Question 1

The quantity of money circulating in the economy is called the

Accepted Answer

A)  fiat reserves.
B)  money stock.
C)  gold reserve.
D)  silver reserve.E) B) and C)
F) All of the above

Question 2

When you are willing to go to sleep tonight with r₁00 in your wallet and you have complete confidence that you can spend it tomorrow and receive the same amount of goods as you would have received had you spent it today, money has demonstrated its function as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 3

Money

Accepted Answer

A)  is a perfect store of value.
B)  is the most liquid asset.
C)  has intrinsic value, regardless of which form it takes.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 4

What is the difference between the average interest banks earn on assets and the average interest rate paid on liabilities?

Accepted Answer

A)  Spread.
B)  Loss.
C)  Gain.
D)  Change.E) None of the above
F) B) and D)

Question 5

Barter exchange tends to be inefficient because

Accepted Answer

A)  gold is difficult to transport.
B)  it limits the time and effort required for trade.
C)  it can be time consuming to find a double coincidence of wants.
D)  a standardized unit of value can be difficult to find in a primitive economy.E) None of the above
F) All of the above

Question 6

If there is 100 per cent reserve banking, the money supply is unaffected by the proportion of its money that the public chooses to hold as currency rather than as bank deposits.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following would NOT be used by a central bank to influence interest rates in the economy?

Accepted Answer

A)  Selling government bonds.
B)  Buying shares.
C)  Setting reserve requirements.
D)  Changing the refinancing rate.E) A) and B)
F) A) and C)

Question 8

Which of the following is not a function of money?

Accepted Answer

A)  Hedge against inflation.
B)  Medium of exchange.
C)  Unit of account.
D)  Store of value.E) A) and B)
F) A) and C)

Question 9

An example of fiat money is

Accepted Answer

A)  paper euros.
B)  gold.
C)  silver coins.
D)  cigarettes.E) C) and D)
F) A) and B)

Question 10

After the 2007-09 global financial crisis, many central banks adopted macroprudential policies.Why?

Accepted Answer

One of the criticisms of central banks d...

Question 11

A bank run is said to have occurred when

Accepted Answer

A)  depositors realise that a particular bank is paying higher interest than its competitors and a substantial number of them rush to deposit their money in it.
B)  a substantial number of depositors suspect that a bank may go bankrupt and withdraw their deposits.
C)  a bank experiences a series of defaults on its loans.
D)  a bank converts its loans into deposits.E) B) and C)
F) B) and D)

Question 12

The set of actions taken by the central bank in order to affect the money supply is known as

Accepted Answer

A)  banking functions.
B)  procedures.
C)  negotiated policies.
D)  monetary policy.E) C) and D)
F) None of the above

Question 13

The repo rate is the interest rate

Accepted Answer

A)  at which commercial banks lend to and borrow from each other.
B)  the South African Reserve Bank pays on reserves.
C)  the public pays when borrowing from banks.
D)  the South African Reserve Bank charges on loans to banks.
E)  banks pay on the public's deposits.F) B) and C)
G) A) and C)

Question 14

A credit risk is the risk a bank faces in defaults on

Accepted Answer

A)  savings accounts.
B)  loans.
C)  client loss.
D)  trade deficits.E) C) and D)
F) A) and B)

Question 15

A double coincidence of wants

Accepted Answer

A)  is required when there is no item in an economy that is widely accepted in exchange for goods and services.
B)  is required in an economy that relies on barter.
C)  is a hindrance to the allocation of resources when it is required for trade.
D)  All of the above are correct.E) All of the above
F) A) and D)

Question 16

Economists argue that the move from barter to money increased trade and production.How is this possible?

Accepted Answer

The use of money allows people...

Question 17

Credit cards are

Accepted Answer

A)  included in M2 but not in M1.
B)  not considered to be money.
C)  included in M3 but not in M2 or M1.
D)  considered as money only when they are in the hands of the public.E) A) and B)
F) A) and C)

Question 18

The three main tools of monetary policy are

Accepted Answer

A)  fiat, commodity, and deposit money.
B)  open market operations, reserve requirements, and the refinancing rate.
C)  the money supply, government purchases, and taxation.
D)  government expenditures, taxation, and reserve requirements.
E)  coin, currency, and demand deposits.F) C) and D)
G) B) and E)

Question 19

What are open market operations and in which circumstances are they performed?

Accepted Answer

Open market operations are the purchase ...

Question 20

A central bank's open market operations represent the purchase and sale of ______________ to and from the banking sector.

Accepted Answer

A)  the money supply
B)  non-monetary assets
C)  cash holdings
D)  savingsE) A) and D)
F) A) and C)

Exam 9: The Monetary System

Which of the following would NOT be used by a central bank to influence interest rates in the economy?

Correct AnswerverifiedShow Answer

What is the difference between the average interest banks earn on assets and the average interest rate paid on liabilities?

Correct AnswerverifiedShow Answer

Which of the following is not a function of money?

Correct AnswerverifiedShow Answer

A double coincidence of wants

Correct AnswerverifiedShow Answer

A credit risk is the risk a bank faces in defaults on

Correct AnswerverifiedShow Answer

Economists argue that the move from barter to money increased trade and production.How is this possible?

Correct AnswerverifiedThe use of money allows people...View AnswerShow Answer

Money

Correct AnswerverifiedShow Answer

The three main tools of monetary policy are

Correct AnswerverifiedShow Answer

After the 2007-09 global financial crisis, many central banks adopted macroprudential policies.Why?

Correct AnswerverifiedOne of the criticisms of central banks d...View AnswerShow Answer

Barter exchange tends to be inefficient because

Correct AnswerverifiedShow Answer

A central bank's open market operations represent the purchase and sale of ______________ to and from the banking sector.

Correct AnswerverifiedShow Answer

If there is 100 per cent reserve banking, the money supply is unaffected by the proportion of its money that the public chooses to hold as currency rather than as bank deposits.

Correct AnswerverifiedShow Answer

What are open market operations and in which circumstances are they performed?

Correct AnswerverifiedOpen market operations are the purchase ...View AnswerShow Answer

The repo rate is the interest rate

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When you are willing to go to sleep tonight with r₁00 in your wallet and you have complete confidence that you can spend it tomorrow and receive the same amount of goods as you would have received had you spent it today, money has demonstrated its function as a medium of exchange.

Correct AnswerverifiedShow Answer

An example of fiat money is

Correct AnswerverifiedShow Answer

The quantity of money circulating in the economy is called the

Correct AnswerverifiedShow Answer

A bank run is said to have occurred when

Correct AnswerverifiedShow Answer

Credit cards are

Correct AnswerverifiedShow Answer

The set of actions taken by the central bank in order to affect the money supply is known as

Correct AnswerverifiedShow Answer

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The use of money allows people...
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One of the criticisms of central banks d...
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Open market operations are the purchase ...
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