Money Matters: Sample Quiz

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1. An economy which lacks a medium of exchange uses:

a commodity money.
a debt money.
flexible exchange rates.

2. Suppose you have the following assets:

$12 in cash and coins
$4 in food stamps
$123 in a checking account at a commercial bank
$50 in a U.S. savings bond.
$450 in a passbook savings account in a savings and loan association.
$500 line of credit on your credit card.

The amount of money you hold, using the M-1 definition of money, is:

$12 $135 $139 $639 $1039

3. The value of money:

remains constant during periods of deflation.
varies inversely with the general level of prices.
declines during periods of deflation.
varies inversely with the level of output.

4. The defining characteristic of money is its use as:

a store of value.
a medium of exchange.
bank debt.
a standard of value.

5. The quantity theory of money:

explains how banks create money.
is a theory of inflation and deflation.
argues that money is a flow, not a stock.
can only be valid with commodity monies.

6. In the U.S. economy the largest part of money stock (M-1) consists of:

deposits in checking accounts.
credit-card limits.
Federal Reserve deposits.
currency and coin.

7. In 1965 the transaction velocity of money was about 30 and the income velocity of money was about 4. This meant that the average dollar changed hands about every:

4 days
12 days.
30 days.
90 days.
120 days.

8. The data in the previous question also indicate that:

only about one transaction of seven or eight was a transaction to buy final output.
GNP was 30 times as large as the money stock.
M-2 was 7 1/2 times larger than M-1.
the price index was rising at a 7 1/2% rate.
b and c.

9. The quantity theory of money suggests that:

inflation is caused by too much money chasing too few goods.
a penny saved is a penny earned.
cheap money drives out the dear.
love of money is the root of all evil.

10. Who is generally acknowledged as the inventor of money?

Alexander the Great
The world's oldest profession
Kronos the Minoan
Money has been spontaneously invented by many societies

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Copyright Robert Schenk