The difference between money and income is that

Select one:

a.

There is no difference, money and income are both stock variables

b.

There is no difference, money and income are bothflow variables

c.

Money is a stock and income is a flow variable

d.

Money is a flow and income is astock variable

Question 2

Currency includes:

Select one:

a.

paper money, coins, and cheques.

b.

paper money and cheques.

c.

paper money, coins, cheques, and savings deposits.

d.

paper money and coins.

Question 3

If one observes a decline in the use of money to carry out transactions, and an increase in barter, then one can infer that

Select one:

a.

deflation has reduced the value of money

b.

the velocity of circulation of money has increased

c.

the use of money has reduced transaction costs.

d.

inflation has accelerated into hyperinflation and money no longer serves as a store of value

Question 4

Which of the following is true about fiat money?

Select one:

a.

It is convertible to gold

b.

It is always inflationary

c.

It is commodity money

d.

It is costless to produce

e.

None of the above

Question 5

Defining money becomes ________ difficult as the pace of financial innovation ________.

Select one:

a.

more; stops

b.

less; quickens

c.

more; quickens

d.

more; slows

Question 6

Which of the following is included in M3 but not in M2?

Select one:

a.

Demand deposits

b.

Personal savings deposits at chartered banks

c.

Foreign currency deposits at chartered banks

d.

Currency

Question 7

How would different monetary aggregates be affected as a result of a rise in the rates of interest?

Select one:

a.

M1 would fall as there is a move out of currency in to saving accounts and M2 would increase

b.

M1 would fall as there is a move out of currency in to saving accountsand M2 would stay the same

c.

Both M1 and M2 would increase

d.

Neither M1 and M2 would be affected as only currency would change

Question 8

What happens if people hoard their money?

Select one:

a.

The velocity of money's circulation will drop

b.

The demand for goods and services will drop

c.

The purchasing power of money will increase

d.

The purchasing power of money will decrease

e.

All except d

Question 9

It is possible to use the dollar as a unit of account without it being a medium of Exchange.

Select one:

True

False

Question 10

t

Which of the following is NOT true

Select one:

a.

Rapid growth in the MS results in high inflation rates

b.

When the MS grows at a much slower rate than output, it can have a deflationary impact

c.

Fluctuations in the Money Supply can be a major cause of business cycles

d.

Fluctuations in the MS affect productivity per worker

Question 11

The use of scrip in the US during the Great Depression was to address the following problems

Select one:

a.

The hoarding of money caused in part by lack of confidence in the banking system

b.

A fall in aggregate demand and a rise in unemployment caused by a shortage of money

c.

A shortage of money caused in part by bank failures

d.

All of the above

Question 12

Read the article and answer the following questions:

http://www.economist.com/blogs/economist-explains/2015/02/economist-explains-15

According to the article, why might negative interest rates not have an expansionary effect on the economy?

Select one:

a.

Because they may encourage a run on the banks and thus reduce the ability of the banks to lend

b.

Because they can make it difficult for banks to attract funds

c.

Because they can hurt banks profits

d.

all of the above could apply

Question 13

The benefits of negative interest rates include all the following except:

Select one:

a.

a weaker currency that results in more exports

b.

a weaker currency that results in less imports

c.

a weaker currency that can help increase inflation

d.

a weaker currency that can increase confidence

Information text

Read the article belowand answer the following five questions:

http://www.economist.com/news/finance-and-economics/21618886-abolishing-notes-and-coins-would-bring-huge-economic-benefits-leaving-dead

Question 14

According to the article the benefits of abolishing currency include all the below EXCEPT

Select one:

a.

Higher tax revenues, brought about by reducing tax evasion

b.

Potential reduction of criminal activities and transactions as illicit payments become easier to trace

c.

Reduction of costs associated with producing currency

d.

Reduction of counterfeit possibilities

e.

Reduction of Seigniorage income

f.

Ability to address the problem of zero lower bound in monetary policy

Question 15

According to the article, the problem of " zero lower bound " refers to a situation where:

Select one:

a.

Real interest rates are close to zero and cannot be lowered any further

b.

The nominal interest rates are close to zero and cannot be lowered any further

c.

Both nominal and real interest rates are close to zero and cannot be lowered any further

d.

None of the above

Question 16

Asymmetry in monetary policy refers to the following

Select one:

a.

In times of inflation there is a ceiling to how high interest rates can be raised by central banks

b.

In times of inflation there is no floor to how low interest rates can be reduced by central banks

c.

In times of recession central banks cannot lower interest rates.

d.

Central banks can easily raise interest rates to fight inflation but cannot lower nominal interest rates below a certain threshold to fight recessions

e.

Central banks can easily lower interest rates to fight recessions but there is a limit to how high interest rates can be raised to fight inflation

Question 17

Why is there a limit to how negative interest rates can become under the current institutional framework?

Select one:

a.

Because at some point cash stops being a store of value

b.

Because at some point both the public and commercial banks will switch from cash to deposits

c.

Because at some point both the public and commercial banks will switch from deposits to cash that has zero interest rates

d.

Because there is no costs associated with holding cash whatsoever

Question 18

All of the following are arguments in favour of abolishing cash except:

Select one:

a.

Monetary policy will be easier to conduct during inflationary periods

b.

The underground economy could be undermined

c.

Monetary policy would be easier to conduct during recessionary times

d.

The costs associated with the production, storage and transportation of cash will be reduced.

e.

Tax payment and tax revenues could be increased

Question 19

Why would keeping currency, but limiting it to very small denominations be an acceptablecompromise?

Select one:

a.

Because hoarding small denominations is more expensive

b.

Because using small denominations makes the use of cash for criminal activities more difficult.

c.

Because it is easier for central banks to go into negative interest rates

d.

All of the above

Question 20

Read the Economist article on "Bips and bytes; A shift from paper to virtual cash will empower central banks" at the link below

and answer the following 2 questions:

The benefits of a CBDC include the following:

https://www.economist.com/finance-and-economics/2020/07/23/a-shift-from-paper-to-virtual-cash-will-empower-central-banks

Select one:

a.

It allows the central banks to lower interest rates further in to negative territory

b.

It makes it possible for the central bank to apply monetary policy more directly and without having to go through commercial banks

c.

It makes it easier for fiscal transfers to reach the targeted groups

d.

A CBDC is more likely to have the confidence of the public, especially in turbulent times

e.

A CBDC can offer a reliable digital currency against private sectors digital currencies

f.

A CBDC can help preserve absolute anonymity and privacy of the citizens.

g.

All of the above except f

Question 21

All of the following are concerns around the creation of CBDC except:

Select one:

a.

Loss of citizens' privacy

b.

The possibility of central banks targeting specific sectors and individuals, which could undermine their neutrality

c.

The possibility of disintermediation and loss of clients by the commercial banks

d.

The possibility that banks may have to rely on other sources of funding instead of deposits

e.

The susceptibility of the digital currency to cyber attacks and breakdowns which could undermine the credibility of the central bank

f.

The inability of central banks to address the problem of inflation