Chapter 25 Preliminary Quiz
Money, Banking, and Financial Markets

Multiple Choice Questions:

Enter your answer to each of the questions in the blank to the left of the question. Be sure to use lowercase letters only!

	1. Which of the following is not a function of money? a. medium of exchange b. unit of account c. store of value d. means of barter and importation
	2. Barter refers to: a. anything that serves as a commonly accepted medium of exchange. b. the exchange of goods for other goods. c. commodity money. d. anything that serves as a commonly accepted store of value.
	3. Money is: a. anything that serves as a commonly accepted medium of exchange. b. the exchange of goods for other goods. c. stock. d. only M1.
	4. M1 consists of: a. coins. b. paper currency. c. checking accounts. d. all of the above.
	5. A savings account would be included in: a. M1. b. M2. c. both a and b. d. neither a nor b.
	6. The amount of interest paid per unit of time expressed as a percentage of the amount borrowed is called: a. inflation. b. the interest rate. c. the present value. d. none of the above.
	7. The dollar value today of a stream of income over time is called: a. inflation. b. the interest rate. c. the present value. d. none of the above.
	8. An asset is _______ if it can be quickly converted into cash with little or no loss of value. a. nominal b. real c. mature d. liquid
	9. The real interest rate is: a. corrected for inflation. b. the nominal interest rate minus inflation. c. both a and b. d. neither a nor b.
	10. The transactions demand for money arises from: a. the need to barter is so strong that demand for money will exist despite the lack of a money supply. b. the need to have money to pay for purchases of goods and services. c. the need for supply and demand to intersect at the interest rate. d. the need for people sometimes to hold money as an asset or store of value.
	11. The assets demand for money arises from: a. the need to barter is so strong that demand for money will exist despite the lack of a money supply. b. the need to have money to pay for purchases of goods and services. c. the need for supply and demand to intersect at the interest rate. d. the need for people sometimes to hold money as an asset or store of value.
	12. Which of the following describes institutions that take deposits of funds from one group and lends them to other groups? a. life-insurance companies b. banks c. financial intermediaries d. all of the above
	13. Assets that banks hold in the form of cash or in funds deposited with the central bank are called: a. liabilities. b. net worth. c. reserves. d. M2.
	14. The ratio of new checking deposits to the increase in reserves is called: a. the money-supply multiplier. b. the reserve ratio. c. the expenditure multiplier. d. none of the above.
	15. Which of the following is a form of financial instrument whose value is based on the values of other assets? a. pension funds b. equities c. government securities d. financial derivatives