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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. ________ is the narrowest monetary aggregate that the Fed reports.
2. All but the most primitive societies use money as a medium of exchange, implying that
3. The M1 measure of money includes
4. When paper currency is decreed by governments as legal tender, legally it must be ________.
5. An examination of revised money supply statistics, when compared to the initial statistics, suggests that the initial statistics
6. Currency includes
7. An electronic payments system has not completely replaced the paper payments system because of all of the following reasons except
8. Which of the following sequences accurately describes the evolution of the payments system?
9. ________ is a flow of earnings per unit of time.
10. Because inflation in Germany after World War I sometimes exceeded 1,000 % per month, one can conclude that the German economy suffered from
11. A smart card is the equivalent of
12. Dennis notices that jackets are on sale for $99. In this case money is functioning as a ________.
13. A personʹs house is part of her
14. The evolution of the payments system from barter to precious metals, then to fiat money, then to checks can best be understood as a consequence of
15. If there are five goods in a barter economy, one needs to know ten prices in order to exchange one good for another. If, however, there are ten goods in a barter economy, then one needs to know ________ prices in order to exchange one good for another.
16. Of the following, the largest is
17. Monetary aggregates are
18. To an economist, ________ is anything that is generally accepted in payment for goods and services or in the repayment of debt.
19. The conversion of a barter economy to one that uses money
20. Which of the following is included in both M1 and M2?
21. Even economists have no single, precise definition of money because
22. The payments system is
23. Which of the following is not included in the M1 measure of money but is included in the M2 measure of money?
24. The components of the U.S. M1 money supply are demand and checkable deposits plus
25. ________ are the time and resources spent trying to exchange goods and services.

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