Quiz
Multiple Choice Practice-1
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Questions in this quiz (43)
1The direct exchange of goods and services for other goods and services is
- Aa legal tender exchange.
- Ba fiat exchange.
- Ca unit of account exchange.
- Dbarter.
2Mike makes excellent cheesecake and Sue is very good at changing the oil in a car. Sue agrees to change the oil in Mike's car, if he makes her a cheesecake. This is an example of
- Afiat money.
- Blegal tender.
- Ccommodity money.
- Dbarter.
3The development of money as a medium of exchange has facilitated the expansion of trade because
- Aholding money increases people's income.
- Bholding money increases people's wealth.
- Cmoney eliminates the barter "double coincidence of wants" problem.
- Dno other mediums of exchange are available.
4A medium of exchange is
- Athe ability to buy something today but to defer payment to the future.
- Ba standard unit that provides a consistent way of quoting prices.
- Cwhat sellers generally accept and buyers generally use to pay for goods and services.
- Dan asset that can be used to transport purchasing power from one period of time to another.
5A store of value is
- Aan asset that can be used to transport purchasing power from one period of time to another.
- Bthe ability to buy something today but to defer payment to the future.
- Cwhat sellers generally accept and buyers generally use to pay for goods and services.
- Da standard unit that provides a consistent way of quoting price.
6The main disadvantage of using money as a store of value is that
- Athe value of money actually falls when the prices of goods and services rise.
- Bcurrency is intrinsically worthless.
- Cit requires a double coincidence of wants.
- Dmoney is not portable.
7The liquidity property of money is the property that makes money
- Aa good store of value and a good standard of deferred payment.
- Ba good medium of exchange and a good store of value.
- Ca good medium of exchange and a good unit of account.
- Da good store of value and a good unit of account.
8Money that can be directly used for transactions is
- Abroad money.
- BM4.
- Cnarrow money.
- Dnear money.
9A loan made by a bank is considered ________ of that bank.
- Aa liability
- Bcapital
- Can investment
- Dan asset
10A deposit in a bank is considered ________ of that bank.
- Acapital
- Ba liability
- Can asset
- Dan investment
11Northland Bank plc has £600 million in deposits. Required liquidity ratio is 10%. Bank must keep ________ in liquid assets.
- A£6 million
- B£160 million
- C£60 million
- D£100 million
12Banks can create money
- Aby making loans that result in additional deposits.
- Bby offering financial services, such as money market accounts.
- Cby paying interest to their depositors.
- Donly by illegally printing additional currency notes.
13The value by which total deposits can increase for every pound increase in reserves is the
- Aliquidity ratio.
- Bmoney multiplier.
- Ccredit limit.
- Dnone of the above.
14Which of he following activities is one of the responsibilities of the Bank of England?
- Aadvising on income tax rates
- Bensuring that there is sufficient liquidity in the financial system
- Cadministration of the indirect taxation system
- Dauditing central and local government accounts
15The central bank of the United Kingdom is known as
- Athe Bank of England.
- Bthe Treasury.
- CLloyds
- Dthe money market.
16Which of the following activities is NOT one of the responsibilities of the Bank of England?
- Amanaging exchange rates.
- Badministering the tax system.
- Cclearing interbank payments.
- Dregulating the banking system.
17Retail Deposits + Wholesale Deposits + Certificates of Deposit (CDs) + cash in circulation =
- AM4
- BM2
- CM0
- DNone of these
18Close substitutes for transactions money are known as
- Atoken monies.
- Blegal tender.
- Ccommodity monies.
- Dnear monies.
19The quantity theory of money assumes
- Avelocity is unstable
- Boutput is below the full employment level
- Cincreases in the money supply lead to increases in real GDP
- Dincreases in the money supply lead to increases in the general level of prices
20M0 consists of
- ABanks' till money + operational balances at the Bank of England.
- BBanks' operational balances at the Bank of England + Private sterling sight deposits.
- CNotes and coins in circulation with the public + banks' till money + operational balances at the Bank of England.
