ScholarMatic: Explanation & Answer
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Which one of the following is NOT one of the functions of money?
Question 1 options:
It must be able to store value.
It must be useful for trade.
It must be convertible to gold or some other precious metal.
It must be useful as a measurement of price and value.
Question 2 (3 points)
What is a problem with commodity money?
Question 2 options:
It is more likely to result in inflation than fiat money.
International trade is more difficult using commodity money.
Recessions tend to be more frequent when we use commodity money.
There are no problems with commodity money.
Question 3 (3 points)
The ease with which money can be used to buy goods and services is called
Question 3 options:
Fiat money.
Liquidity.
Return on the asset.
Spendability.
Question 4 (3 points)
If there is no difference in risk, then we expect that as assets become more liquid, the return on those assets will
Question 4 options:
Increase
Decrease
Remain the same.
Question 6 (3 points)
Why might a bank choose to hold excess reserves?
Question 6 options:
They have to by law.
To protect against risk.
Both A and B.
Banks will never hold excess reserves.
Question 7 (3 points)
A bank holds $500,000 in deposits. The reserve requirement is 0.3. How much must
this bank hold in required reserves?
Question 7 options:
$150,000
$250,000
$350,000
$1,700,000
Question 8 (3 points)
If the money multiplier is 3 and reserves are increased by $600,000, what will happen to the money supply?
Question 8 options:
Decrease by $200,000.
Increase by $200,000.
Increase by $600,000.
Increase by $1,800,000.
Question 9 (3 points)
The objective of the Federal Reserve is
Question 9 options:
Stable prices.
Full employment.
Both A and B.
None of the above.
Question 10 (3 points)
Why is the money supply curve a vertical line?
Question 10 options:
Because inflation occurs regularly.
Because of government price controls.
Because households will save the same amount regardless of interest rates.
Because only the central bank controls the supply of money.
Question 11 (3 points)
If households, on average, become more anxious about their finances, what will
happen to the demand for money?
Question 11 options:
Increase
Decrease
Remain the same
ScholarMatic: Explanation & Answer
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