Chapter 1 (Introduction)

Front 1

In general, there is an inverse relationship between the money supply and the value of an individual monetary unit? (True/False)

Back 1

True

Front 2

In general, there is a direct relationship between the money supply and the value of an individual monetary unit? (True/False)

Back 2

False

Front 3

In an inflationary environment, a form of money may fulfill which of the following money functions?

a) Medium of exchange
b) Standard of value
c) Store of value
d) Both a and b are correct
e) Answers a, b, and c are all correct

Back 3

A) Medium of Exchange

Front 4

In a non-inflationary environment, a form of money may fulfill which of the following money functions?
a) Medium of exchange
b) Standard of value
c) Store of value
d) Both a and b are correct
e) Answers a, b, and c are all correct

Back 4

C) Store of value

Front 5

An Economy with a widely used form of money is better than a barter economy because money fulfills the ______ function.
a) Medium of exchange
b) Standard of value
c) Store of value
d) Both a and b are correct
e) Answers a, b, and c are all correct

Back 5

a) Medium of exchange

Front 6

When we think of the US $ as a possible candidate for a world currency and we realize that most of the oil sold anywhere in the world is priced in US $’s, the $ is serving which function of a global money?

a) Medium of exchange
b) Standard of value
c) Store of value
d) Both a and b are correct
e) Answers a, b, and c are all correct

Back 6

b) standard of value

Front 7

Today, the US $ is a fiat currency.
a) True
b) False

Back 7

a) True

Front 8

A fiat currency has value because it is backed by something that has intrinsic value.
a) True
b) False

Back 8

b) False

Front 9

In times of little or no inflation fiat money can serve as a store of value.
a) True
b) False

Back 9

a) True

Front 10

The higher the inflation rate, the less fiat money acts as a store of value.
a) True
b) False

Back 10

a) True

Front 11

Which of the following is true?
a) Fiat money is established by government decree
b) Fiat money has value only because people are willing to accept it in return for things that have intrinsic value
c) Fiat money has value because it is backed by something of intrinsic value.
d) Both a and b are correct
e) Answers a, b, and c are all correct

Back 11

d) Both a and b are correct

Front 12

Which of the following spends more than it takes in?
a) Surplus Spending Units
b) Deficit Spending Units
c) Both

Back 12

b) Deficit Spending Units

Front 13

Who are the net savers in the economy?
a) Surplus Spending Units
b) Deficit Spending Units
c) Both

Back 13

a) Surplus Spending Units

Front 14

Which of the following financial institutions are “depository institutions” in the U.S.?
a) Commercial Banks
b) Savings and Loan Associations
c) Credit Unions
d) Both a and b are correct
e) Answers a, b, and c are all correct

Back 14

e) Answers a, b, and c are all correct

Front 15

Which of the following financial institutions are “depository institutions” in the U.S.?
a) Commercial Banks
b) Savings and Loan Associations
c) Investment Companies (mutual funds)
d) Both a and b are correct
e) Answers a, b, and c are all correct

Back 15

d) Both a and b are correct

Front 16

Which of the following financial institutions are “non-depository institutions” in the U.S.?
a) Investment Banks and Brokerage Houses
b) Pension Funds
c) Commercial Banks
d) Both a and b are correct
e) Answers a, b, and c are all correct

Back 16

d) Both a and b are correct

Front 17

Which of the following arrange sales of assets between buyers and sellers but do not keep an inventory of the assets that are sold between buyer and seller?
a) Brokers
b) Dealers
c) Broker/dealers

Back 17

a) Brokers

Front 18

Which of the following maintain an inventory of the assets and buy and sell for their own account?
a) Brokers
b) Dealers
c) Broker/dealers

Back 18

b) Dealers

Front 19

Which of the following both maintain an inventory of the assets, buying and selling for their own account, and also arrange sales of assets between buyers and sellers?
a) Brokers
b) Dealers
c) Broker/dealers

Back 19

c) Broker/dealers

Front 20

If you buy farm machinery, you are buying in an intangible asset.
a) True
b) False

Back 20

b) False

Front 21

A bond would be considered _____.
a) A tangible asset
b) An intangible asset
c) An equity asset
d) A derivative asset
e) None of the above

Back 21

b) An intangible asset

Front 22

Which of the following involves a commitment of money to an asset from which you expect to receive an appropriate return for a given level of risk?
a) Investment
b) Speculation
c) Hedging
d) Arbitrage

Back 22

a) Investment

Front 23

Which of the following involves the attempt to profit over the short term from fluctuating prices?
a) Investment
b) Speculation
c) Hedging
d) Arbitrage

Back 23

b) Speculation

Front 24

Which of the following involves taking an opposite position from an existing risky position so the two cancel out and you lower your overall risk?
a) Investment
b) Speculation
c) Hedging
d) Arbitrage

Back 24

c) Hedging

Front 25

Which of the following involves simultaneously buying and selling the same asset in two different markets at two different prices in order to exploit pricing inefficiencies across markets and earn riskless profits?
a) Investment
b) Speculation
c) Hedging
d) Arbitrage

Back 25

d) Arbitrage

Front 26

Which of the following forces the Law of One Price to hold?
a) Investment
b) Speculation
c) Hedging
d) Arbitrage

Back 26

d) Arbitrage

Front 27

Is our Federal Government currently an SSU or a DSU?

Back 27

DSU

Front 28

Which of the following is correct?
a) SSU’s provide savings to investors.
b) SSU’s provide savings to savers.
c) SSU’s provide funds to borrowers.
d) SSU’s provide funds to firms raising equity capital.

Back 28

c) SSU's provide funds to borrowers