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Money, Banking, and Financial Markets Practice Test: The Basics of Money
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Money has four main functions: standard of deferred payment, store of value, medium of exchange, and unit of account.  Money can also be defined as an item or medium of exchange that symbolizes perceived value. People generally accept it for the payment of goods and services, as well as the repayment of loans.  There are many types of money, including: Fiat money: Notes and coins backed by a government Commodity money: A good that has an agreed value, such as cowrie shells, bars of salt, furs, feathers, and cattle Fiduciary money: Money that takes its value from a trust or promise of... Show more
Money, Banking, and Financial Markets Practice Test: The Basics of Money
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25 Questions

1. In explaining the evolution of money
2. Which of the following sequences accurately describes the evolution of the payments system?
3. Money is
4. All but the most primitive societies use money as a medium of exchange, implying that
5. Small-denomination time deposits refer to certificates of deposit with a denomination of less than ________.
6. The increase in holiday spending is not the same every year causing the Fedʹs adjustment for________ to be revised as more data becomes available.
7. Because inflation in Germany after World War I sometimes exceeded 1,000 % per month, one can conclude that the German economy suffered from
8. If an individual moves money from a small-denomination time deposit to a demand deposit account,
9. Increasing transactions costs of selling an asset make the asset
10. During the past two decades an important characteristic of the modern payments system has been the rapidly increasing use of
11. ________ is the narrowest monetary aggregate that the Fed reports.
12. The components of the U.S. M1 money supply are demand and checkable deposits plus
13. If an individual redeems a U.S. savings bond for currency
14. If merchants in the country Zed choose to close their doors, preferring to be stuck with rotting merchandise rather than worthless currency, then one can conclude that Zed is experiencing a
15. The difference between money and income is that
16. Which of the following is included in M2 but not in M1?
17. If there are four goods in a barter economy, then one needs to know ________ prices in order to exchange one good for another.
18. Which of the following is not included in the measure of M1?
19. The total collection of pieces of property that serve to store value is a personʹs
20. Since it does not have to be converted into anything else to make purchases, ________ is the most liquid asset.
21. Which of the following statements best explains how the use of money in an economy increases economic efficiency?
22. People hold money even during inflationary episodes when other assets prove to be better stores of value. This can be explained by the fact that money is
23. The Fed estimates initial monetary aggregate reports because ________ depository institutions report the amount of their deposits infrequently.
24. Which of the following statements accurately describes the two measures of the money supply?
25. As the payments system evolves from barter to a monetary system,

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