- DBanks' till money + operational balances in the Bank of England + private sterling sight deposits.
21The main reason that people hold money - to buy things - is referred to as the
- Atransactions motive.
- Bprofit motive.
- Cprecautionary motive.
- Dspeculation motive.
22When economists speak of the "demand for money", which of the following questions are they asking?
- AHow much wealth would you like?
- BWhat proportion of your financial assets do you want to hold in non-interest bearing forms?
- CHow much cash do you wish you could have?
- DHow much income would you like to earn?
23By August 2016, the total amount of the Quantitative Easing programme in the UK reached
- A£445 million
- B£445 billion
- C£375 Billion
- D£44.5 Billion
24The Monetary Policy Committee of the Bank of England has a target to achieve
- A2% RPI Inflation
- B2% CPI Inflation
- C2% GDP growth
- D2% PSNCR as a share of GDP
25From 2009-2016, the Bank of England official interest rates
- Astayed constant at 5%
- Bvaried between 4.5% and 5.75%
- Cfell to -5%
- Dremained constant at 0.5%
26Which of the following would appear as a liability in a retail bank's balance sheet?
- Aloans to customers
- Bmoney at call and short notice
- Cbills discounted
- Ddeposits of customers
- Enone of the above
27A commercial bank can create money by
- Aselling some of its investment securities
- Bincreasing its reserves
- Clending its excess reserves
- Dprinting more cheques
- Ebuying government bonds
28Other things equal, individuals are likely to desire fewer money balances when interest rates are high
- Abecause they cannot afford to borrow as much at high interest rates
- Bsince high interest rates imply high opportunity costs associated with holding money
- Cbecause such times are also characterised by falling prices so money is spent more quickly
- Dsince high interest rates imply high prices for bonds which makes bonds more attractive for investors
- Enone of the above
29A general increase in interest rate levels will, all other things being equal, automatically lead to
- Aan increase in the demand to hold money
- Ba decrease in the value of money
- Can increase in the supply of money
- Da decrease in the price of government bonds
- Eall of the above
30Which of the following will cause an increase in the demand for money?
- Aan increase in real GDP
- Ba decrease in nominal GDP
- Can increase in the nominal interest rate
- Dan increase in the real interest rate
31If, at the current interest rate, the quantity of money demanded exceeds the quantity supplied
- Abond prices will rise and the interest rate will fall
- Bboth bond prices and the interest rate will fall
- Cboth bond prices and the interest rate will rise
- Dbond prices will fall and the interest rate will rise (SHORTAGE OF LIQUIDITY, SO PEOPLE SELL BONDS)
32Quantitative Easing (QE) involves
- Athe illegal printing of money
- Bthe cancellation of the national debt
- Can increase in the budget deficit
- Dthe creation of new money caused by the central bank purchasing government securities
- Ethe central bank purchasing assets financed by the sale of other assets
33An asset is liquid if it is easily converted into money.
- ATrue
- BFalse
34The QE programme allows the Bank of England to buy equities on the London Stock Exchange.
- ATrue
- BFalse
35The deposit multiplier implies that total deposits increase by a multiple of an initial new deposit.
- ATrue
- BFalse
36An increase in the quantity of money shifts the aggregate demand curve leftward.
- ATrue
- BFalse
37The opportunity cost of holding money is the interest rate.
- ATrue
- BFalse
38According to Keynesian monetary theory, the interest rate is determined by the intersection of the supply and demand for money.
- ATrue
- BFalse
39Cash held in bank safes and deposited with the Bank of England is included in M4.
- ATrue
- BFalse
40M2 will be a larger figure than M0
- ATrue
- BFalse
41The Bank of England is a lender of last resort.
- ATrue
- BFalse
42Deposits made with a bank are classed as the bank’s asset.
- ATrue
- BFalse
43Bond prices (gilts) rise as interest rates go up.
- ATrue
- BFalse
Information
- Description
- Multiple Choice question for applications of economics module.
- Author
- Anas Mohammed
- Language
- English
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- 12
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