Macroeconomics 1. Fiat money is ? a. All of the above b. Something more valuable

Question

Macroeconomics

1. Fiat money is?

a. All of the above

b. Something more valuable as a monetary instrument than as commodity

c. Money backed by gold

d. Anything that the government says is money

2. If income and GDP rise and GDP rise and supply of money remains constant, economic theory would predict?

a. All of the above

b. A rise in the demand for cash balances and reductions in demand for consumer goods

c. A rise in the velocity of exchange if prices are constant

d. A fall in prices if the velocity of exchange remians constant

3. If people hold money because they need to spend money before their next paycheck, this is an example of?

a. the quantity theory of money

b. the velocity of exchange

c. the transactions demand of money

d. None of the above

4. In which of the following situations would money function as a store of value?

a. You tanke out a loan at the local bank

b. In all of the above

c. The husband checks the prices at the local market

d. The wife checks the balance in the family savings account

5. M2 money is?

a. All demand deposits plus all currency and coin in circulations

b. M3 money plus all the currency and coin in the circulation

c. M1 plus near money

d. M3 plus near money

6. People hold money?

a. to have money for purchases in between receipts of income

b. to have money in case of unforseen emergencies

c. to have money to take advantage of economic opportunities as they arise

d. for all of the above purposes

Explanation / Answer

1. d...Fiat money is a currency that a government has declared to be a legal tender

2.c... MV=PY, if P and Y rise and Mis constant then definitely V rises..so velocity rises

3.C...The transaction demand is holding money to bridge gap between payment and receipt

4.D...The wife checks the balance in the family savings account

5.C... M2 is a calculation of the money supply that includes all elements of M1 as well as "near money."

6. D..In all mentioned purpose it's essential

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