Chapter 3 Practice QuizMultiple Choice. Choose the one alternative that best completes the statement or answers the question.1. As a store of value, moneya. must be currency.b. does not earn interest.c. cannot be a durable asset.d. is a way of saving for future purchases.2. Which of the following is included in both M1 and M2?a. small-denomination time depositsb. savings depositsc. currencyd. money market deposit accounts3. Which of the following statements accurately describes the two measures of the money supply?a. M2 is the narrowest measure the Fed reports.b. Short-run movements in the money supply are extremely reliable.c. The two measures' movements closely parallel each other, even on a month-to-month basis.d. The two measures do not move together, so they cannot be used interchangeably by policymakers.4. If peanuts serve as a medium of exchange, a unit of account, and a store of value, then peanuts area. bank deposits.b. loanable funds.c. reserves.d. money.5. People hold money even during inflationary episodes when other assets prove to be better stores of value. This can be explained by the fact that money isa. the only thing accepted in economic exchange.b. backed by gold.c. extremely liquid.d. a unique good for which there are no substitutes.6. In explaining the evolution of moneya. commodity money, because it is valued more highly, tends to drive out paper money.b. government regulation is the most important factor.c. new forms of money evolve to lower transaction costs.d. paper money is always backed by gold and therefore more desirable than checks.7. The conversion of a barter economy to one that uses moneya. increases efficiency by reducing the need to exchange goods and services.b. increases efficiency by reducing transactions costs.c. increases efficiency by reducing the need to specialize.d. does not increase economic efficiency.8. When we say that money is a stock variable, we mean that a. we must attach a time period to the measusre.b. it is sold in the equity market.c. money never loses purchasing power.d. the quantity of money is measured at a given point in time.9. Dennis notices that jackets are on sale for $99. In this case money is functioning as aa. medium of exchange.b. unit of account.c. payments-system ruler.d. store of value.10. If an individual moves money from currency to a demand deposit account,a. M1 stays the same and M2 stays the same.b. M2 stays the same and M2 increases.c. M1 decreases and M2 stays the same.d. M1 increases and M2 stays the same.Answers on the next page.Answers to Chapter 3 Practice Quiz.1. D2. C3. D4. D5. C6. C7. B8. D9. B10.
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