16- Money fails to act as a store of value when: a. it is no longer backed by go

Question

16- Money fails to act as a store of value when:
a. it is no longer backed by gold.
b. the inflation rate is very high.
c. the goods produced in an economy are indivisible.
d. the economy goes into a recession.
e. coins are replaced by paper money.

17- The measure of the money supply that includes the fewest types of assets:
a. is M4.
b. is M2.
c. is M3.
d. is M1.
e. are both M1 and M3.

18 - According to Gresham's Law:
a. money with relatively high intrinsic value will be used for transactions.
b. money with relatively low intrinsic value will be used for transactions.
c. money with relatively high intrinsic value will cause inflation.
d. money with relatively low intrinsic value will cause inflation.e. inflation increases the intrinsic value of money.

19- Suppose the reserve requirement is 10 percent and a person deposits $1,500 in a local bank. That single
local bank can now create a maximum of:
a. $150 in additional money by lending $150.
b. $15,000 in additional money by lending $15,000.
c. $1,500 in additional money by lending $1,500.
d. $1,350 in additional money by lending $1,350.
e. $135 in additional money by lending $135.

20- Which of following policies of the Congress was aimed to place the Fed above politics and maintain
continuity in the policymaking process?
a. The President elects the entire Board of Governors.
b. The Federal Reserve district banks elects the Board of Governors.
c. The Congress elects a board member every five years.
d. One board member’s term expires every second year.
e. Only bankers are allowed to be appointed as board members.

Explanation / Answer

16) Money fails to act as a store of value when  the inflation rate is very high. Hence, the answer is (B).

17)The measure of the money supply that includes the fewest types of assets is M1.Hence, the answer is (D).

18) According to Gresham's Law, money with relatively low intrinsic value will be used for transactions.Hence, the answer is (B).

19) Suppose the reserve requirement is 10 percent and a person deposits $1,500 in a local bank. That single local bank can now create a maximum of $1,350 in additional money by lending $1,350.Hence, the answer is (D).

20)The President elects the entire Board of Governors was aimed to place the Fed above politics and maintain
continuity in the policymaking process.Hence, the answer is (A).

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