
market for the goods.
B)
high demand for a certain item.
C)
double coincidence of wants.
D)
federal tax law in effect.

14)
The stored value of money over time should not change significantly as long as
the level of inflation is
A)
high.
B)
low.
C)
adjusted by the government.
D)
less than your pay increases.

15)
According to the U.S. Secret Service, approximately $2.6 billion of U.S. paper
currency in circulation is counterfeit. Undetected counterfeit currency which
is spent and circulated in the marketplace is an example of the counterfeit
currency being used as a
A)
medium of exchange.
B)
commodity money.
C)
store of value.
D)
bank reserve.

16)
According to the U.S. Secret Service, approximately $2.6 billion of U.S. paper
currency in circulation is counterfeit. As long as counterfeit U.S. currency
remains undetected and in circulation, an increase in the U.S. inflation rate
would essentially
A)
decrease the real value of the counterfeit currency.
B)
increase the real value of the counterfeit currency.
C)
decrease the nominal value of the counterfeit currency.
D)
increase the nominal value of the counterfeit currency.

17)
According to the U.S. Secret Service, approximately $2.6 billion of U.S. paper
currency in circulation is counterfeit. The U.S. government is continually
adding security features to its paper currency to help make counterfeit money
easier to detect. If counterfeit currency remained undetected, a vast increase
in the supply of counterfeit U.S. currency would
A)
decrease aggregate demand in the short run.
B)
lead to inflation.
C)
reduce the amount of M1.
D)
lower the nominal income of the average U.S. worker.

18)
Money that has no intrinsic value and is created by a government decree is
called
A)
barter money.
B)
commodity money.
C)
fiat money.
D)
asset money.

19)
What gives money value under a fiat system?
A)
Fiat money is backed by gold.
B)
The supply of fiat money is controlled by the government.
C)
Fiat money is also a commodity.
D)
Fiat money is the same as Treasury bonds.

20)
M1
A)
is the sum of currency plus traveler’s checks.
B)
is the narrowest definition of the money supply.
C)
includes small time deposits.
D)
includes credit cards.

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